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From: Glenn Petersen9/19/2017 10:11:44 AM
   of 162898
 
Booze delivery businesses were Amazon-proof — but now they're bracing for the Whole Foods factor
  • At the end of August, Amazon quietly expanded the cities included in the alcohol delivery service through Prime Now, one of its subscriber services that mainly delivers groceries.
  • It's one of many new perks that make it easier to imbibe if you subscribe to the e-commerce membership.
  • The rise of Amazon Prime booze is another shoe that's yet to drop for the start-ups that compete with Amazon.
Anita Balakrishnan | @MsABalakrishnan
Published 9:44 AM ET Sun, 17 Sept 2017 | Updated 15 Hours Ago CNBC.com

Alcohol has been mostly out of grasp for Amazon — until recently. Even with a network as vast and complex as Amazon, the logistics of shipping booze is somewhat nightmarish.

Intoxicating liquor can't be mailed in the U.S., and services like FedEx have strict requirements for delivery. Then there are individual state mandates on both shipping and retailing, not to mention the need to check the ID of every purchaser.

But at the end of August, Amazon quietly expanded the cities included in the alcohol delivery service through Prime Now, one of its subscriber services that mainly delivers groceries.



Great Lakes Brewing Company in Cleveland, Ohio.
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Columbus, Ohio got the service in March, but resident Sourabh Ratnaparkhi said it's been mostly under the radar.

"I'm a casual drinker that likes to keep a six-pack in the fridge at all times, and I also like to try a ton of new beers which I think this service will help give me more options," Ratnaparkhi said. "I think it's great for the city of Columbus because the brewery scene is booming and something a lot of people here are proud about, so this helps the breweries reach a wider customer base."

It's one of many new perks that make it easier to imbibe if you subscribe to the e-commerce membership. Voice-activated assistant Alexa, for instance, can now be used to order alcohol in some areas. And MillerCoors created an Amazon Dash button this year — a physical button that triggers an Amazon beer run when pressed.

And Amazon's acquisition of natural grocer Whole Foods gives it physical locations that could help it realize its "strong interest in home delivery of beer," MillerCoors wrote in a blog post about the merger. It could, for instance, allow consumers to "click and collect" their beer at a local Whole Foods.

"Beer is very different from other consumer categories that have been disrupted by Amazon. But there's little doubt that the industry will feel the impact of the largest online retailer expanding into grocery," the beer giant wrote.

The rise of Amazon Prime booze is yet another shoe that's yet to drop for the start-ups that compete with Amazon — like Blue Apron, which ships exclusive wines, or Postmates, which just started rolling out its alcohol courier services this year.

One such start-up, Thirstie, added mail-order services to its on-demand liquor delivery service last year, in order to appeal to consumers searching for hard-to-find varieties. Many brands that offer online delivery, like Dom Perignon, actually use a white-label version of Thirstie.

"They are clearly a massive giant, they can get into any market. There are some very real challenges," said co-founder and CEO Devaraj Southworth. He added: "We've seen companies that have raised millions of dollars to do this, many of those companies no longer in existence."

Jerald O'Kennard, director of Tastings.com, said he's consulted with wineries that currently list on Amazon. He suspects that there will be few, if any, brands that turn down the chance to get the exposure of an Amazon listing, given how hard it's been to get national exposure online in the past.

"The joke in the industry is the only person that made money on Wine.com is the person who sold the URL," O'Kennard said. "It's a thing, it's just a tricky thing. It's a nightmare to organize that. Adult beverages have a lot more strings attached. Taking the approach of shipping to your retail network, really is kind of a brilliant coup on Amazon's part..... It probably underreported the impact it will have on the industry. "

The industry has lingo for the holy grail of liquor delivery — the "three-tier system" of distributors, retailers, and producers that's considered the only way to fairly abide by the laws.

That's something Amazon CEO Jeff Bezos now stands to disrupt, said Duane Stanford, executive editor at Beverage Digest.

"The three-tier alcohol distribution system is a complicated web of state-by-state laws that make it tough to scale online delivery," Stanford said. "If anyone can apply pressure and creativity to the problem, however, it's Amazon, and Whole Foods gives Bezos yet another paint brush."

Southworth said he thinks that greater variety, whether it's through local shops or Thirstie, stands to separate Amazon and Whole Foods from other options. Thirstie works through local shops to do the deliveries and has an algorithm that only shows consumers in each city in state the options that are legally available.

"This has been a mystery for decades," Southworth said. "It's something that we've spent a lot of time to get right."

Great Lakes Brewing Co. is one Ohio brand that's participated in Amazon's PrimeNow push, and said it's been an exciting way to reach its fans. But it's still unclear how the future will unfold as more liquor sales go online, the company said.

"This is still very new territory for us," a company spokesperson said in a statement. "Because of the three-tier system, we (the suppliers) provide beer to our distributors who then work with the retailers to get our beer on the shelf. In this case, Whole Foods (a retailer) is now working with both distributors and Amazon to coordinate online beer sales. Since we're not directly involved with this step, it's a bit hard for us to give any real insight as to how it's going."

But with winter approaching in Ohio, Ratnaparkhi might sooner give in to the temptation of Amazon.

"Winters here are brutal, so if I know the Amazon service is readily available, I think it provides way more convenience than physically going to pick up the beer," Ratnaparkhi said. "Amazon is really about to run the world for millennials."

cnbc.com
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