The 40 percent annual revenue growth for Naked Wines last year and a recent $103 million purchase deal from a major United Kingdom-based wine retailer highlight the success so far for the 6-year-old venture that blends angel-style investment with a wine club.
“It’s not so much the relationship between us and the consumer but between the winemaker and consumer,” said Benoit Vialle, 43, chief operating officer of Naked Wines and a “Route to Market” panelist at the Business Journal’s Wine Industry Conference on April 24. “A fundamental piece of our business is to build those relationships.”
On April 10, Majestic Wine announced a £70 million deal to acquire Naked Wines, which was started in the U.K. in 2008 by Rowan Gormley. He will become CEO of Majestic, and the two companies will continue to operate independently.
Naked Wines last year had $100 million in revenue, with $30 million of it coming from the U.S. from sales of about 400,000 cases. Its business model calls for consumer-investors, called “angels,” subscribing to a project by one of the 130 company-vetted winemakers on most every continent. There are about 300,000 angels worldwide, with one-third of them in the U.S.
Loyalty and trust between consumer and winemaker are fundamental for the company because the angels are prepaying for their wine, Vialle said.
“At any point, they can take their money back — the money is not committed,” he said. “We make sure winemakers are worth contributing for. Without trust, people can just buy wine from a website.”
Vialle talked with the Journal about how bridging winemakers’ quest for capital and consumers’ thirst for involvement in all aspects of the winemaking process builds brand loyalty and how the latest mobile and social-media technology is helping to strengthen those connections.
What are the major challenges producers have in getting wine to market?: Our winemakers still have their own personal projects. The challenges our winemakers have is financing their wines — It’s capital intensive — and support from the beginning of the project. We provide value on the sales and marketing side.
Winemakers can try to sell direct, but it’s hard to reach a large number consumers and distribution costs are much higher without scale, so it is hard to make money. If they work at scale, they have to rely on third-party distributors, so margins are much lower. What they’re not paying to UPS and FedEx, they are paying to distributors.
We combine the two parameters — meet consumer and order fulfillment — so they can focus on the winemaking and the artisinal aspects. The consumer wins, as well, because the wine is built in a nonindustrial fashion.
Here’s the key component of why our company is making a difference. On the winemaking side, we can build a social network around the wine, so there is the peer-to-peer interactions. We have some “superconsumers” and “superangels” who know a lot about wine and are helping less-knowledgeable consumers.
Often, our audience is coming into our website for the first time. Peers, “archangels” and winemakers respond to comments. We offer a money-back guarantee, so consumers can try new wines. The idea is to move as far away from the traditional retail model as possible and build long-lasting relationships with them.
That was key reason for Majestic to buy us. What they don’t have is taking the customer along on a journey and building a relationship with a consumer.