Are Subscriptions the New Wine Clubs?
Wineries large and small consider a new way of providing wine to consumers
FROM BAKING BOXES TO bath essentials, Americans have found subscription boxes to be an enticing offer. Companies like Stitch Fix (a personal styling service), HelloFresh (meal kit delivery service) and Dollar Shave Club (grooming products) have been some of the most prominent subscription boxes nationwide, but you could easily find a box for just about any product or service you wanted. Subscription clubs like these offer flexibility, frequency, discounting and discovery of products—and it’s very alluring to a growing variety of consumers.
The model has seen even more interest since the beginning of the coronavirus pandemic, as consumers chose to have frequently purchased products, such as pet supplies, food/drink and health/wellness items, delivered to their doors each month, rather than brave a trip to a brick-and-mortar. Clothing/accessories and leisure/hobby boxes haven’t seen as much interest during this time, according to a CivicScience study, as sweatpants and in-home activities became the norm.
Overall, that study showed 15 percent of U.S. adults have joined a new subscription service in the last year, and the main driver was to obtain savings—discounts on frequently purchased items were the real draw.
More importantly, the CivicScience study backed up the continuation of the subscription trend. A 2019 Clutch survey showed that 54 percent of online shoppers were willing to join a subscription service. In its report on the survey, Clutch stated that “the industry became popular thanks to e-commerce’s growth, social media, and consumer comfort with paying for value over time,” and that subscription boxes are likely to grow in tandem with e-commerce.
Now, if the spring of 2020 was any indication, Americans aren’t afraid to stock up on wine. From pantry-loading and curbside pick-up to first time e-commerce purchasing, legal-drinking age consumers bought a lot of wine. While that increased spending trend has ebbed and flowed over the last year, the fact remains that many consumers are now aware of shopping for wine online, possibly for the first time.
If interest in subscription services has risen and awareness of wine e-commerce has risen, can wine subscription boxes also work? If you ask Winc, First Leaf or Bright Cellars, the answer is a resounding “yes.” All three (and other services) source wines from producers across the world or develop private labels, and send an assortment of wine based on each consumer’s drinking preferences with measurable success.
To bring in new customers, the three have mastered the art of digital advertising, and regularly appear in ads or sponsored posts on websites and in social media. They offer deep deals on the first box or on a time-in-club basis and offer a wide variety of SKUs. They are essentially wine aggregators—but that model won’t necessarily work for a winery, particularly one with fewer SKUs.
Can wineries compete? There are an enterprising few testing out subscription models now, and their hope is that they can complement, or possibly even replace, the traditional wine club.
This article will focus on the ways in which wineries have made strides into the subscription box world. While the models share some similarities, it seems that no winery subscriptions are exactly the same. Each winery has found a unique solution that worked for them and, importantly, for their target consumers. This piece will look at what the club is, how it works, and what differentiates it.
The Pros and Cons
Before we begin, it’s important to note that moving to this model, like any major decision, has some benefits and challenges.
BENEFITS
At the heart of this type of club is personalization: the ability for a member to completely customize shipments to what type of product they want, when they want it. At the same time, curated subscriptions (those that choose the products and extras for you) offer a sense of discovery, providing a customer new and exciting items that are tailored to their preferences. It’s a delicate balance between the two, but one that, if done properly, can make a customer feel like their needs are being met or even exceeded.
“They want to feel special,” said marketing consultant Jennifer Leitman, who said that small to medium wineries shouldn’t feel that they can’t implement this type of program because of limited production. “A big part of this is to get beyond the product. Once you know more about your customer, you can think about what else they are looking for and the partners you can bring to that subscription program.” Are you customers also music fans? Maybe your subscription box also includes access to a Spotify playlist, or limited access to a live/virtual concert, she added.
In a COVID era, subscription boxes can be an interesting way to bring in new customers who wouldn’t be able to visit your tasting room in person. By providing an add-on benefit, such as a discount or non-wine items, they are more engaging than a one-time shipment and, importantly, appear to provide less of a financial commitment to a new consumer than a traditional wine club.
Leitman said that subscription clubs can also help deliver a sense of belonging and entertainment, without anyone needing to physically be present. The smart clubs, she said, are constantly evaluating how they can best deliver on that promise between shipments. With the increased frequency of shipments, there are extra opportunities to communicate with the member, to tell the story and convert more sales.
Subscriptions are also appealing to younger consumers in urban markets, who may not have the chance to visit wine regions. “There’s a lot of pent up demand for this kind of a flexible service that really puts the consumer at the helm of their experience,” said Miia Suortti, director of digital and e-commerce marketing at Ste. Michelle Wine Estates. “The younger generation is either just discovering or has begun to discover wine. They might be still building their taste preferences, so they want to have the ability to discover new wine.”
CHALLENGES
Implementing a subscription club is no easy feat, as many wineries have attested to, though all are excited by the early stages of the program. It is a serious commitment of time and resources, and everyone in the business needs to be on board.
“It’s not ‘If you build it, they will come,’” said Leitman. “The customer acquisition costs for a lot of these subscription programs outside of wine are incredibly high and there’s a pretty big failure rate, to be honest. The ones that do well do really well, and the companies invest in them.” While the customer acquisition and retention costs in this type of program are substantial, Leitman said that the opportunity to reach millions of people is there, if the wine industry would invest more in e-commerce.
Outside of general e-commerce improvements, there are some challenges inherent to subscription clubs on the technology front. To start, a number of wine industry e-commerce point-of-sale and shopping cart systems aren’t yet equipped with the appropriate features. Commerce7 is a popular option for wineries looking to implement this model. WineDirect does not yet support this style of club but, according to marketing director Adrienne Stillman, the company has been watching the trend and the team is currently building out support for subscriptions. They plan to launch this summer.
With a traditional wine club, a winery roughly knows how much inventory is going to move and when. They also know how much income will come in. This presents some additional challenges in inventory management, fulfillment, and cash flow planning, as several of the wineries below have pointed out.
All this said, those interviewed found that the opportunity to create new, loyal members, offer an alternative to existing members and better serve the needs of customers they’ve not yet met is worth the effort.
Bingham Family Vineyards offers a traditional wine club and a subscription wine club (as well as a discount on case purchases) to give their customers more flexibility and choice in their purchasing.
Bingham Family Vineyards
In January 2021, Bingham Family Vineyards in Meadow, Texas, launched its subscription club in addition to a traditional wine club that had been running for five years.
“Our new subscription club meets our individual customer’s needs better than our traditional wine club, which we also still provide,” owner and DTC manager Betty Bingham said. “With traditional wine clubs, the club member receives the wines selected by the winery at the times selected by the winery. The subscription club is a way to allow the choices to be in our club member’s hands.”
Under the new program, Bingham hopes to offer more flexibility in not just the frequency, but also the type of wine shipped out. Four-bottle shipments are sent out either every month, every other month, every three months or every four months, depending on which the customer chooses. To create the four-pack, customers can choose between the winery’s 17 varietal wines, seven wine blends and Rosé. Or, if they’re feeling adventurous or indecisive, Bingham’s software will choose the wines for them based on previous purchases.
Should a customer wish to shake things up, they have the opportunity to do so. Bingham Family Vineyards is using Commerce7 software, which will automatically send out two-week and two-day email notices to members before their shipments to remind them to check their pickup location, as well as adjust their wine selections.
Bingham reported that some of the challenges with the new program are outweighed by the advantages. Because the winery operates sales and pick-ups at four different locations, it takes some inventory planning to get everything right, though the Commerce7 platform does assist. She also stated that it’s been nice not needing to create separate club shipments based on customer preferences within the system, because the customers can now do it on their own.
Overall, the team is thrilled with the program, even in its early stages. “It is a win/win situation for both us as a winery and our customers, in helping us to provide quality estate wine to our customers to best meet their individual needs,” Bingham said. “Our subscription club is on the verge of overtaking our traditional clubs in number of members. Many existing members have chosen to switch over because of the advantages, but our new club members are also choosing the subscription club at a higher rate.”
Limerick Lane Cellars does not offer a “traditional” wine club. The winery uses an allocation model and recently launched a new subscription club to bring more mailing list members in to the fold.
Limerick Lane Cellars
In Healdsburg, Calif., Limerick Lane Cellars is following a similar model. When the current owners took over the wine brand, they also inherited a small wine club membership, but decided to move to an allocation model without discounts and were letting the club membership dissolve through attrition.
Recently, however, they created and launched Winemaker’s Folly, a subscription club with discounts. It was the perfect solution to grandfather in the remaining club members and reach out to its mailing list of customers who don’t order as often.
“I thought that this model complemented our allocation model really well. In the past, we’ve had some of our VIP customers ask us to ship wines periodically. They did not want to be bothered with the allocation selection process,” said general manager David Messerli. “I will eventually create another version of this subscription club that caters specifically to these top tier customers, but for now it seemed like a good way to reach out to the 75 to 80 percent of our list that do not order as frequently through our allocation process.”
The benefits of being a subscriber? Members can choose to have wine shipped every two, four or six months, choose any four or more of the winery’s pre-selected SKUs, pay $15 flat ground shipping, and receive access and offers on Limerick Lane’s allocation-only wines. Members can also choose to change the contents and frequency, skip shipments or cancel online.
“Overall, the transition was fairly simple and clean,” he said. “We reached out to current members to let them know what to expect and the response was positive.” The team had to educate/answer questions for some of its long-term club members who were accustomed to the old club model, but he didn’t see too many questions from new customers—just a lot of enthusiasm.
“So far, we’ve received excellent feedback and very few questions about how the club works. It seems to be very intuitive and easy to manage,” Messerli said, adding “We received over 50 new memberships in the first two days without offering any wine discounts.”
Owing to the additional membership, he predicts a substantial amount of sales volume by the end of the year. Because the subscription club has a lower purchase threshold than the former club, and the offers go out several times more per year, he doesn’t yet know how this new program compares to a traditional wine club.
Messerli and Limerick Lane are also using Commerce7 to facilitate this new program in conjunction with their third-party fulfillment house, Wineshipping. He reported that the implementation and transition to the new program has been smooth and easy to manage on the back end as well. “Their integration allows for real-time inventory synchronization, which save lots of time. It also offers our customers the option to choose a requested delivery date rather than the standard shipping date,” he added.
“When we were creating the packaging for the ēlicit Wine Project DTC website, we wanted to showcase our welcoming nature to our customers, so we decided to mix in a few fun, ‘non-tasting’ notes into the text on the outside of the package,” said Miia Suortti, director of digital and e-commerce marketing at Ste. Michelle Wine Estates. “Our wines are made for people who may not always feel welcomed by traditional wine companies—and we wanted to make that clear to people who order our wine online.”
ēlicit Wine Project
ēlicit Wine Project is the innovation and incubation hub of Ste. Michelle Wine Estates, charged with creating new methods of wine production and marketing to build brands. In August 2020, the project debuted a brand new website, one that offers features such as wine recommendations based on what others are shopping, curated selections, and browse by occasion collections—and, of course, a subscription service.
“We put a stake in the ground and realized that there is also an opportunity to actually improve the experience from the more traditional wine club model, which provides consumers not that much flexibility,” said Suortti. “There’s something to be desired when it comes to giving the consumer the range to choose what they want, how frequently, and based on their wine style preferences.”
ēlicit rolled out the ability for customers to choose from any of of the project's brands, which include Altered Dimension, Borne of Fire, Cosmic Egg, Fruit & Flower, Intrinsic, Merf, and others. Customers choose a frequency, the number of bottles and specific SKUs. If a customer wants to change the type of wine or the number of bottles, they can place that current subscription on hold and create a new one. Subscription assortments suggested on the website include “special occasion” and “weeknight hang.”
The team is using Ste. Michelle’s Microsoft Dynamics 365 platform, and it’s offered them the chance to be flexible and sophisticated, Suorrti said. She added that since the website and tasting rooms run off this same platform, it’s been helpful when creating and delivering on an omni-channel strategy and understanding consumer habits through data.
Suorrti said that the team is still in the awareness-building stage of the subscription service and, while they have attracted quite a few subscribers already, they are currently measuring success through media coverage, social media impressions, and buzz.
“When we launched the site in August, we had a pretty large influencer strategy that carries into this year,” she said. “And we’ve been starting to see that consumers are organically talking about elicit and the brand, so that’s very encouraging. We do need to build that awareness before we can blow out the long-term conversion or direct-response type of acquisition media efforts.”
She is very hopeful for the future of the service and the brand. While there is excitement surrounding the launch, she knows that the team will need to continue to invest time and resources into the endeavor, as well as keep innovating.
“What we really try to maximize and take advantage of with elicit, and get the retention up, is through always offering something new, because we believe that one of the big value propositions for elicit is the newness factor,” she said. “This year alone, we will be launching and testing five to eight new wine brands that we will make available to the ēlicit Wine Project customer base.”
Nostalgia Wines
Owner Gina Fernandes Harfman of Nostalgia Wines, Inc. (formerly Oliver Twist Estate Winery) in Oliver, British Columbia, wanted her visitors and customers to have complete control over their wine shipments. Like her small-lot wines, she wanted each club shipment to be entirely unique—a personalized assortment of a member’s favorite wines.
She and the team started the Recollections Wine Club, one that has no membership fee, the freedom to choose any of the winery’s SKUs and a 10 percent discount on wine. Where it differs from other memberships, however, is that members must commit to purchasing a minimum of 24 bottles per year. After an initial 12-bottle purchase to begin the membership, customers can choose when they would like to make additional purchases to fulfill the 24-bottle minimum. Orders can be shipped in boxes of 4, 6, 12 or 15 bottles, with free shipping for orders of 12 bottles or more.
Members can mix and match their own cases by choosing their wines in-person at the winery or by contacting them through the online store, email, phone call, or social media.
“Gina always thinks of our club members when she’s winemaking,” says Nostalgia Wines Inc. general manager, Sheila Whittaker. “She doesn’t like to surprise people with unexpected charges to their credit cards. The only surprises are the exciting, small lot wines she makes exclusively for the club.”
NakedWines.com
No article on subscription models would be complete without at least a quick review of NakedWines.com. Years ago, NakedWines.com launched with a unique business model: Its members, or “Angels,” would pay a set amount each month (currently $40), and that money would go into a piggy bank of sorts. The member could then use those funds to purchase whichever wines they wanted, whenever they wanted.
With a wide variety of brands from winemakers across the globe, Angels have the flexibility to buy new variations of tried-and-true styles, or discover varieties, blends and winemakers they hadn’t yet had the opportunity to try.
The model has been so successful that NakedWines.com is the 22nd largest winery in the U.S. (See the February 2021 issue of Wine Business Monthly) and now sells 2 million cases in the country, with 400,000 members. Globally, the company sells just over 4 million cases.
How to Make the Model Work
Should you consider a subscription program, there’s one piece of advice you should follow, and Leitman said it best.
“Everybody’s got to be on board for it. It’s a new business you’re launching, and acquisition costs can be kind of high, but it pays off,” said Leitman. She likens it to the way you would invest in your tasting room: You pour time and money into building a nice place for people to try your wine, hire staff to attend to the customers, and convert through in-person sales and follow-up emails.
“Somehow that same philosophy is not being really taken into subscription or e-commerce, or anything from the digital side—and the upside is huge,” she said. “You need to treat it like a real business. You invest in the right platforms, people, and culture to make it happen.”
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This article originally appeared in the May 2021 issue of Wine Business Monthly.