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Internet wine firm prospers

Started by ex-Medford man

PORTLAND -- Like a grape ripening in the sun, Evineyard's ambitions are rounding into condition.

The little Internet startup company has installed a new chief executive officer, nailed down $2 million in initial investments and talks freely about becoming a $200 million-a-year company within three years.

We will become the wine retailer in the United States, said CEO Larry Gerhard. What do you call that? Our big, hairy, audacious goal.

A primary executor of the goal will be the 58-year-old Gerhard, who last week announced that he would leave Beaverton's Summit Design Inc., a publicly held engineering software company, to become CEO of Evineyard.

Gerhard, who owns a 14-acre vineyard, said he wanted his last venture in the corporate world to be in the Internet commerce sector. And since he loves to drink it and grows grapes to make it, wine was a natural.

Gerhard has joined a young company launched last year by Mike Osborn, for whom it's been a consuming hobby.

Osborn grew up in Medford and attended Medford schools. His father, Jim, who also works for the company, was formerly the general manager of the Mail Tribune.

Mike Osborn's other business card lists him as vice president of sales at CTR Business Systems, an information systems consulting firm. The 30-year-old's background is in software and systems integration, but he's loved wine since before he married his wife, Debra, in Rex Hill's vineyard five years ago. He has led a wine tasting at CTR and has poured his heart into Evineyard launching a Web site -- -- that offers some 450 labels of premium wines for delivery to consumers.

Nobody owns the category, Osborn said, referring to online wine sales. Many firms aspire to sell you a bottle of Pomeroy's Old Plonk over the Net -- Virtual Vineyard, Wineshopper.com and others -- but none can claim to be the obvious leader.

It's a changing landscape, said Jeremy Benson, executive director of Free the Grapes, a nonprofit group that advocates direct shipments of wine to customers. Numerous companies want to establish themselves as online wine retailers, he said. All of them will find it to be a competitive business, he said.

Benson's group is a natural ally of companies such as Evineyard, which must thread a maze of state and federal regulations governing the sale of wine.

That regulatory landscape is the factor that poses a hardship and offers an advantage to Evineyard, Gerhard believes.

Because the United States has a confusing quilt of 50 sets of laws governing the sale of alcohol to residents, Evineyard can sell into only nine states -- including Oregon, Washington and the real prize, California -- with one more expected to permit such sales in the near future.

In business terms, the regulations tend to favor the fragmented web of wine distributors who typically deliver bottles of wine to retailers and restaurants. That works against direct sellers -- such as Evineyard -- who hope for a day when they can ship directly to a buyer in any state. But for now, the company is forming relationships with important distributors, including Columbia Distributing Co. in Portland, and is content to do business where it can.

The business opportunity for wine sellers is substantial, even in a limited geographic market. The Wine Institute says the retail value of wine sold in this country has grown steadily each year since 1993, reaching $17 billion last year. Even in the $7-a-bottle-and-higher range in which Evineyard operates, that's a large potential market.

In the quarter that ends this month, Gerhard said, Evineyard is on target to collect sales of just under $70,000. By year-end, he said, the company should have sales of $70,000 or so a month as people discover the site.

The site was known mostly to friends and family until last month, when Osborn unveiled a buy-one-bottle, get-another-free promotion and began advertising online. The company will sharply increase its marketing efforts with the new money, raised from a variety of investors, including Portland's Shaw Venture Partners.

Gerhard expects to put his skills to use as Evineyard hustles to raise another $20 million in the next few months. With that money in hand, Evineyard should be well-positioned for the expected surge in sales for holiday and end-of-the-millennium celebrations, he and Osborn said.

Former Medford resident Jim Osborn, one of Evineyard's employees and father of the company founder, packs boxes of wine for shipment in Portland. - Photo from AP