Business Model
Problem:
There are 2500+ wineries in Aus and over 2000 distributors making it highly fragmented and extremely erosive on supplier’s margins. Distributors margin = 35% + marketing support. Retailers margin = 35 – 45% margin + marketing support
There is no one technology that everyone uses.
Supply change hasn’t changed in 30+ years. It’s incapable of serving fasting growing markets – direct to consumer and online markets. Modern consumer expects delivery in 2 days and in Aus this is next to impossible.
Solution:
Technology that connects the industry; the goal being that everyone in the industry has some contact with it. Use that connection to unlock the value and improve delivery time and reduce human resources in the supply chain.
Platform – 3 key components:
Each can function alone but are all vertically integrated.
Order management system – SaaS. Cloud-based application that connects the various stakeholders within the industry allowing users to consolidate and manage orders generated across all their sales channels - websites, cellar doors, retail channels, wholesale channels, export channels. This is done all in one place giving a holistic view of their inventory holdings regardless of whether they are in their warehouses, 3rd party warehouses or on a ship to China.
These are integrated with key technologies used within the industry including ecommerce solutions but also specialised software used by wineries to manage their cellar doors and production.
Logistics solution – the only way to solve delivery within 2 days was to actually hold inventory locally and being able to pick and pack and deliver from those locations. Digital Wine Ventures have a network of depots around the country where they hold inventory on consignment on behalf of their customers. As orders come through they get routed to the nearest depot, pick, packed and delivered.
The best part is they employ 4PL meaning they don’t operate the warehouses – they use 3rd party warehouses. They use DW8 technology, systems and processes and customers have no idea that they are using a range of different suppliers for this. It becomes a simple singular experience and very simple for them to use.
This has been accomplished through a partnership with Australia Post providing access to 57,000 sqm of storage and >100 warehouse staff on a variable cost base, scaling up and down as required. The benefits are reduced capital expenditure and execution risk.
Their orders flow directly into APs fulfillment system – allowing same and next day delivery in Adelaide, Brisbane, Sydney, Melbourne and Perth. There is no other business in Australia that can do this in the amount of markets they can, some can do it in Sydney and Melbourne but they are the only ones who can do it nationally.
AP was deemed an essential service, so they’ve been able to maintain all of their operations.
B2B marketplace – goes live later this year and is what this business is all about. Marketplace allows suppliers to sell directly to thousands of trade buyers, providing a low-cost route to access and service the wholesale market without a distributor.
This helps suppliers
•Build brand awareness
•Generate incremental sales
•Provide customers an order portal
•Reduce paperwork and administration
Current wholesale wine market has ~$2.2B of trade that goes through the market every year – going through distributors who typically take 35%. This is an enormous amount of lost profit. Digital Wine Ventures is cutting out middleman and enabling a higher margin for suppliers all while allowing suppliers to maintain direct relationships with buyers. Originally, they wouldn’t be aware of who’s stocking their product. This will generate incremental sales and reduces administration cost for them.
Revenue Model – 3 Core Revenue Streams
Platform fees: SaaS subscriptions, support, and data. They have currently waived these fees to increase their customer base as well as offer support in these difficult times to wineries. They will increase those fees over time which will become substantial recurring revenue.
Trading fees: charge a % of overall transaction. From B2B marketplace (later this year) – Dean Taylor compared it to what online share trading did for broking industry – creating an online platform that allows efficient trade of product without layers of middlemen.
Fulfillment fees: storage, freight, surcharges.
Annual release pattern of the wine industry provides them access to recurring revenue. Over time they expect trading fees on their B2B Marketplace to become their largest and most profitable revenue stream. This is now their primary focus.
For a list of their fees: https://winedepot.com/rate-card/
Addressable market (Australia)
SaaS Income
Wineries – 2,500+
Distributors – 2,000+
Licenced venues – 60,000+
Trading Income:
Wholesale wine market - $2.2B pa DW8 believe they will grow this by providing easy ramp for wineries
Fulfillment Income
Wholesale – 70M cases pa
Direct-to-consumer – 12M cases pa
Online retailers – 10M cases pa
Global wine market is expected to reach USD 423.6B by 2023
Once proven in Australia, Winedepot plans to progressively expand its unique trading and fulfillment model into other key wine markets.
China is Australia’s largest wine export market at $1.2B pa
Digital Wine Ventures has established the corporate, legal, financial and IT structures required to operate their trading and distribution platform in mainland China, already having a small office in Shanghai.
Partnerships with Australia Post provides access to 15 distribution centres in China servicing Tier 1 and 2 cities, which could be used to expand their depot network.
They are also providing fulfillment for olive oil and vinegar for existing customers.
Key Strengths
Green field “tech” opportunity
Recurring revenue streams
No inventory risk (none of the product is under their ownership)
4PL logistics model – meaning they’re not investing in any of that “old world” infrastructure
Totally agnostic – they don’t work with any wine partners meaning they can work with Coles, Woolies, Metcash inclusively.
Highly experienced team
