Uncorking opportunities

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Most wine connoisseurs will earnestly debate whether a bottle of, say, Chilean Alamosa Cabernet Sauvignon goes down better with a roasted duck or a pot of beef stew. Peter Byck is more concerned with the Internet technologies that might have contributed to the wine getting bottled in the first place.

Byck, a longtime software developer for wineries, is co-founder and CEO of Novato, Calif.-based, an e-hub that matches wineries with their suppliers. The exchange, which launched last June, recently received $15 million in venture capital funding. The round, which brings its total amount raised to $24 million, puts it in good stead to position itself as the go-to hub for the $100 billion global wine industry.

The question is whether wine traders are ready to support it.

WineryExchange's executives are gambling that the exchange's Internet technologies-among them, real-time grape auctions-will attract a critical mass of traders. So far, it seems a good bet. The hub has signed on some 1,000 wineries, or 80% of total U.S. wineries, by offering them a cheaper and easier way to buy everything needed to run their businesses, from corks to labels to bulk wine.

Glenn Gow, CEO of Los Altos, Calif.-based Crimson Consulting Group, said that among WineryExchange's biggest challenges is getting clients to use the hub once they have signed up. "Not all people at wineries use computers a lot," Gow said. "I need to make sure that my investment in learning this exchange is worth it to me."

Byck said he is confident that WineryExchange's Web technologies, and the money and time they can save users, will make it a success. He also pointed out that the wine business is booming, giving WineryExchange a thriving user base to work with. "The industry is doing very well right now," Byck said. "A lot of people want to get into the business."

'From the dirt to the bottle'

WineryExchange intends to help wineries and suppliers do all their business online; indeed, its marketing slogan is "From the dirt to the bottle." Perhaps its most significant niche is in the bulk wine business.

Bulk wine is the industry's multibillion-dollar secret. It is sold by the ton to fill the bottles of less expensive wines and, often, to round out bottles of fine wines.

The exchange's real-time platform allows bulk wine to be traded as the commodity it is, driving down costs. Auxiliary services such as e-settlement and sample ordering can be handled online as well. The exchange makes money by charging transaction fees ranging between 2% and 7%.

WineryExchange, unlike some exchanges that are attempting to bring offline businesses online, is shrewdly letting brokers use its site. Among those it has signed on is Joseph W. Ciatti Co. Inc., the General Motors of the U.S. bulk wine trading business.

Most of WineryExchange's marketing, is being handled offline through one-on-one sales calls. "We're within a two-hour drive of 90% of the U.S. wine producers," Byck said.

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