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Do Not Operate This Business Under The Influence Of Wine

Contributed by Kristen Sager

Once a cottage industry that relied on sommeliers and industry experts like Wine Spectator to dictate taste and influence sales, the business of wine has been revolutionized by new technologies, beginning with e-commerce sites but more dramatically with new social media networks like Twitter, Facebook, and platforms like the iPhone that create influencers out of everyday people. The millenials who have embraced these technologies represent a large market: 76 million consumers with buying power of $221 billion. According to a national study by Sonoma State University, the percentage of millenials who consume wine has increased 70 percent from 2004 to 2006, and as a cohort, they are more inclined to drink wine than beer.

These are trends that we explored in a market feasibility assessment for a touchscreen manufacturer that was considering developing wine software applications and devices. But while more consumers are talking to their friends and recommending and purchasing wine online, we found that the majority of underlying businesses weren’t making money. Antiquated laws, concentrated distribution and a highly competitive, brand-driven environment hinder the development of new, profitable business models. So, although our study validated what a career wine executive said – “everybody wants to be in the wine business” – the potential applications assessed didn’t make sense for our client.