I remember a time in my newspaper career when Craig's List was first introduced. We all scoffed at the notion that one day it would replace newspaper's classifieds. Well, it did. And I get that same feeling when wine producers scoff at Mark Tarlov's concept of eliminating the middle men and selling directly to consumers at greatly reduced prices.
Direct-to-consumer businesses are growing in popularity in the wine industry and, although not yet a huge force, they represent a threat to retailers and wholesalers.
Tarlov -- a successful movie producer who turned to wine for fun -- introduced Alit to show to consumers how much they are paying for delivery services to their store. On his website he is very honest about where the money goes for a $27.45 bottle of his Oregon pinot noir:
Farming and fruit $5.66
Five employees $2.14
Winery and equipment $3.31
French oak barrels $1.11
45% gross profit margin: $12.35
Price to consumers $27.45
Now, his pinot noir is still more expensive than what most people are willing to pay for a bottle of wine. However, Tarlov argues that he is trying to be responsible with farming and winemaking, so his costs may be higher. But, he is revealing to consumers how much he is paying for farming and how much he is profiting from a single bottle ($12.35). Nothing like honesty to make me a believer.
If the retailer and wholesaler were added to this expensive sheet, that same wine would sell for $50 or more.
He is currently selling only pinot noir and sparkling wine through his web site, www.alitwines.com.