With the recent news that Winc had filed for Chapter 11 bankruptcy, Adam, Joanna, and Zach discuss the ill-fated direct-to-consumer wine company, why they were never able to make their model of private-label bulk wine into a sustainable one, and whether this will dissuade some of the other companies that have followed in their footsteps.
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Adam Teeter: From VinePair’s New York City headquarters, I’m Adam Teeter.
Joanna Sciarrino: I’m Joanna Sciarrino.
Zach Geballe: In Seattle, Washington, I’m Zach Geballe.
Adam: This is the VinePair Podcast. What are you guys drinking? This is the month that everyone seems to drink, so I’m curious what you drink.
J: We always drink every month all the time.
A: I know. You know what the funny thing is? I haven’t drank this month. I had a dry week and a half recently, so I forgot. Nothing to share.
J: Except for recently, we drank a lot of stuff.
Z: Cognac. Okay, fine.
A: Oh, that’s going to be my thing, but anyways.
J: Okay, that’s your thing.
A: It is funny, this is the month that everyone talks just like the Super Bowl for the alcohol industry. It’s time to go, and I’m taking it easy. I’m getting ready for a wet January.
J: What? Wet and wild January for Adam.
A: Dry December, wet January.
J: We opened a bottle of wine that I think I got from the office when I first started here, Landmark Vineyards, 2018 Overlook Pinot Noir. That was very good this weekend. I think Keith is a big fan of Landmark Vineyard. He’s chatted about them before.
A: He has.
J: That was good, but that’s the extent of my drinking recently.
A: Interesting. Zach.
Z: You chumps, whatever, I’ve been drinking.
J: I’ve been drinking.
Z: If we had to open a couple of nice bottles of wine for Caitlin’s birthday.
A: I saw that.
Z: Yes, some friends over for her birthday, we had a magnum of Laurent-Perrier ’08 champagne.
J: A magnum?
Z: A magnum, I know, from Friday, but I knew we were going to drink a lot of sparkling wine. As I said on that episode, that’s one of the few categories where I do think it fits well. Drank a bottle of Barolo from Baroli, which was weird because Caitlyn also really wanted chicken wings, which is not really a great pairing for Barolo…
A: Chicken wings?
Z: Yes. My cousin brought the Barolo and we were like, “Well, we’ll drink it. Sure.” She had chicken wing craving so that’s what we got for her birthday. What can I say, it’s my wife.
Z: Then I’ve been dabbling with some winter cocktails. I did one of these things like when you’re building out your home bar over the years, you sometimes see a bottle and you’re like, “I should buy this,” because it’s a thing. This was me with Pimm’s. I don’t even really like a Pimm’s Cup that much, which is literally the only drink that I know that uses Pimm’s.
Z: Caitlyn the other day asked me for– Normally, it’s like her whiskey cocktails that are bitter and really spirit-forward, and pretty intense. She’s like, “I still want a boozer cocktail,” but she’s like, “But I want it to be warm like a holiday cookie.” I was like, “Okay, what the hell do we have that I can do this with?” That’s where I went back to the bottle of Pimm’s. That and a little bit of rye whiskey and just a touch of, I guess, a little bit of Amaro as well, just rounded out. Splat, just a tiny bit of lemon juice just to brighten the thing. It was pretty good. I’m pleasantly surprised. Maybe in the next five years, I’ll get through that bottle of Pimm’s.
J: I feel like I don’t even actually know what Pimm’s tastes like on its own.
Z: I have the bottle and even I would be hard-pressed to define it, but it’s a little bitter, a little vegetal, but it’s not nearly as intense in those ways as most of the other things we put in that category. It’s fine enough with some soda water. It’s like you can make a little thing that way, but it’s just– I don’t know. It mostly just sits there on my shelf and [crosstalk]
J: I definitely have a bottle in the back of my cabinet.
A: I don’t.
Z: Adam, tell me about your Cognac.
J: Yes, tell us what you’ve been drinking.
A: I judged the Rémy Martin Cognac Sidecar Cocktail Competition this past week, which was awesome. They had bartenders fly in from six different regions. They won their region, then they competed in the nationals, and now they’re going to go to the international competition in France.
J: The winner will.
A: Yes, the winner will. The entire challenge is you had to take a Sidecar and basically do a riff on a Sidecar inspired by three different eras. The eras you could do were either the Gilded Age, you could do disco, or you could do what would be considered modern. The sidecars were really interesting, all of them, but my favorite was the one that won by– It was a stirred Sidecar, which I’d never had, and it was Gilded Age-inspired. Basically, the bartender, Marco, who won, he’s from Miami, he only used ingredients you would’ve been able to find in the 1920s.
A: Yes, it was very clever. Then he stirred the cocktail because… While there were a lot of shaken cocktails as well in the ’20s, but he was alluding to this idea that a lot of the cocktails that we really love now, that are stirred cocktails, came out of the ’20s. He stirred this Sidecar. He made an oleo saccharum to sweeten, but also bring the acidity to the drink. He added rum that had been aged in Cognac casks to also bring in the Cognac. He obviously used Rémy 1738. It was just a really delicious drink.
The judging panel, it was myself, Joaquín Simó, who’s a very celebrated bartender, used to own the bar Pouring Ribbons that he closed recently, and then the head of Rémy trade representation. We were the three judges. All of a sudden, it was the one cocktail where I would order it multiple times. I think what was also interesting about it was it was deceivingly easy to drink for how boozy it was. It was spirit-forward, but actually much easier to drink than lots of the other cocktails.
J: Was it served up?
A: Yes, up, not over ice, just up. It was really, really delicious.
A: That’s all I drank this week.
J: A lot of Cognac.
A: A lot of Cognac. Then I went to the after-party.
J: Had more Cognac.
A: Had more Cognac. Also had something which I’d never heard of before, which I’m curious about. We went to this bar called Night Moves, which is owned by James Murphy from LCD SoundSystem. Rémy and us took it over as the after-party with a bunch of bartenders. The bartender at Night Moves had created an orange Chartreuse. Have you ever heard of this?
A: Zach, apparently, he said into the ’70s or the ’80s, I can’t remember now. For four or five years, Chartreuse made an orange version as a way to try to get Chartreuse to become more popular on the American market. He has tried it once or twice. He’s found old models and tried it, and so he’s basically reverse-engineering it. He takes orange juice and clarifies it, and then melds it with the green Chartreuse, yes, he uses green Chartreuse. It brings out this very orange flavor to the Chartreuse. It was super interesting. It was really delicious.
J: That sounds really cool.
Z: No, I have never heard of that. Wow.
A: I thought it was wild. That was really interesting. He made a cocktail of orange Chartreuse and Cognac that was really tasty for the after-party.
Z: Pretty dope.
A: Pretty dope. Obviously, we have a lot to talk about this Monday and a lot to talk about, meaning that the final, it was coming for a long time, but the final death of Winc. It was a wine club that’s been around since 2012. They’ve raised over $50 million. They IPO’d a few years ago, and almost immediately upon IPOing, the stock started to tank.
J: A year ago, right?
A: Yes, only a year ago. They’ve raised so many rounds. They started a pre-seed round in 2011, an angel round in 2012. A seed round in 2012, a venture round, they called it in 2013, a Series A in 2014, a Series B in 2016, a debt financing round in 2017, a Series C in 2019, a Series D in 2019. Then an equity crowdfunding round in 2020 and they finally IPO’d, raising about $22 million in the IPO in 2021.
Then the stock basically crashed. When they finally filed for bankruptcy, the stock was sitting at around 20 cents a share. Cratered even more. It went up a little bit recently on news that it might get bought out of bankruptcy, but the stock now is sitting, as we’re recording it’s at 21 cents a share. The market cap for the company right now is less than 10, it’s $2.7 million, that’s the value of the total company.
There’s a lot of very wealthy people who could easily buy that without even blinking. When they went public, they were valuing themselves at $172 million, something like that. This is a huge crash, but it’s not unexpected. I think that’s what’s so interesting about this, is that this isn’t shocking to anyone. This is another one of these businesses that was able to raise a lot of money on buzz, on the fact that the founders told a really good story, were able to convince a lot of people outside of the alcohol industry that this was a really smart business, but then a lot of the people in the alcohol industry were very skeptical of.
There are a lot of other businesses still like Winc that look successful today. Those are basically carbon copies of what Winc is, that still exist in the market that I think will also ultimately go under, but it’s convinced their own group of investors that this will not be a problem.
When you think about who Winc raised from, very prominent investors in California. They were one of these early DTC darlings that were raising from the similar investors as Warby Parker did and Casper. This was the wine version of that.
From very early on, it became obvious that the way that they were growing and scaling was via discounts.
They were paying very high bounties to Facebook, et cetera, to gain users. The churn was insane in terms of the amount of users that were dropping out after buying their first or second pack. The reorder rate wasn’t that high, and so then you saw Winc starting to pivot towards the end to try to create brands they would ultimately sell on-premise, but it seems like that last—
J: Last ditch.
A: Last ditch. Same as what House ultimately was trying to do. It was like, “Oh, shit. This actually isn’t working online. The cost per acquisition of a user is way too high. We got to go into the traditional model.” Maybe there’s something everyone knew about this that we didn’t know, and maybe you can’t hack and break the three-tier system. You see Winc trying to do that as well, but that’s not a venture-fundable business.
That’s what Gallo and Constellation, that’s what Jackson Family Wines, they do all the time, is create brands and bring them into traditional retail and scale them. Winc doesn’t know how to do that, and so the brands never really took off. We are where we are. I’m curious what both of your reactions were when you saw this. Did either of you ever try Winc? What did you think and what do you think this says about where we are in the world of direct-to-consumer wine specifically?
J: I never tried Winc, but I understand the appeal and then I understand why it was so successful for the people who it was successful with. When I worked before doing e-commerce, Winc was extremely popular.
A: When you were at Food52?
J: No, when I was at Forbes for a hot minute, working and contributing to their affiliate revenue, a brand like Winc gave really good commission rates. When you have a company like Forbes recommending a product like Winc and that membership, it had this mass appeal. I think that’s what you’re saying.
A: It would convert really well for Forbes.
J: Yes, exactly. I think it’s because it wasn’t targeting people in the industry. This wasn’t a wine club membership for wine people. This is a wine club membership for people who didn’t really know anything about wine, who drink wine, but just want to make that process easy for them, or the way to get wine simplified. I think that’s why it was so appealing.
Z: I think that one of the other issues that Winc and similar companies have faced and will face is that exact thing that you described in a way, Joanna. Adam, you mentioned the cost of acquisition and retention for subscribers for Winc and that being a big driver of their lack of long-term profitability, but I think part of it is also just structurally.
If your main argument is the entire rest of the wine industry sucks and they’re cheating you and you can get better wine for less and blah, blah, blah. And there are other facets of the wine industry and other niche markets that have attempted to take the same general tact and come out with slightly different products on the other end, the problem with that is it eventually comes into conflict with actual reality because that isn’t true.
If you are the person who becomes a subscriber to Winc, you like it, are you going to be completely cut off from the rest of the world of wine forever? Probably not. You’re going to go out to eat and drink and you’re going to probably order wine, whether by the glass or the bottle, and you might try those wines or you might have a friend over or go to a friend’s house or something. This whole closed ecosystem that Winc was trying to create, where people never get wine anywhere else is a great idea in practice if you can execute it, but it just doesn’t hold up to scrutiny because what happens– Even if this person likes their wine from Winc, but you know what? They drank the last bottle, the next shipment isn’t due in for five days and they’re at the grocery store and they’re going to look at grocery store brands that are similarly priced.
J: Right, and they can’t get those wines.
Z: Yes, and you just can’t really keep the veneer going that the wines are anything special. Once you get past that veneer, then what are you left with? You’re left with extremely generic wine that’s not that inexpensive, that’s in many cases priced higher than comparable wines at the grocery store. You’re left with that and the, I guess, ease of delivery. Again, whereas I think people initially looked at something like Winc and said, “Oh, here’s a company that’s going to thrive in the pandemic,” and maybe early on they did because they were already DTC-conversant. Everyone has had to get that way and it doesn’t really set you apart anymore to say, “We’ll ship wine to your door.” Everyone can do that.
The last thing I will say is then you also have engendered a bunch of ill will throughout the rest of the industry by either aggressively or in some cases passively showing how much disdain you have for that industry, and the industry remembers. One of the many reasons that Winc’s “brands” got no traction when they tried to pivot to selling them into distribution is people have long memories and they remember the press clippings, they remember the comments. The brands are not strong enough to survive without a lot of backing from some broader distribution network. Those distribution networks frankly don’t need to bail Winc out and they’re not.
A: I think what this basically proves is all of these very cheap bulk wine, wine clubs, all of it is just window dressing. It’s a really beautiful package. When it comes to your house, it has the exact same, what we say, premium mediocre branding on the outside of the package is like, the pans you’re buying and the clothes you might be buying and the Allbirds and all that stuff, it fits really well into that world, but the liquid inside is not good. It’s very cheap bulk wine-
J: It’s fine.
A: With fake brands that are meant to actually confuse you even more because they don’t want you to be able to search for these wines. I think that was what always turned me off about the brands like Winc from the beginning, was that this was always purposeful. This is how they make money.
J: It’s very opaque.
A: Yes. If you run the numbers, it is very hard to hit the pricing for these six-bottle packs they were selling, give the discounts they were giving with actual wine made by producers you know. It’s almost impossible. You take a massive loss, it goes through the three-tier system. The way that Winc “figured this out” was creating a winery license in California, which is the most liberal license in the country, then selling direct- to-consumer through a winery. Basically creating a wine club, just like we’ve talked about before, that Chateau Montelena has and Stag’s Leap has and always their very well-known wineries, but then using bulk juice to create these fake brands that were garbage.
That’s why they had such huge churn because I think even a normal consumer who’s not wine-obsessive knows that these wines suck. They’re just not that great, but, yes, they’re serviceable when they’re on discount, when you get that initial signup bonus, but then once Winc starts asking you to pay the price you actually need to pay for them to be profitable and sign up for their subscription models, if you’re like, “I don’t want to drink these wines,” all the time.
Also, the wines change because that’s also how they make money. At least with a normal under-$10 bottle of wine, which is at the end of the day what Winc is selling you, they’re just making you feel like it’s a $20. Winc is using packaging and branding to make you think that the $5 bottle they’re selling you is worth $15 or $16. That’s the business. At least with the $5 bottle, it’s the f*cking same every time. If you like one of those $5 brands, it is the same every time. That is what the big wineries that make those wines are good at doing. They’re good at consistency. There was no consistency with Winc or any of these other wine clubs.
If anyone is trying to sell you wine for the price that Winc was, and I don’t want to name names here, I’m not going to name any of them but you know who they are. They’re all the wine clubs that are in your Instagram feeds, on social that are being written about glowingly by—
A: -media companies, then saying, “We might take an affiliate fee for this transaction.” That’s why they wrote about it, guys. Let’s be smart here. If they’re looking to get affiliate revenue, they’re writing about it because they’re going to get a good bounty on your click and purchase. They’re not writing about it because they actually think it’s a good f*cking wine. It’s a good deal for the media company. If they’re doing that with any of these, you can bet it is the same model as Winc because a lot of people saw what Winc was doing and were like, “Oh, this is really smart.” When they were doing it, everyone was like, “This is brilliant.” I remember in 2015 and 2016, people thinking that Winc was one of the smartest wine companies out there.
J: Yes, that’s what I was going to say. 2011, nobody else was doing this when they launched it. I think it had its gimmick, you took a quiz, like that part of it was very, very appealing to people. I think 10 years later it doesn’t hold up, and them trying to transition, I think it was a little too late. I was going to say, also Winc was so popular because it’s great for gifting. It’s one of those things where you can gift a three-month membership. You mentioned this earlier, Adam, nobody’s coming back. Right?
J: After that. That’s a one-time purchase, which seems great, especially during a very busy season. After that you’re not having repeat customers.
A: No, I think that’s why it almost feels like when we heard they were trying to create brands, that’s when Josh and I were like, “Huh.” If they’re going to do anything, this is actually probably the smart play. I just feel like they did it way too late.
J: Too late, yes.
A: They should have just been pushing like the same brand over and over and over in the pack and then put it into Target. Put it into Publix, right? The problem is then that’s not a wine club, because then you’re not getting the variety that people want from a wine club and so they just walk away from it. The thing is that like a lot of these other wine clubs are doing the same thing. I think the most brilliant wine club that’s doing the same thing is this wine company who will remain nameless, that’s white labeling their wine club under lots of different companies names like, X Publications, Wine Club, there’s a few of them. Whether that is a wine club that is natural wine or whether that’s a wine club that is—
J: You mean there’s a company behind it—
A: There’s a company behind it.
J: —that’s creating clubs for different places?
J: Got it.
A: It’s all bulk wine. You guys, I’m sorry to tell you you can buy bulk natural wine. You can.
J: We talked about this.
A: Yes. You can buy it at wine fairs across Europe where they are happy to sell you their wine because almost every winery has a little bit too much and they’re happy to ship it here and let you put it under a label that is not searchable on Wine-Searcher. So you can’t figure out how much this wine should actually cost. They can tell you that this is the equivalent of a $20 bottle of wine when they know damn well it’s equivalent of a $5 bottle of wine. It’s almost impossible to figure out for a consumer. That’s what’s happening. That’s what all these things are and that’s why I don’t like any of them.
Z: I think you come back to the fundamental suspicion that something like Winc raises in consumers over time, which is like, if this stuff’s so great why can’t I just go buy it at the store? Right? In the end, if you’re out here trying to— I don’t want to get into a broader societal piece of commentary, but there is an element of this idea of like, “Oh, we’re bringing you behind the curtain.” In my previous comments the rest of the wine industry is lying to you there, taking advantage of you and we’re going to bring you into the fold in some sense. There’s just that element of like, you can perpetuate that myth for a while, but eventually people are going to start asking questions, whether it’s like, “Why is it that this bottle of wine that’s showing up at my door—”
When I go on Wine-Searcher, absolutely nothing comes back. There’s no winery name on it. Why don’t I know anything about this wine? In some cases maybe it has the name of a variety on it, but it comes from Italy or it comes from California. It doesn’t come from a smaller place that I might recognize. Again, there are great wines that any one of those descriptors could be applied to or perfectly fine wines. At some point when you are just selling people on this mix of convenience, I guess, and like, “We’re not like those other wine companies.” We just send wine to your door, but we’re doing it for good reasons. People just eventually tire of it.
The market has gotten more saturated and I think the wine-consuming public. Again, I think premiumization has maybe taken a bite out of some of this too. Some people have decided that they don’t want to drink these wines as the wines that they have at their house regularly. They might want slightly nicer wines and how they get those is a whole ‘nother conversation. I think that it is true that some of the smoke and mirrors that made Winc and other companies like it successful and appealing are not completely ineffective, but maybe have reduced effectiveness to the point where these businesses just can’t survive. Because they inevitably are functioning on thin margins and a lot of long-term prospects that eventually investors are like, “Woah, okay, great, but where’s my money?”
J: Yes. We should also say that these types of wine clubs are different from, like, some curated wine clubs or like a retailer doing a monthly drop or something like that where you can— Obviously, you know the bottles that you’re getting you can find in other places and you know something about them.
A: The wine clubs we were talking about that are garbage are the wine clubs where you got a discount code with your purchase on Office Depot or, does Office Depot even exist anymore? I don’t even know, Staples, or you saw it on your Instagram ads and there was like, “If you refer a friend, you get $10.” These are the ones we’re talking about. Then when you get the wines, you’ve never heard of them.
That’s most of these, or four of the bottles you haven’t heard of until you have, that’s also a trick a lot of these wine clubs use. Where it’s like they’ll put one or two in, so then you just assume, “Oh, well then I must know the other ones too.” Maybe they’re not coming up on Wine-Searcher for some reason or maybe they are super obscure like the wine club said, that’s not true. It’s those they made up and they put through the TTB and they’re the ones that have them and then they’re selling them to you. There’s so many tricks that they can use.
Those are the ones that we’re talking about. We’re not talking about the Verve or Flatiron Wine Club that— [crosstalk] Look, to be honest, those are incredible companies with great wines, but those are very thin margins. It’s a very hard business and it’s not one that I would want to be in. That’s a very hard thing to be in unless, as we talked about before with Haus, you go very high-end.
That is really a concierge business where they are cultivating a very high-end clientele list that is willing to spend a lot of money when they’re dropping bottles of Burgundy and Barolo and Bordeaux and Napa Cab and stuff like that. That’s the business. Then the other good business with wine clubs is the wine club through a winery, where you have a relationship with the winery.
A: There again, that is a business that is only lucrative when you are selling the seller select bottles and the bottles that you only sell via the club that are expensive, that your loyal consumer is willing to spend on because they want to have a case of your wine every year.
J: What you’re saying is the exact reason why these wine clubs exist. Right?
J: Because otherwise it’s really exclusive. It’s expensive.
J: It filled a need.
A: It did.
J: In a shitty way.
A: It’s a need that exists that can’t be filled. You know what, like sorry, it’s just true. To fill that need, you are going to have to do something sketchy. It’s like, “Yes, that’s great.” Everyone wants to have this fashion that looks like high-end, made in Italy, but you’re going to have to accept that it was made in sweatshops. I don’t want that. That just is what it is. You want to have fast fashion, you want to go to H & M, and Zara and shit like that, you’re going to have to accept that the people who made those clothes were not treated well. If you’re okay with that, then fine. If you’re okay with the fact that this is not very good wine, and it was not made with sustainable practices at all. Probably the workers who harvested the grains were treated like shit and sprayed with tons of chemicals, but you feel like you got a deal, cool, but that is what these wines are. That’s where I feel like we don’t have to solve everything. Maybe we can just try to be more approachable as wine shops, wine professionals, et cetera, and bring more people into wine than saying, “I have a hack for it. We’re going to create a quiz.” Then via that quiz, we’re going to give you a discount on a 6-pack and we hope that then you’ll sign up to our monthly recurring shipment. F-off. Anyways—
J: That’s that.
A: —that’s that. You know what, RIP, wait, no one’s going to miss you. You all know how I feel about Winc now, and if anyone else has any thoughts, hit us up @podcastvinepair.com. We’d love to hear what you think. I’ll talk to you guys on Friday. I got a really exciting surprise.
J: Okay. Have a good week.
Z: I can’t wait.
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