Naked Wines: Changing the Game for Wine Drinkers – and Winemakers
“Wine can of their wits the wise beguile, Make the sage frolic, and the serious smile,” from The Odyssey, by Homer.
How do you disrupt a business whose product is 9,000-plus years old and is based on a cycle as simple as cultivate, commercialize, and quaff?
That was the challenge for Rowan Gormley, a serial entrepreneur who has founded, among other businesses, Virgin Wines. Gormley wanted to offer consumers high-quality wines at a more palatable price point, and to enable winemakers to make unique wines.
So he blended the “pitch your product” competition of Shark Tank, principles from crowdfunding and angel investing, the ease (and steady income) of the subscription model, the enthusiasm of tens of thousands of wine aficionados, and the expertise of wine producers eager to be entrepreneurial and experimental. The result: Naked Wines, an online wine retailer that’s as distinctive as the wines sold on its site.
Unlike online wine clubs, most of which sell wines that are readily available elsewhere, sometimes through affiliations that are loosely related at best (think media properties, for example), Naked’s wines are proprietary. Many of their winemakers have “day jobs” at well-known vineyards, making wines for labels that are household names.
Even more distinctive than the wines, though, is Naked’s business model. It funds winemakers by collecting money each month (currently $40) from customers — AKA “Angels” — which goes into the Angels’ Naked Wines accounts, to be spent on wine. While Naked Wines has a robust marketing machine that includes its ubiquitous $100 discount offers, prospective Angels usually have to wait about a month before they get their wings (if not their wine). The wait creates a “fear of missing out” and a sense of exclusivity – and allows would-be Angels to start building up their accounts.
It’s clear what’s in it for the Angels. What about the winemakers? For them, it’s a relatively easy way into a business that can have high barriers to entry, including costs, risk, and in Gormley’s words, a market that is “managed.” In an interview with The Financial Times, he claimed, “Inventories are artificially constrained to force prices higher. Nobody really knows how much wine is being made, sold or drunk.”
Gormley set out to create a “virtuous circle”: where “everybody gets more for less”: customers get more value, and winemakers get more freedom. Naked’s process is fairly simple: A winemaker pitches a wine idea, aiming to distinguish their offerings with such factors as terroir, aging techniques, and nontraditional grape combinations. If the proposed wine tickles the fancy of Naked’s staff, the winemakers are paid an “advance,” funded with Angel money. After the wine is made, Naked buys the entire inventory, and handles marketing and distribution.
In addition to removing the business-side hassle, Naked allows winemakers to craft the “wines of their dreams” and build their own personal brands. The wine industry is dominated by a handful of conglomerates, such as Gallo and Constellation. Observes New York Times wine columnist Eric Asimov wrote, “Generally speaking, mass-produced wines are often another category, tailored to fit a preconceived notion in which flavor, texture and color have been carefully tested for popular appeal.”
Gormley was looking for wines of a completely different sort, and with a different approach: “Instead of screwing our suppliers we decided to support them financially so they could focus on making their wines delicious.”
For winemakers who helped put other names on the map, the chance to see their own name on a bottle of wine is a huge incentive. Ana Diogo-Draper, director of winemaking at Napa winery Artesa, makes varietals for Naked Wines that have her name on them. Richard Bruno, another Naked-funder winemaker, is a two-decade veteran of California’s wine business, having worked for Francis Ford Coppola Winery and Don Sebastiani. And former Angel Tom Shula, who started making wine in his garage as a hobby, has produced several wines for the site that have received “90” ratings from customers (meaning that 90% of customers would buy the wine again).
Winemakers also have the opportunity to get feedback from people who have tasted their wine. Ideally, Angels participate by doing more than merely adding money to their accounts (and then spending it). They’re encouraged to rate and comment on every bottle, to help both Naked Wines with their recommendations and the winemakers in choosing what to produce.
Indeed, community just might be the true secret ingredient in Naked Wines’ success. Angels feel they’re getting access not just to wines, but also to the winemakers themselves, who generally respond to every comment. Angels can also communicate with each other, sharing tasting notes and recommendations. With more than 6 million reviews of wines on its site, Naked Wines has a robust, personalized recommendation function, not just pointing Angels toward wines that they would probably like, but steering them clear of ones they probably wouldn’t.
Though Naked Wines was bought in 2015 by UK wine retailer Majestic (which sells both online and in brick and mortar shops), Naked Wines still functions very much as it always did. As Gormley, who became CEO of Majestic after the acquisition, assured worried angels at the time, “The magic ain’t going anywhere.”
Here’s a look at three other companies that found a way to disrupt traditional businesses in uncommon ways:
Surf Air is a membership-only airline that modeled its all-you-can-fly-for-a-monthly-fee model on Netflix. (Surf now offers other tiers of membership as well as the one on which it founded its model.) Servicing cities in California and Nevada, the company will fly any scheduled flight with even one passenger. By flying planes that carry only nine passengers, Surf Air can eliminate security screening and a lengthy check-in process.
Flying in and out of small, largely underutilized regional airports means passengers waste almost no time on the ground, and passengers get the feel of flying private. But to CEO Jeff Potter, membership is what makes Surf Air special. “Membership gives people something in common from the very start,” he says. “It makes people more invested in your product or service.”
KING PRICE INSURANCE
King Price Insurance, headquartered in Pretoria, South Africa, has a novel policy pricing approach for car insurance: Premiums decrease monthly, as the value of the vehicle depreciates. Says founder Gideon Galloway, “We just think it makes sense to pay less every month to insure what is worth less every month.”
By taking in more data than traditional insurance policies, the company can afford the decreasing premium model. Founded in 2012, the company is valued at approximately $200 million, and estimates it has saved clients close to $7.5 million dollars in premiums. King Price has won numerous awards for both its innovation model and its customer experience.
Garçon Wines, launched in 2017, is hoping to change home delivery of wine in the UK with its flat, flask-life plastic bottles, which fit in boxes that in turn are narrow enough to slip through the letter slots (AKA “letterboxes” that are found in the vast majority of residences in the UK. The bottles, which the company says are made from 100% post-consumer recycled plastic, contain the same amount of wine that traditional wine bottles too.
Garçon Wines hopes that the convenience of being able to mail wine will increase people sending wine as gifts. Naked Wines had partnered with Garçon as a way to “offer our customers a new way to…introduce their friends to Naked with a bottle direct to their doormat,” according to Naked Wines UK Chief Operating Officer, Laura Rosenberger.