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…

The Wine Society (TWS) is in equal parts inspiring and frustrating. Unique in the mail order landscape, the Society is a co-operative that doesn’t pursue the profit principle. It exists in stark contrast to the behemoth that is Direct Wines and the UK consumer is all the better for it.

I’ll declare my association right from the start. I worked for The Wine Society a couple of years back, project managing their move to a new web platform. They are located in the Hertfordshire ghetto of Stevenage (Lewis Hamilton grew up here, learning to drive fast to enable a quick exit), the working culture is akin to that of a state run company in a command economy. However, there is something safe and reassuring about the business and my sixth month contract ended up resulting in a two year stay.

The Business is run by a Committee of elected members but, as in any self preserving “democracy”, the election rules are designed to protect the status quo so don’t imagine that by becoming a member you’ll get a shot at the board.

But the wine is simply fantastic, at every level. The buyers have a greater degree of freedom than in any other business ofcomparable size or greater. Couple that with the fact that they are not just looking to make a quick buck and you get a merchant that fosters great relationships with growers (not seeking to beat them into submission on price) and delivers interesting and often challenging wine to its customers.

The best way to get the most out of TWS, is to join the “Wine Without Fuss” subscription scheme. Basically,

you set up a direct debit and you receive a regular supply of wine. You choose the case style, price points and the months you want it delivered. It’s a far more flexible scheme than those run by Laithwaites (buying from Laithwaites, you can’t help think you’re buying from a business model than a wine merchant) and often, the cases contain the most interesting wines that the Society gets its hands on – small parcels, one off buys etc.

TWS has also made great strides in the accessibility of their Fine Wine range with Shaun Kiernan doing a great job in giving customers really interesting offer such as the recent Ridge Wines mixed case.

TWS is a heritage brand and as such you are buying into a part of a British stuffiness that I usually recoil from. TWS certainly has its faults. It’s still disappointing that they don’t embrace community more than they do – you get no sense of being part of a Society, they have an old fashioned approach that dictates that the Brand is the endorsement and that the customer is subservient.

As a result they refuse to unleash the web as a communication tool in the same way that, for instance, Berry Brothers has done. However, I’m confident that they’ll get there in the end and that one day they can find a way to unleash the more progressive instinct that certainly exists amongst the rank and file.

To join the Society you have to fork out £40 or a lifetime membership (one off cost).  There’s some nonsense when joining about your application being approved by a committee (it isn’t- the company does not do any checks on you, it’s just a brand construct to create the concept of exclusivity) so you’ll have to wait a couple of weeks until your Share Number and members pack is issued.

To get a taste of the offers the Society is currently pushing take a look here.