Naked Wines: Scale Economies Shared

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?

Yes; I think that it helps Naked. I don’t know that it’s the thing that makes it succeed. You can get access to wine anywhere, in the modern day. The issue is, are you getting good wine and how do you make a customer feel confident that they are getting good wine? When people purchase wine, they are looking for anchors of confidence. I’m not talking about the top people who are absolute wine nerds; I’m talking about that middle group. If you take wine drinkers and you stack them on top of each other, based on their engagement with wine or their passion for wine, with the wine nerds at the very top and, at the bottom, people who are just looking for cheap alcohol, when you are coming up with a campaign, you want to talk to the group in the middle, because the group in the middle is where the real value is. The two ends of that stack have very powerful magnetic poles and so your campaign either gets pulled into the wine nerd style or it gets pulled down to the great deal side.

The way around that is the story that is told around the wine or the anchors of confidence you can give to people in the middle. Prior to Naked, people didn’t know where to find the anchors of confidence because, generally, the people that they were buying from seemed to have more knowledge of the wine than they did. It was things like, has it won an award? Has it won medals? In Australia, it’s James Halliday; has it got Halliday points? Is it from a famous region and does the variety match the region? People felt confident because of that.

Naked’s real ability was to go anywhere around the world, grab wine and say, this is an authentic story behind this. This is why the wine maker made it. You are a part of their story and you can take confidence in it. By the way, other angels have been rating this wine and, therefore, it’s not just us saying it’s good; it’s other angels. That seems really obvious now, but at the time, that was a new level of confidence that people could get and, therefore say, I’d be willing to try a wine from anywhere in the world because those filters that have been applied to it give me confidence that it’s probably going to be good.

As you said, the old wine clubs were just purchasing wine, labelling it and trying to push it to their wine club?

Yes; and then making the mistake of saying, we’ve got them. What we need to do now is to try to play a price war. The way we will play that price war is, we will continue to cheapen the production of the wine, so that we can reduce the cost of goods and take cost out of the wine. In essence, what that did was say, it’s got awards or it’s got a label or it’s got a credible region, and that matters more than what is inside the bottle. All that did, over time, was erode people’s confidence further. Rather than flip that and say, well it doesn’t really matter what is on the label and it shouldn’t matter whether it’s won awards because, as we know, there are award shows where everyone wins an award, what really matters is what is inside the bottle. It was a longer game, but that’s the game we tried to play with Naked. We want to give people confidence and, to do that, we’re going to make it naked. We’re going to strip away all of that stuff and make sure this is wine made by somebody’s passion about making it and made for you and we haven’t tried to cut corners in the wine-making process. That was the advantage.