Cellarmasters Business Model

What was the Cellarmasters business model?

Cellarmasters was one of the first or earliest wine club models. It was the first to do the direct-to-consumer thing. I remember, you used to get a catalogue and you purchased from the catalogue. Cellarmasters used to send out millions of catalogues a year. It was all targeted letters, catalogues and so on. In 1997, I think it was selling a million cases of wine a year, through that model; it was a pretty amazing business. It started in the mid-80s and it had lived off partnerships with banks and things like that, and by creating wine clubs. You had the Qantas Wine Club, the Westpac Wine Club and so on.

Were they just buying directly from wine makers and branding it themselves? It wasn’t integrated with the wine makers, like Naked would be?

No, it wasn’t at all. They did vertically integrate, though. I had a second stint at Cellarmasters and Cellarmasters ended up getting purchased by Foster’s. This was at a time when Foster’s were saying, we know we are selling beer into a whole bunch of venues around the country. When our salespeople go into that venue, we want to broaden out our product range. So what we’ve decided to do is to buy a whole bunch of wine companies and we’ll become a beer and wine company. It didn’t work very well for Foster’s and they ended up breaking up the wine side of that eventually, but that was more to do with some bad decisions as opposed to their strategy not working.

Basically, Cellarmasters was going out and getting fruit and wine from wine makers. They would make their own label and sell it. Nobody really knew they were making their own labels. This is now really common, but I think Cellarmasters led the way of sourcing the fruit, make the wine, turn it into a label and sell it to people as amazing wine. It was amazing wine but it wasn’t always independent brands. I think, in the end, something like 67% of the wines it sold were wines that it actually made and just labelled as something else.

You started in Sydney and then you moved to Europe, in the wine business?

Yes. As I said, Foster’s were going on this mad, wine-purchasing concept. They asked me to move to London where they had just purchased a company called the Australian Wine Club, which also ran the Telegraph Wine Club, in London. I moved to London, in 2001, to take up a role there. I stayed with Foster’s, in London, for two years and then they asked me to move to Switzerland. What had been happening is that Foster’s had been buying up wine companies. When I say wine companies, I don’t mean wineries, but wine companies that were selling wine. In Switzerland, we had an opportunity to prove to them that you could actually organically start one, rather than purchase it. They were buying companies that just weren’t that great, to be honest. They had this big portfolio of companies that were really struggling. I was young and was convinced that we could just start one organically.

We decided to base ourselves in Switzerland and serve Germany, Austria and Switzerland. I went from London to Switzerland and, once I got to Switzerland, I was in more of an entrepreneurial role, for Foster’s, but without any of the personal risk; it was Foster’s money.