Will Gallo’s New Amazon-exclusive Wine Fail?

It came without press coverage… It came without ads… It came without catering to millennials with fads.

Unlike the considerable amount of media attention King Estate Winery was able to achieve by the clever wordsmithery in their June press release, presenting their new NEXT line as “the first wine ever developed from conception to release with Amazon Wine,” the only announcement of E.&J. Gallo Winery’s new Proverb wines came by way of a single email from Amazon Wine (pictured) on Tuesday, August 29, 2017 at ~3:30pm PDT.

Clicking through to amazon.com/wine reveals significant promotional support for the wines, which appear to be exclusively sold on Amazon.com instead of through EJG’s e-commerce web site (thebarrelroom.com) or carried by any of its off-premise retail accounts.

And therein lies the reason this is big news.

Could this be the signal the alcohol beverage industry has been waiting for — the world’s largest wine company launching an exclusive product with one of the world’s largest e-tailers?

Whether or not this signal marks the beginning of significant capital investment and hockey stick growth for the DTC segment (currently ~5% of the $41B U.S. wine market), you can be sure other large producers in the industry will fast-follow, now that EJG has made this significant foray into DTC wine sales and online commerce.

DTC and e-comm aside, here are a few other interesting points:

  1. EJG chose a third-party e-tailer instead of its own online shop for this DTC effort. Smart move, as it significantly reduces customer acquisition and infrastructure/software costs.
  2. There is no Proverb web site or any social media accounts, which is uncharacteristic of EJG. This may indicate the DTC/e-Comm-focused launch of Proverb project is led by Sales rather than Marketing (or, maybe EJG’s fast-growing digital team).
  3. There are only a few hundred cases of Proverb wines available for purchase. (They’ll be more on this allocation number a bit later in this article.)

To be fair, EJG has product listings from its other brands on amazon.com/wine, which have been on the site for several months. Most notably, their massive Apothic brand, where one could assume they’re testing consumers’ brand affinity and loyalty to see if people would rather have Apothic Red shipped directly to their homes instead of picking it up at their local supermarket.

However, while there is the obvious benefit of increased margin on wines sold direct to consumer, the Apothic wines are not priced competitively enough to impact off-premise sales.

But, Proverb is different.

True to form, EJG’s branding and messaging for Proverb is strong. The positioning is also expertly calculated, albeit the most competitive, with six different wines (3 whites, 3 reds) made from the most popular varieties (Chard, Sauv Blanc, Pinot Grigio, Cab Sauv, Merlot & Pinot Noir) and all priced at $12.75/bottle.

And there you go.

The wines are priced right smack dab in the middle of the $10-$15/bottle price range. Pardon the pun, but this is the proverbial “sweet spot” for the amount (per 750mL bottle) most U.S. wine consumers are willing to spend on wine.

Side note: While EJG has its own consumer research division, this pricing insight is also backed up by Hello Vino data collected from an unprecedented sample of nearly 340,000 U.S. wine drinkers.

So, how are sales going?

It’s been a week since Amazon sent an email announcement to its wine customer base (or a select cohort, anyway) to promote the launch of Proverb wines. The large promotional banner shown to everybody who visits amazon.com/wine has also been live for the past week.

Before I jump into numbers, I will admit the following is a sort of backdoor hack to try to gauge sales of Proverb wines on Amazon. This assumes no additional bottles were allocated over the past week, which is typical until inventory levels get much lower than those shown here. Multiple ship-to states were also tested, which revealed no variability in inventory levels across the U.S.

Of the six varietals, there were a total 2,304 bottles available for purchase at 12pm PDT on Wednesday 8/30/17. As of 12am PDT on Tuesday 9/5/17 (six days later, including the Labor Day holiday weekend), there are 2,261 bottles available for purchase.

In other words, there are 3.5 fewer cases available for purchase.

Again, these numbers are estimates based on Proverb wine inventory levels revealed by the Amazon shopping cart.

Comparison of Proverb wine inventory levels on amazon.com/wine

How can they improve online sales of wine?

The Proverb product launch seems to have taken a “Web 1.0” approach to online marketing and sales:

  1. A broadcast email listing all the wines with nothing more than a bottle shot and varietal name.
  2. A large home page banner linking to a landing page with all the wines.
  3. Some brand-focused wine lifestyle quotes (Get it? They’re proverbs.) attached to each wine.

The missing link: Personalization.

Personalization is hard. But, it can be pulled off with this unique combination:

  1. The mechanism to collect enough data on a wine consumer’s buying habits (beyond just their online purchases).
  2. The algorithm to decipher the data to create an individual wine consumer buying profile (wine is different than any other CPG product).
  3. The communication and conversion vehicle through which the wine consumer will receive the personalized message and complete the purchase.

Oh wait, that already exists:

Hello Vino does for wine retailers and wine producers what Amazon’s app does for Amazon and its suppliers: It stores the consumer’s preferences and provides personalized answers to wine questions based on data that provides a picture of the buyer.” — Thomas Pellechia on Forbes.com
Personalization features in Hello Vino “Vintage 5.0” app re-launch.

But, back to the subject at hand.

Will Proverb fail to live up to the category-leading standard set by other virtual EJG brands such as Apothic, Carnivor or Dark Horse? Or, will the brand be a huge success, inspiring a wave of online-only brands by the largest wine producers in order to foster DTC growth?

Or maybe this is just an experiment by EJG?

One thing is certain: Online is not offline, and the same traditional sales and marketing methods used to dominate a category won’t be enough in the digital age.

Update [September 5, 2017 5:40pm PDT]: I received the following clarification via email from a Senior Director of Public Relations from E. & J. Gallo Winery: “I did want to clarify one point. Proverb is currently launching nationally through our distributor network, and will be available in select channels nationwide.”

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