Question: What do Laithwaites, Sunday Times Wine Club, Telegraph Wine Service, Natwest Wine Club, British Airways Wine Club, Warehouse Wines, Avery’s, and (pause for breath!) Virgin Wines have in common?
Answer: They are all owned by Direct Wines, the behemoth of the UK wine by the case market.
Founded upon one man’s passion for Bordeaux in the 1970′s, the company rose triumphantly into a £250m business, effectively writing the rules for delivering wine directly to peoples homes. It was an amazing success story.
But in recent years the company hasn’t found life so easy. Cost cutting, a recruitment freeze and a management cull leading predictably to this years posting of a £5.5m loss.
They remain a privately owned business so do not need to stand in front of a pack of blood hungry shareholders at an annual AGM. But if they did, they would no doubt explain away their malaise by pointing towards the recession, the weak pound and increasing prices.
All of which are valid but they do not tell the full story.
Having spent some time with the business in 2004 it was clear then that the company was at a turning point as it struggled to come to terms with a new competitive and technological environment.
The decline of Direct Wines boils down to three simple truths.
1) The business model that has served them so well for 30 years is now broken.
Direct Wines are a traditional direct marketing operation. They get you to buy an introductory case at a ludicrously low price and then try to get you to buy another case at a higher price. If enough customers convert to the higher priced cases, they then make a profit.
Unfortunately, not enough people are “trading up”. Not surprising considering that, through their omnipresent marketing, they’ve educated the public into believing a deal is always available.
In this sense they are no better than the supermarkets who they claim to stand apart from. They’ve done as much to commodatise wine as say, Tesco, have.
2) Their wines might not be quite what their customers think they are.
Laithwaites sing proudly about the exclusivity of their wines and the fact that the products cannot be found in the supermarkets. They invite you to believe the notion that their buyers travel the world to find real wines from real winemakers. Direct from the vineyard.
However, could it be the case that customers have got a little wiser to what’s actually in the bottle?. Take the recent qualification added to the video of Il Papavero on their website -
Because Giuliani (winemaker) sources grapes from all over Italy, national wine regulations demand that Il Papvero be labelled a “Vino De Tavola” however “hiding behind its humble Vino de Tavola status is a red full of the warmth of Italy” (Sunday Times)
So, each year they find the some grapes at the right price from wherever they can get them and then make the wine in any given location and ship it to England. Nothing wrong with that at all, but is it really what Laithwaites customers have been led to believe over the past 20 years?
I wonder how many other wines on Laithwaites best selling list would reveal similar stories to Il Papvero?
3) Somewhere along the way it lost it’s love of wine
Direct Wines is first and foremost a direct marketing operation. The model was genius, but it became all about the model and they forgot about the product. In recent years they might as well have been selling widgets.
The company now has a new management team in place, with much of the old guard making way for new kids on the block.
Can it survive? Of course it can. But it needs to demonstrate innovation pretty soon. The brand is an irrelevance to the next generation of wine drinkers but has enough equity in it’s existing customer base to provide a platform for either regeneration or a slow painful death.
So how do they turn it around? Over to you…
To be honest the wines I’ve sampled from the Big L have failed to excite to any great degree. It might be a case of a retailer not changing quickly enough in the face of new technology/competition but if the wines are not that great to start with no amount of overly enthused marketing is going to help.
I’m loathe to comment on this as I do think Virgin/Warehouse Wines and some of the others have great value wines and also very good quality wines. I think Virgin’s site and service is innovative and exciting – far more so than most supermarkets to be honest – it has a more personal feel and I know how much time and searching goes into the wines by the buyer. I buy wines from Virgin and have always been happy (and I’m a wine snob
) I think what Naked are doing is exciting and very much for the consumer but it’s also Rowan’s job to find the gems that his consumers wouldn’t and offer them to their consumers (which I think he does anyway). A model like Rowan’s has more chance to innovate quicker. I think rather than criticise we should all be looking to help one another at a time when the economy is forcing many people out of business… One may not like people at the top, but it’s the people in the middle and at the back who implement and make things happen often.
Both Gavin and Cath make valid points. There are plenty of good and good value wines on offer within the Direct/Laithwaites stable, including some very fairly priced award winners from the 2009 International Wine Challenge and Decanter Awards. The various clubs service a huge number of people and have done a great job of introducing them to wines they might not otherwise ever have encountered.
However, Gavin has a point when he talks about the broken model of offering cheap introductory cases and relying on consumers to trade up. We live in an age when the big supermarkets now ALWAYS have wines on sale at 3-for-£10, including perfectly decent basic fare from familiar producers and regions. Buying these in the high street doesn’t require any long term commitment, and similarly attractively priced wines can be bought online from the same chains. It is interesting to note that when Direct Wines first ran its ads proposing cheap introductory cases, the same magazines also had ads for music and book clubs using similar introductory-offer models. Today, those of us who want to buy discount books can do so from The Book People without making any commitment at all.
One of Direct Wines’ strongest suits lies – or should lie – in the personal service and advice provided over the phone to vast numbers of its more loyal customers. It may be that the future of this/these business/es lies in acknowledging that expensively-acquired, bargain-obsessed customers are no longer worth having. Anyone who suggests that Laithwaites’ good times are definitely over, should remember similar comments being prematurely made about Marks & Spencer and IBM.
Gavino
You have balls the size of small planets!!!
However, as with most other wine merchants they need to cut the B.S. from their copy and let customers review their wines for them.
Bring on the wine revolution where customers can taste the wine without the fluff and overpromising copy on the label. We’ve all moved on from the ‘new customer only offers’. There are millions of wine producers and I want to conversations with them direct. In LW’s case, i think they lost their founding principle of bring new and innovative wine direct from the producer. Tony L is the real talent behind LW’s not the mgt team. Customers are wiser, smarter and more informed.
Taste is everything and everyone’s taste is unique. Let’s celebrate our differences and learn from each other. LW’s don’t get it and it maybe too late for them.
I love wine and I love to learn more about wine – where is the wikipedia for wine??? winewiki let’s start a wine revolution NOW….
SocialPete
just thought id correct you, the telgraph wine club is not run by direct wines, neither is virgin wines although their are some bussines links. and averys of bristol is still mainly run by John Avery, I know him; however they are owned by direct wines because of their location for imports.
the wines that laithewaites sell are very good quality, it all depends on what you want to spend. they will source wines that are exclusive to them, but due to the popularity of some of the finer wines they will stock them as well so that there is variety; after all it is the spice of life!
I have had wines from direct wines, berry bros n rudd, waitrose, averys, majestic, odd bins etc. and as far as im concerned direct wines has the best selection of wine for drinking. unless you want to spen billions of bread on a bottle of chateu lafite then you go to the berry brothers.
Virgin Wines is 100% owned by Direct Wines so of course they have complete control over its management. The VW MD is a guy called Jay Wright (founder of Warehouse Wines). Jay is a DW employee reporting direct to the DW chairman.
And as major (only?) shareholders in Avery’s I’d say there’s very little independence there either. In fact I was recently led to believe DW were looking to wind down Avery’s as one of their small-scale loss-making brands. (note Warehouse Wines has already been disbanded – the web address now directing through to VW)
With regards to the question of DW’s survival, the fact remains although there may be some ‘new’ blood in the management team, they all still report to Mr Laithwaite, who I’d say is quite frankly a bit too old to play the game.
In the last 5-10 years consumers and retail have irreversibly changed. Old direct marketing models just don’t cut the mustard anymore. The internet has expanded and diversified far beyond simple online stores. Consumers drink more, drink better and have much more access to information, meaning they’re far less easily led. The DW business model, under any guise, provides squidly dot unique point of difference from the supermarkets. Their repetitive high-margin, low discount models are the exactly the same. As are a lot of the wines, all dressed up as ‘exclusives’ for the sole purpose of removing transparency of value. And of course the real killer is that without providing something more than the supermarkets can, DW end up lagging behind. Because if they wine isn’t any better than those at Tescos and you can’t get your milk and bread with your Pinot Grigio and you have to pay £6.99 for delivery that takes a week, what’s the point?
Unless DW change they’ll die out with the last Telegraph-reading Count Down viewing, flat-cap wearing, Volvo driver. And I don’t think they will ever change. Because I think through its very core DW are slow, insular, old-fashioned and arrogant. They still own the lion’s share of the market so perhaps that’s why they still think they’re doing OK despite continuous loses. But regardless of size, a business just isn’t going to survive unless it at least maintains a successful status quo. That’s just basic maths.
But Naked Wines is like the DW antidote. They may hit the big-time, they may not. But they’ve certainly got a much better chance of survival than any of the DW brands. And the simple reason is they’re clever people. They’re different, they’re innovative and they’re fast-moving. Rowan Gormley left Virgin less than 18 months ago. Within 6 months he had a fully functioning wine retailer set up and trading. And less than 12 months later they’re in bed with Jamie Oliver and celebrating selling over 800 cases in one day (see their facebook page). I’m no Alan Sugar but I’d say that’s pretty outstanding growth. But the absolute key element to their inevitable continuing success is their utter transparency.
I can’t possibly rant enough about how different these people are. I’m not going to go in to detail, you can find out that for yourself if you’re interested. But Naked Wines are doing stuff no other wine retailer (or any retailer for that matter) is even thinking of. Not only is their website utilising social networking facilities to link consumers to producers and consumers to consumers, but it’s their customers who are selecting the product range and dictating the selling prices. Yes, that’s right, the CUSTOMERS. Not Rowan. And not a bunch of clipboard-holding winebuyers. With a model like that, you just don’t need BS ‘we got this off a back of a lorry’ wine stories.
So in answer to your question Gavino the only way DW can turn it around is if Tony Laithwaite retires and sells up to someone who’s prepared to shake the whole caboodle up. Even then I’m not so sure. Laithwaites is a pretty ancient brand. Even Virgin brand lovers are on the verge of early retirement.