Home Wine News Articles Shop for Wine Accessories About Links Downloads Contact

Good Grape Wine Company

Left side of the header
Right side of the header

After the Dust Settles …

If I were a small producer, say fewer than 5,000 cases, running my business via sales from the tasting room, wine club shipments, online commerce and spot distribution in a few states, I would use this time to build a beachhead in new markets.

All things considered, instead of frittering on Twitter, I’d work on retail accounts in new places.

By the numbers, the top 30 wine companies in the industry represent over 90 percent of the U.S. wine market by volume, according Wine Business Monthly.  According to Wines and Vines Magazine there are over 6,200 wineries in the U.S.  These two facts combined very plainly explain the sales problem gripping the wine industry:  there are too many wineries fighting for a very small percentage of the domestic wine market.

Because traditional distribution seems closed off to new brands with uncertain velocity turns, is there more reason why the Inertia Beverage Group Direct-to-Trade program makes good sense?

Direct-to-Trade remains a very misunderstood solution for the industry.  Were it understood, what Inertia has done and is planning to do would not create derision, but instead applause. 

This is okay, of course, because it gives the savvy wine marketer time to work by the cover of other people’s confusion.

In the bad breath blowback that got personal amongst anonymous sources in the New Vine Logistics (NVL) meltdown and acquisition of assets by Inertia Beverage Group (IBG), a very important point has been missed – this combination of technology and logistics infrastructure can be very good for the wine industry.


And, admittedly, I missed the bigger picture on this one.  In previous commentary about IBG and NVL I missed wide right in my field goal attempt at postulating their acquisition motives.

The net summary is I suggested that IBG’s interest in NVL was potentially a direct correlation to NVL’s compliance software and nascent relationship with  While that may still hold true, I missed a larger strategic component. The completed acquisition now points to a vertically integrated solution for the wine industry that combines direct-to-consumer and direct-to-trade software and shipping logistics.  Compliance?  Yeah, they can do that to.

This is a very good thing.

I recently had the chance to meet Ted Jansen, CEO for Inertia, and catch-up with former colleague Mitch Schwartz, VP of Sales, and I received some additional clarifying answers to questions by email.

I found Jansen to be a thoughtful, amiable (albeit reserved) businessman with a sharp intellect.  It’s important to note the tangential aspect of my interaction because I believe it plays to a deeper core of some of the issues that have bubbled up around the handling of the NVL saga by IBG.

Coming from outside of the wine industry and having navigated the perilous waters of the incredibly competitive travel business, Jansen strikes me as very similar to many other leading executives in other industries – he’s strategic, has a vision, and views business as a competitive sport; a Texas Hold’Em game whereby you don’t place sequentially larger bets against the flop unless you know that the cards your holding can win the pot.


Texas Hold’Em is a game of strategy.  Unfortunately, while good business, this flies counter to the very parochial, collegial and transparent aspects of much of the wine business.

By way of background, I should reiterate that I am a former employee of Inertia and worked with and for Mitch Schwartz.  I remain cordial with several people at the organization (including Mitch); but, I have no particular affinity for the business outside that of curious observer for the piece of business that I directly impacted – the Direct-to-Trade program.

According to Schwartz, the Inertia Direct-to-Trade program will be available in 20 states by Mid-2010, up from the current 12.  This access to market will address over 85% of the wine consuming marketplace.

Effectively, what the Direct-to-Trade program affords is a small winery to get access to new markets – again, currently 12, growing to 20 states.  Using the Direct-to-Trade system as a technology enabler, a winery can now directly reach out to restaurants and retailers and have that trade account purchase wine legally via

With the assets from the New Vine acquisition, that order can be fulfilled directly from Inertia (or a company of the winery’s choosing) in California, or a winery could stage wine at a regional hub with an Inertia partner, either a distributor who can pick, pack and deliver or another partner like Copper Peak, who has a wine quality warehouse and partnership with MaterialLogic based in St. Louis.

What remains unclear is the distributor “virtual book” program referenced in several media outlets.  While the program itself is clear – distributors can sell wines they don’t have to stock in inventory, what is unclear is whether Inertia will make the move to customize a personalized version of for a specific distributor in a specific geography.

If that’s the case, watch out. 

While it has been a long-time coming, the acquisition of the New Vine assets crystallizes significant potential for the Direct-to-Trade program – potential that can act as a complement to the traditional three-tier system, giving access to market to wineries who were previously shut out, creating an end-to-end solution for a channel of business that desperately needs it.

My bet is that any existing hardship people have will resolve itself as the organization goes through a rebranding exercise this fall.  With a fresh coat of paint, 12 months from now, I suspect that Inertia and New Vine will be faded memories and the new entity will be providing significant value to wineries, and ultimately end consumers.


Posted in, Wine: A Business Doing Pleasure. Permalink | Comments (15) |


On 07/29, mydailywine wrote:

Great commentary on the wine business as usual.
Barry Schuler gave a keynote speech at WBC09 and he said that wine has not had its ‘internet moment’ yet.
I predict this will happen in 2010. All signs point that direction: wine wholesaler inventory restrictions and a new generation that embraces ecommerce.
Companies like IBG and VinTank will lead the way because they are ahead of the curve in terms of market knowledge and staff experience. But many more will follow. This is simply a new channel for wine sales.
Wine lovers and wine trade should pay attention.
Traditional 3 tier distribution will not disappear but much like old school wine press, there power is becoming diluted.
Cheers, Amy

On 07/30, Dylan wrote:

What interests me most from the post is the figure you mentioned: Of our 50 states, 20 represent 85% of the wine drinking market. That’s a very concentrated number and it makes me wonder, are there states where there is little-to-no wine drinking market at all, or all the percentages less concentrated as they spread equally from state to state? In other words are these 20 the cut-off for the majority and then the minority is spread out fairly equally or are there only 4 or 5 more states beyond that number which represent 100% of this market?

On 07/30, Jeff wrote:

Hi Dylan,

Thanks for the comment.  You’re right—the percentages are less concentrated as they spread from state to state.

For example, California represents a significant portion of wine consumption, as does NY, Florida and Texas.  This is based on population and volume.

My state, Indiana, may only represent 1% or less of wine consumption relative to the U.S.

So, it’s very reasonable that 20 states represents the vast majority of the wine drinking market.

It doesn’t mean that people in N. Dakota or Oklahoma don’t drink wine it just means they drink a slight percentage as a part of the overall pie.

Thanks for commenting!


On 07/30, .(JavaScript must be enabled to view this email address) wrote:

As one who would like to see the arrogant, inefficient and complacent wholesale monopoly brought into line through ending the insulation from many market forces that the 3-tier system allows them, I welcome this concept.  The Devil, however, is always in the details, and the greatest detail lies with the California wineries.

Given their history of smugness, one can’t help but fear that they are viewing this solely as a way to keep the wholesalers’ margin for themselves.  An impulse that could only be strenthened by the dire financial circumstances that much of the CA wine industry finds itself.  If that is their m.o., it is bound to fail, and the wholesalers will have locked in their undeserved monopoly for another generation.

If on the other hand, the wineries have enough foresight and strategic vision to see this as an opportunity to wring inefficiences (and wholly undeserved profit margins) out of the system, passing these along to retailers, restaurants and ultimately consumers, they will be doing a great service to the American consumer and themselves.

On 07/30, .(JavaScript must be enabled to view this email address) wrote:

I don’t think I would try to make a business of selling wines that are unable to attract representation in the marketplace by wine distributors. While there are exceptions, few wine distributors turn down business opportunities and usually are fairly abreast of what will and will not sell in their market. They do not pass up business. Most will represent a winery, not stock inventory, but take orders and with order in hand will bring in and resell that amount of wine. One thing for sure, if a winery cannot sell itself to a distributor, I can assure you its wine does not sell itself. That is a different problem than market access.

There is certainly no need for adding a new tier between the supplier and the distributor, so the hope would be to sell directly to the retailer, bypassing the distributor.  But then you bypass all the functions that a distributor fills….cheap, efficient shipping, local inventory to fill all the last minute requests and “emergencies” (that the third tier seems to have), knowing who to extend credit to and who to avoid, sampling, one on one salesmanship, consolidation of wine and spirit brands, trade tastings, personal relationships, bill collection,etc.

If there were no wine laws, there would still be three tiers because it makes the most sense.

On 07/31, Jonathan Newman wrote:

This is very well written blog and raises a lot of interesting questions regarding the state of the wine industry and direct shipping. Even though I previously ran the largest purchaser of wine and spirits in the Country, I have been a huge advocate for direct shipping from day one. This is an especially troubling time for small wineries with the impact of the trade down economy, less traffic in tasting rooms and continued wholesaler consolidation. With the failure of New Vine Logistics, the Ca. ABC ruling, and the changing landscape, many wineries are waiting until the dust settles. Other options for small wineries like Amazon have stalled for now and bricks and mortar retailers are watching their inventory levels. Small wineries certainly want to look for direct shipping opportunities, but gaining loyal wine club members and marketing what makes their winery special is crucial.  While wholesaler consolidation troubles me as a wine lover, great wines will ultimately find a way into an evolving marketplace through direct shipping, boutique distributors or other creative outlets.

On 07/31, Thomas Pellechia wrote:

Having had the jolly job once of being a wine salesman for a distributor, I have less than fond memories of retailers who my distributor boss because, “I don’t need another monthly invoice.”

Before going to work for the distributor, I owned a small winery. When trying to sell some of that wine to retailers and restaurants I used to hear quite often, “I don’t need another monthly invoice.”

Granted, there are many ‘better’ retailers than there were twenty years ago—at least in New York, where I am—but there still are the cigar-smoking, box counting, gruff types who measure wine strictly by the amount of shelf space it takes away from Yellow Tail.

What’s in Inertia’s program to address that situation?

I have this feeling that all the systems in the world won’t replace a good sales and marketing effort. I also have this feeling that the wine industry might best decide to split itself into two: leave the mass distribution to the big guys and let the small ones work directly from winery to living room.

On 07/31, Thomas Pellechia wrote:

Sorry, some words got dropped from my comment; they are:

“memories of retailers who DID NOT work with my distributor boss…”

On 07/31, Jeff wrote:

Thanks for the great comments and perspective.

Duke—Inertia doesn’t act as an interventionist, just an enabler, so the wringing of margin that is presumably in the hands of the winery can and should be used to bring some efficiencies to the retailer and subsequently the consumer.  Ideally, the retailer passes it down in the form of savings over tasting room.

Morton - you bring up very valid points across the board.  Yet, I have a hard time with the fact that all wineries who deserve representation will find it.  I just don’t think that’s the case.  You presumably live in California, the land of milk and honey.  In my state, Indiana, we have, perhaps, seven distributors servicing the state and supposedly about 5% of all wines available, available in the state.  There are dozens and dozens of superb wines that could find a ready home here if there was a distributor will to take a flyer on assisting in building shelf presence. 

Jonathan - very pleased you stop by.  Please continue to comment as see fit.

Generally speaking, its the distributor consolidation that scares the hell out of me.  While this creates the opportunity for boutique distributors to develop one wonders if there are enough small guys to capitalize and develop in the wake of money, resources and influence.  I hope so.  But, I also believe that a 2.5 tier in which a wine is legally brought into the state by a distributor but drop shipped from the winery to retailer is a very viable solution for market access.  PA not being a good example based on laws on the books.

Thomas, as always, you have the 360 degree perspective.

I understand the “don’t need an invoice” thing.  But, for smaller retailers who strive on providing selection and value to customers, I suspect Direct-to-Trade is a good solution to get wines into the state that otherwise don’t have a home.  Of course, market acceptance and sales for Direct-to-Trade is miniscule.  I think we’re several years off of a slog before mindshare builds, competition comes in and the model is validated.  But, I do think it will be validated.

Thanks again for the comments.  And thanks for stopping by my site.


On 07/31, Thomas Pellechia wrote:


That would be 180 degree perspective. 360 would have me going in circles—or is that what you meant? wink

On 07/31, Jeff wrote:

Thomas—ha.  I did mean 360 as you have a full circle of experience—distributor, retailer, winery owner and, actually, the 4th estate, too. 

Not too many people can speak to the whole value chain like you can!


On 07/31, tom merle wrote:

The discussion ought to include the direct to consumer component in IBG bag of tricks—the soon to be launched enterprise.  Chris Edwards of WTN dismissed it as something they tried and dropped in their first few years through a consolidated website and shopping cart, but as WTN failed to take advantage of actual wine tastings.  EWinerySolutions, in conjunction with NVL, had Wine Syndication which they pulled the plug on, but again there may not have been enough tasting of offerings “in the field”.

So I would propose that IBG develop a series of events to put their clients’ juice in the mouths of would-be consumers who will then drive on premise off premise interest in stocking limited production wines, as well as stimulate eCommerce sales at the site.  This is a challenge; Wine 2.0 has attempted something like this and found it unimplementable.

On 07/31, Thomas Pellechia wrote:


Now I get it.

If you think wineries have troubles, you should check out the state of the 4th estate…

In any case, I’m convinced that the wine industry’s sales outlets will be, as the saying goes, Balkanized over time. There simply aren’t enough wine consumers for the volume of wine produced and it might best suit small wineries to cultivate their home turf.

On 08/02, .(JavaScript must be enabled to view this email address) wrote:

I think there are three misconceptions surrounding Direct to Trade that I would like to address.

First, DTT is not new.  California wineries have been selling California restaurants and retailers direct for years.  So have NY wineries, Virginia wineries, Michigan wineries, etc.  What Inertia is doing is expanding this practice across state lines.

Second is a question of scale.  DTT will not replace traditional 3-tier, it should supplement it.  There are roughly 100,000 establishments in the US licensed to sell wine.  If 5% of those bought wine DTT, the program will be a huge success.  So those accounts that don’t need to differentiate themselves from the competition by the uniqueness of their offer, or are credit risks, or have an absentee owner, will not be part of the program.  DTT will be a success without them.

Third is the comment that any wine that deserves representation can find it.  Not a week goes by that some winery doesn’t contact me complaining that they have an account(s) in a given state that want to buy their wine, but can’t get a distributor to return their call, let alone carry their wine. 

Bottom line, DTT has a future.  We jsut haven’t determined how bright that future will be.

On 05/07, TN Pas Cher wrote:

ry doesn’t contact me complaining that they have an account(s) in a given state that want to buy t


View More Archives