A Wine Experiment – Naked Wines: The GOOD and BAD in the Wine Industry

What is Naked Wines?

Naked Wines is introducing a revolutionary concept to the Wine Industry.  The premise is to provide crowd source funding to bankroll winemakers, so they can focus on the winemaking and consequently offer lower prices to the consumer.  The company was founded in 2008 in the UK. The strategy includes a website where:

• Consumer members preferences are tracked
• Consumers can interact with the winemakers
• Consumers can offer reviews and feedback on the wines

This captures the advantages of social media and the internet and brings it to the wine industry.  The concept also effectively brings the winemakers closer to their customers, allowing them to hone their craft and tailor the product to meet demand.  The “Angels”, as the investors / members are called, are required to submit $40 USD/mo. to provide seed money and then in return they receive discounted prices on the resulting wine when released.  Naked Wines interviews and accepts winemaker members upon application based on qualifications, experience and training.

Visit and Interview

During our trip to the Northern California Wine Country, I stopped in to talk with Kirsten Bragg the tasting room manager for Naked Wines in Sonoma County, CA.  The following information was offered by Kirsten and has not been verified:

• Roughly 1,500 winemakers are involved from around the world producing less than 1000 cases of wine each
• 30,000+ “Angels” contribute to the program

According to Kirsten, the growth has been mercurial and forced them to begin a waiting list to allow the organization to keep pace with demand.

Understanding Winery Costs

Before you can understand the Naked Wines philosophy, it is important to get a feel for typical boutique wine production costs (around 5K cases produced).  These numbers do not reflect table, nor cult wine production costs, but somewhere toward the lower end of the average small winery.  Estate Wineries and Larger Producers (>50K cases produced) have very different cost structures.  Here goes some rough numbers that were taken from several reliable sources:

• Nor Cal Quality Fruit $4 / bottle cost

• Oak Barrels – $1 / bottle cost

• Mobile Bottling & Bottle – $2 / bottle cost

•  Overhead, Equipment, Debt Service (Sonoma)- $5 / bottle cost

•  Salaries – $4 / bottle cost

• Sales & Marketing – $2 / bottle cost

Total Cost per Bottle: $ 18

In the Naked Wines business model, Winemakers may be sharing Overhead and Investment, consolidating Salaries and leveraging joint Sales & Marketing costs – picking up advantages that could drive bottle cost down to $13/btl in this example.  Keep in mind, these numbers are all speculative and just to illustrate a point…  This data is relevant in order to provide a perspective on Kirsten’s comments – when she says, “We are looking to produce wines that will sell in the $15 – $20 per bottle sweet spot in the market.”

This Business Philosophy and Why it Leads Down the Path to the Dark Side

So, nothing wrong with that thinking… “know thy market” (first rule of marketing), but it does take some wind out of the high-minded, lofty vision of “freeing the winemaker to express his/her art” (paraphrasing here).  I like the whole idea, in theory.  This concept establishes a form of Co-Op for winemakers, funding the business by allowing consumers to dictate the successful producers based on their feedback and the demand.  Great stuff! Only, the whole thing goes awry, when you begin to target a price point.  A few reasons:

• Limiting Winemaker Creativity?

Let’s say, a Winemaker wants to make wine requiring a technique called “extended maceration“, or perhaps barrel-age in French Oak for 12 months.  These ideas add cost to production and would not fit into the “sweet spot” price discussed above. Perhaps, the Winemaker wants to contract for fruit from a grower and dictate yield per acre, harvest timing, or block harvesting fruit at different times.  These approaches add cost to the fruit and require a long-term commitment to a specific vineyard.

• Unwittingly Dictating Your Own Demand?

Let’s go in another even more important direction. What if offering wines in this specific price range attracts consumers who prefer simple, easy drinking table wines. Nothing wrong with that… but won’t that skew the majority of “Angel” reviews towards that preference and deliberately dictate where the crowd source funding will be spent… on the making of easy drinking table wine?

Are Naked Wines Good?

I tasted several of their wines from different winemakers: sparkling, reds, whites.  All reasonably well made. All generally enjoyable, but nothing that stood out as above average.  Which (unfortunately) is about what I would expect from this approach to making wine.

How Could the Concept be Improved?

There is so much more potential for this idea than is being realized.  In its current form, this Co-Op will inevitably continue to produce reasonably priced, consistently average wines.  I typically choose to purchase wines that are interesting and different, or of exceptional quality and am willing to spend more than $20/btl to access my preferences.  That type of consumer would not be attracted to this model and is the primary limitation of this business approach.  Their community of “Angels” is large enough to begin breaking into individual focus groups and then maybe… it could attract a more representative cross-section of wine consumers.  Is that important?  Certainly not to the success of the business, but if you view wine drinkers as a community (I do), it definitely excludes an influential segment.  Personally, I know I would enjoy feeling part of the production of the wine I drink by offering winemakers my consumer tasting notes, feedback on various techniques used and suggestions on modifying structure, balance, texture and flavor profiles.  This is what internet marketing does best, build relationships and brand loyalty between producers and their customer base.

Added after publishing, from reader feedback…

Business Models

Yes, these kind of creative business ideas are fantastic for the wine community, but with concepts like this that have such broad potential to influence the entire industry and are exclusionary in practice… not sure that is a good thing.  Nothing wrong with targeting a price point in your business model… but perhaps I was personally disappointed.  When I discovered the inherent circular logic driving the demand and consequently where the money is being invested, it was disappointing.  Maybe this piece will not achieve its objective – to provide a viewpoint that broadens the concept further to include the premium slice of the market – but it is worth the effort.  Viewing wine consumers as a community may not be a very popular concept from a business perspective, but I think it has some merit from a marketing point of view.