Naked Wines: A Unique Subscription Model | In Practise

Naked Wines: A Unique Subscription Model

Former CEO at Naked Wines, International

Learning outcomes

  • How Naked Wines improved the existing online wine club model
  • Why Woolworth’s purchased Cellarmasters and potential parallels with Naked
  • Story of launching Naked in Australia
  • Naked’s unique connection between wine maker and customer
  • How Naked curates the onboarding experience to drive retention
  • Core reasons for Angel churn
  • Differences in market structure and opportunity for Naked in Australia, UK and US
  • Potential risks to the Naked model
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Executive Bio

Luke Jecks

Former CEO at Naked Wines, International

Luke joined the wine industry in 1997 and spent the following 20 years building online wine businesses globally. He joined Cellarmasters, an Australian direct mail wine business, in 1997 before moving to launch Foster’s European wine club in 2001. During his time in Europe, Rowan Gormley, who was running Virgin Wines, persuaded Luke to join him at Virgin to create a new online wine model. Virgin was challenged and Luke returned to Cellarmasters in Australia and was involved in selling the business to Woolworth’s in 2008. Luke was then hired by Rowan to launch Naked in Australia in 2012 which he ran for 3 years before being promoted as the CEO of Australia and US under Rowan when Naked was part of Majestic Wine. Luke now runs SLOCACH, an online sports coaching marketplace, based in Australia. Read more

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Luke, can you share some context to when you first started working in the wine industry?

I hate to admit this because it is a long time ago, but I started in the wine industry in 1997 and it was all by chance. I had been playing a bit of rugby and living in Sydney, doing odd jobs, and somebody mentioned a company called Cellarmasters. I went and applied for a job; they asked me about wine and I told them I only ever drink beer. I must have done something right and I got a job in their call center, in 1997. Immediately, I found at Cellarmasters, the stuff that I had learned at uni and sport and so forth, appeared to really work in rising through the ranks at Cellarmasters. Within three or four years, I was in a fairly senior management position and they were moving me to the UK, to work on a business that they had just purchased there.

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.

What was different about the model in Switzerland versus Cellarmasters, for example?

By the time we got to Switzerland, Foster’s reach into global brands was greater than what Cellarmasters had had. Cellarmasters had its own brands and then a bit of reach outside of that, whereas Foster’s had bought Southcorp, it had bought Wolf Blass; it had an incredible brand portfolio. It was global, as well. It had operations in France and things like that. In Switzerland, we were very much using the full Foster’s portfolio and creating the wine club model, into Germany, Austria and Switzerland. We started the Visecco Wine Club, which was basically Visa, and the Swissair Wine Club. We started the Reader’s Digest Wine Club. There were a number of these partnerships that we were using to build wine clubs for these groups.

Within 12 months, we’d proven a viable way to build a business. Foster’s ended up selling it, but that business still exists today.

What was the biggest challenge in running that wine club, in the early days, in Switzerland, for example?

It’s not what you would probably think. The biggest challenge for me was that I was the only person in the office that didn’t speak German, whilst they could speak English. I was doing German lessons, three days a week, after work. I learnt, pretty quickly, how to read German, in a business scenario but catching on in an office, where you are doing a startup and everybody just naturally speaks German and you have to catch on, was the biggest challenge. Again, young guy, at that time, and thought nothing of it. I thought, this is just what you do. But I was learning, I guess, about marketing at that time. I had been involved in marketing but, all of a sudden, I was in a country where the culture was different from what I was used to and I was selling into countries that were across a border, into Germany and Austria.

I was learning about the principles of marketing and how you apply them, without leaning on your own understanding of culture. I didn’t know it at the time, but when I look back at it, that’s probably what the experience really taught me. In addition to that, what was quite difficult was that the Swiss pride themselves on how hard they work and how long they work. We would work with the French and the French would, basically, take Fridays off. The Germans would finish at lunchtime on a Friday and our office would be open till late on Friday. Getting used to working across borders and trying to get product out of here and there and then forgetting that nobody is working 40-hour weeks like the Swiss want to, that was an interesting experience, as well.

How did you see the different cultures of the Swiss, the Germans, the French, approach online wine as a product, as an experience?

Back then, firstly, there was a parochialism amongst the French, the Germans and the Austrians, as you would expect. This was going back to when Austria was still suffering from the controversies that they had had, previous to that, with the windscreen wiper chemical found in the wine. As a result of that, Austrians had become very parochial for Austrian wine, because the rest of the world had rejected it, to an extent. The French, obviously, thought their wine was the best and the Germans thought their wine was the best. But all of those countries, at the time, were starting to embrace Australian wines. At the turn of the century, we were starting to see more Australian travelling wine makers so they were all embracing Australian wine.

So they had the local parochialisms and then they were embracing Australian wine. What we ended up doing was selling a mixture of the old world wines and access to all these Australian wines. We were one of the first companies – a bit by chance perhaps – that were really offering that as a selection to them that they could purchase and I think that’s what helped it work.

Do you think Naked has an advantage, today, where they get such scale globally that they can offer a really unique offering of different wines, from different regions?

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Naked Wines: A Unique Subscription Model

November 26, 2020

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