Can the Digital World Change the Wine and Spirits Industry?
Every day it seems a new tech startup emerges to tap the keg of the spirits industry, especially on the consumer delivery side. The team at New York’s SevenFifty took on a different approach, however, trying to fix inefficiencies in the alcohol distribution cycle.
A recent funding round is giving SevenFifty fuel to grow. The question is whether the startup can rise at a time when blending beverages with technology is getting frothy like a beer with too much head. Early this month, SevenFifty raised $8.5 million in a Series A round led by Formation8, with other investors such as Pritzker Group VC participating.
SevenFifty developed a platform to streamline wholesale wine and spirits sales. “We saw that there were huge gaps in the way that information was being communicated across the three-tier system,” says CEO and co-founder Aaron Sherman.
In the U.S., alcohol is sold through a three-part system made up of producers of the beverages, distributors, and the retailers and servers who get the drinks in consumers’ hands. Sherman says there was a lack of a solid data backbone for the three-tier system, which made it difficult to find information about products.
The system was created after the repeal of Prohibition in this country, forcing the supply chain to make certain products available locally only through particular distributors. “If you want to buy anything, you first have to figure out who sells it, and that information didn’t exist anywhere,” says Neal Parikh, SevenFifty’s CTO and co-founder.
Figuring out what products are available, who distributes them, and what the prices are cannot be found through mere Web searches, he says. That leads to chasing information through sales reps and other contacts.
Making things even more complicated is the fact that how distributors operate can vary by locale, Sherman says. “Having experience in one market does not mean you’re going to have any sense of how to buy when you are in a new place,” he says.
Restaurants, retailers, and bars can use SevenFifty’s platform to find local distributors and look up data and details about the products they want to purchase. For distributors, the platform lets them track sampling activity and gives potential buyers a way to peruse their portfolios of products.
There is no question that wine and spirits continue to see significant demand in the U.S. A quote often attributed to Benjamin Franklin proclaims, “Wine makes daily living easier, less hurried, with fewer tensions and more tolerance.”
It is fair to say, however, that startups are in a hurry to make money via booze. On Tuesday, goBeer, an on-demand beer delivery service from Philadelphia-based startup goPuff, expanded its reach into New York. There are also other apps such as Thirstie for ordering drinks for home delivery, apps such as HouseTab to make mobile payments for drinks at bars (even for friends who are across town at other bars), and robots such as Somabar that can mix cocktails with a few commands from a smartphone app.
Sherman says this market has changed rapidly, even as SevenFifty was in development. “When we first launched, there really was not another technology company that was looking at alcohol,” he says.
Though the spirits and wine scene now has no shortage of technology eager to shake things up, SevenFifty has stayed away from the consumer-facing part of the industry. The startup works with more than 700 distributors across 30 states, which Sherman says represents about 60 percent of the market, and some 30,000 buyers use the platform. “We’re really the only company focused on this distribution tier as the central point of where our relationships lie,” he says.
Sherman and co-founder Gianfranco Verga knew each other in college, and worked as bartenders, sommeliers, and consultants to the wine and spirits industry. Parikh was a quantitative analyst working on Wall Street. Together they launched SevenFifty in 2012.
As it grows, SevenFifty might look for ways to work with other startups that are more on the consumer side of the industry, Sherman says. “We have the capacity to help power and partner with these companies,” he says, whether they are in on-demand delivery, e-commerce, or point-of-sale systems at stores or restaurants. “There is a larger opportunity to streamline things without causing negative disruptions.”