In this post series I want to address what I think is a very misunderstood concept–Wine Clubs. My thoughts on this were confirmed by an article I read some time ago from Wall Street Journal’s wine columnist Lettie Teague called Do Wine Clubs Really Deliver on Their Promises? Now to be clear, I’m not questioning Ms. Teague’s credentials as a columnist, but with regards to this topic I think she’s missing the point. In her article she joins three clubs, none of which are direct from wineries. There is a key distinction here. All of the wines she was receiving were delivered through distribution, meaning even though she may never have heard of them, these wines are available to the public through one means or another. This is a very different kind of club vs. what most wineries offer.
However, explaining what wine clubs are, their differences, why they exist, and what the benefits are for consumers and sellers alike will take more than a single post. The answers are complicated and the genesis for their existence dates back to the end of prohibition. So, I’ll begin by illustrating what a wine club is and its history.
So, What is a Wine Club?
In brief, a wine club is a commitment to purchase a defined quantity of wine over a period of time. Wine clubs were traditionally sold by wineries, but are now being sold through wine shops, online retailers, and yes, even the Wall Street Journal. Commitments are determined usually in terms of shipments. The amount of wine can vary from a few bottles to several cases per year. After the minimum commitment is met (usually a year’s worth of shipments) you can choose to cancel or allow it to continue indefinitely. In most clubs, the seller chooses the wines, but some are now allowing the consumer to choose from a list. Once you choose a club, wines are shipped direct to your home or business at predefined intervals and you are billed on a per shipment basis. Simple, no? No, definitely not.
Winery Wine Clubs
Wineries were the first to sell wine clubs. In fact, until 2004 wineries were the only entities that could sell wine direct-to-consumers (aka DTC). It is generally accepted the first wine club was actually the Automatic Tasting Program (ATP) introduced by Ridge Winery in 1977.
Ridge Winery’s “Automatic Tasting Program” is considered by most the first wine club.
I was a teenager growing up near their winery in Saratoga, CA when my dad joined the program. Back then it wasn’t a “shipping” as much a “sampling” program where local customers would journey to the winery to get their new releases to take home, try and enjoy. The winery would then offer the same wines at a discount so that members could immediately purchase their favorites. My dad and his buddies eagerly awaited each release to the point where the “journey” to Ridge became more a celebrated pilgrimage. Their excitement was around the differences each vineyard, varietal, and vintage would bring. This excitement is why many people join winery wine clubs to this day.
However, it took years before wineries could actually ship club wines to consumers in other states. The vagaries of the 21st amendment and dreaded 3-Tier System have slowed progress in DTC sales. I will discuss more on this in a later chapter. Today, virtually every winery has some form of DTC program. One of my favorite local wineries (Dry Creek Vineyard) has a club program with options ranging from $250-$650 per year. Incentives include 20-25% off wine as well as discount shipping and special events/perks at the winery itself like free tours and tastings. As I alluded earlier, what’s important to note about winery clubs is they concentrate on selling wines DTC they don’t sell via distribution. The consumer is getting access to unique, small production wines they can not get any other way. Sometimes this is confused as a “holding back” tactic on the winery’s part to drive up price and exclusivity. I will discuss why this isn’t true in a later post as well.
Retail and Internet Wine Clubs
In 2004 the Supreme Court declared that retailers could sell wine online as long as they distributed it according to each state’s regulations. Online wine retailers, clubs, and “flash” sites have been popping up ever since. The same decision has allowed wineries themselves to open their own e-commerce websites. Overall, it has been a positive development for the wine industry. However, unlike winery clubs, the retail club value proposition is to choose the best wine values that match their customers’ tastes. Club W, now called the Tasting Room, which is mentioned in Ms. Teague’s article feels a bit more like a dating site than a wine retailer. Club managers are purchasing wine available on the open market from wholesalers they perceive as offering wines that are unique, of good value, and match their customers tastes. That’s a far cry from what a winery club offers. With some exceptions there are a lot of middlemen taking a cut of these wines; importers, distributors, wholesalers, even other retailers. Retail clubs are a great way to discover wine as whole. However, because they are selling wines that are available on the open market, they tend to lean on marketing gimmicks like tailoring wine to your palette (which, by the way is constantly changing), price target, expert choice, etc.. I appreciate what they’re doing, but I don’t think it’s anything like a winery club.
Why Sell Wine this Way?
What’s the deal? Why not just sell all wine in stores or on Amazon like everything else? I’m both a wine club salesman and member. I’ll be the first to say it’s a wacky way to sell wine. On the surface it can even seem disingenuous. Despite this, DTC sales are increasing much faster than retail. Most industry experts still dismiss DTC as a minor part of the market (<5% overall), but for smaller wineries it is an essential–if not only part of their sales strategy.
So, how can a subscription based service that requires the consumer to;
- commit to an annual minimum purchase
- be home to sign for delivery
- and, not even be sure of what they’re getting
be so successful? As they say, the Devil is in the details. In this case, I’m afraid there are more Devils than details. In my next post I’ll discuss why the compromise to end Prohibition has a lot to do with how wine clubs came to be, and why they are becoming more popular so many years later.