Digital Wine Ventures (ASX: DW8) has declared that it has moved into a “very profitable market segment” after its WineDepot brand signed Vodka Plus as its first craft spirit customer.
The move could be a watershed moment for the Australian market with possible other craft spirit producers looking to also establish online distribution agreements in order to reach more customers.
The agreement is for Digital Wine’s cloud-based technology platform, WineDepot, to stock Vodka Plus products and leverage online connectivity to deliver craft spirits to Australian customers nationwide. According to the terms of the deal, the minimum term will be three months with an automatic renewal on a rolling three-month period unless terminated by either party.
Digital Wine Ventures first launched WineDepot in August this year via a partnership with Australia Post, describing the venture as a “vertically integrated trading and logistics platform that caters for producers, distributors, importers and retailers”.
The platform uses four major distribution centres in Australia and allows orders to be fulfilled from large inventories thereby reducing delivery times, freight costs and offering a wider variety of purchasing options.
Digital Wines also intends to roll out its WineDepot business model to other markets that demand Australian wine and spirits, namely, China, the US, the UK, Canada, Hong Kong, Singapore and New Zealand.
“While our platform has been built with wine in mind, we’ve discovered that it works equally well for craft spirits, beers and ciders,” said Digital Wines founder and chief executive officer Dean Taylor.
Venturing into spirits
The segway into spirits is expected to supplement the distributor’s existing focus on wine and could potentially lead to a growth in revenues.
With the announcement made this morning, Digital Wines said it would be offering the full Vodka Plus range of vodka, soda mixers and “ready to drink espresso martini blend” in time for the high-demand festive season.
“WineDepot provides the opportunity for new and emerging brands like Vodka Plus to connect with and deliver to their customers in a fast and cost-effective manner. Previously many of their customers had to wait up to two-weeks for deliveries, which just doesn’t cut it in 2019,” said Mr Taylor.
In a market statement, WineDepot said that the agreement proves that its online-focused business model is scalable into other verticals.
So far, several high-profile customers including wineries and distributors have started using WineDepot’s integrated logistics, trading and order management platform including Josef Chromy, Primo Estate, Hutton Vale Farm and Golding Wines.
By signing its first craft spirits supplier, the hope is that Digital Wines can leverage WineDepot into reaching more customers while streamlining the delivery process.
“We’re excited to partner with a forward-thinking tech company that’s helping craft spirits producers like ourselves to build and grow the direct-to-consumer market in Australia. We’re all about challenging the norms and looking for new and innovative ways of thinking,” said Vodka Plus co-founder Marko Pavasovic.
“WineDepot will enable us to reach a wider customer base while retaining greater profit margins than through other distribution channels,” he said.
Today’s deal also means that Vodka Plus has appointed Digital Wines and WineDepot to manage its national distribution and has propelled the company into the spirits market with an addressable market value of around $5.3 billion per year.
According to the spirits company, it stocks a range of award-winning iconic Australian-made vodka that’s been distilled with South Australian grapes, Tasmanian rainwater and added Australian botanicals. Moreover, the company also wants to court health-conscious spirits connoisseurs by providing gluten-free, sugar-free and lactose-free “vegan vodka” with no chemical additives.
“This opens up a whole new market for us that is rapidly growing and not currently catered for. It increases the potential addressable market of our platform immensely and we expect that many more craft spirit producers like Vodka Plus will follow their lead,” said Mr Taylor.