Planned Internet Service Hopes to Solve Direct Shipping Issues

Dana Nigro
Posted: March 13, 1999

If Peter Sisson has his way, illegal wine shipments will be as much a thing of the past as speakeasies. Instead, wine lovers who can't find certain wines in a nearby store will be able to order them all from one place. And they won't have to worry whether or not local laws allow them to receive wine shipped from out of state.

Sisson's company, San Francisco-based Naxon Corp., is setting up a Web-based wine locator and shopping system that will bring wholesalers and retailers together with wineries to serve customers across the country. The company's goal is to use the Internet to work within state laws and enhance the current distribution system, instead of bypassing it.

"The wine market is stunted in this country," said Sisson, who comes from outside the industry, but whose love of wine prompted him to start the new venture. "When I was in grad school in Stanford, I cofounded a wine-tasting club. After graduating, I went back east and discovered that many of the wines I had fallen in love with in California were not available." Sisson -- whose background is in strategic planning, computer science and financial analysis -- later moved back to California and started looking into the issue, meeting with winery owners, industry associations and lawyers in the regulatory field.

Naxon has the backing of the Wine & Spirits Wholesalers Association -- which up until now has been fighting to prevent consumers from purchasing and receiving shipments of wine from out-of-state companies. The association's wholesaler members are opposed to Internet, phone and mail orders that bypass their distribution system and could threaten their business. About a year ago, WSWA pledged to create a toll-free wine locator service to improve consumer access to wines, but found the project too overwhelming and sought outside help.

"Our part of the equation is to bring online the inventory of wholesalers across the country," said WSWA spokesman David Dickerson. "One of our top priorities will be using every opportunity to explain the system and get our membership excited about it and provide the data Naxon needs."

Naxon plans to merge all the state wholesaler inventory information into a database that will show which products are available. The database will also include information from small wineries whose products aren't in distribution and would otherwise have to be ordered and shipped directly from the winery. Retailers could then locate and obtain these wines for their customers, even if they don't have them in stock.

As Sisson envisions the system, consumers could also go to the company's Wineshopper.com site, search for wines (by grape, winery, label name, characteristics or ratings) and place their orders. The wines will then be cleared through a state wholesaler and retailer and legally delivered to the customers' homes. For all deliveries, recipients would have to provide age identification to ensure that alcohol is not being purchased by minors. In states that prohibit home delivery, the wine will be sent to a nearby retailer chosen by the consumer, who will then be notified when he can pick it up.

To handle the distribution, Naxon purchased Virtual Distribution, an established network of wholesalers and retailers that is licensed in 37 states. Naxon hopes to eventually be able to distribute wine in all 50 states. Wholesalers and retailers will be paid a fee for clearing wines they don't already carry. "The wine should reach the consumer at the same price as if he bought it through a large chain retailer," said Sisson.

Naxon's system doesn't have a launch date yet. So far, between 200 and 300 wineries -- primarily from California -- have indicated interest in participating, said Stephen Koetzner, the company's vice president of trade development, who was formerly national sales director for Domaine Chandon and Simi Winery.

Many of the wineries that have been approached by Naxon are intrigued but cautious. "For about the past three and a half years, various people have been coming to us saying they have solved the problem, or part of it, in providing access to consumers in non-reciprocal states [ones the winery can't ship to] to special wines or replacement wines," said Robert Mondavi's vice president of direct and interactive marketing, Jennifer Becker. "At first, we were extremely skeptical. Then, at least initially, we were impressed by the fact that they had identified and addressed all of the issues -- and there are so many -- and had thought a lot about it and had conceptual solutions."

Free the Grapes!, a group of wineries and wine lovers that advocates direct shipping, pointed out that Naxon still faces numerous obstacles in getting a national wine locator system to run smoothly. In a statement distributed to the media, the group's executive director, Jeremy Benson, said these problems include state requirements that brands and labels must be registered before sale, possibly making one-time shipments impractical due to high costs and lengthy waiting times. Delivery times could be slowed by state requirements that wines spend a certain time in the distributor's warehouse before delivery or that prices must be posted well in advance of any sale. And special arrangements would need to be made in the 18 "control" states where the state acts as distributor and retailer.

But if Naxon does succeed in getting its service running, wineries could finally legally sell their wines to interested customers who haven't been able to buy them. Becker added, "Consumers are extremely frustrated by this situation. Since many companies are shipping illegally, they say, 'Well, Winery X does this, why can't you?' and it makes us look like the bad guy."

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