Snooth Blog

Snooth User: John Andrews

Wine Clubs

Posted by John Andrews, Jun 16, 2008.

Are wine clubs worth it? Which one should I join? How do they work? These are questions I hear a lot. The topic of wine clubs has even recently been brought up on Snooth . The topic of wine clubs is something that I've wanted to write about and the discussion on Snooth tells me it is time to do so.

What exactly is a wine club? A wine club is really a 'preferred' list. They are similar to any loyalty program. They are usually free to join and, like loyalty programs, offer things that non-members do not get. A wine club is a way for consumers to ensure they get the wine from a winery they like or get exposed to wines they might not have tried before and sometimes both. For wineries or stores it is a way to create a loyal group of patrons and have some predictability in sales. For a wine club to work it has to provide value for the consumer as well as the retailer. A properly executed wine club does both.

The first thing to know is that there are two broad types of wine clubs: winery based wine clubs and retail store wine clubs. Most people belong to one of these types of wine clubs. They are similar in that you have to be members but differ in execution. As expected a winery wine club will focus on a single label and a retail store will offer a variety of wines. While I focus on winery based wine clubs, most of what I put here is applicable to retail store based one clubs.

Before I dive into the details there are a two things that I should clear up. Mailing lists and Allocation lists are often mentioned in the same breath as wine clubs. They are very different. Mailing/Allocation lists are more like priority position in a line to buy tickets for a concert. Also there is a category of wine clubs I call 'hybrid' in that they have qualities that are both winery like and retail like. These are wine clubs that are run by co-op tasting rooms/stores. An example of a hybrid wine club is the wine club of Cult Wine Central in Napa.

Why do wineries create wine clubs? I touched one of the reasons above. A wine club helps to establish a loyal group of customers that can be used to help create some predictability in sales. Going beyond the predictability in sales, a wine club helps a winery to forecast wine production, determine staffing needs and plan its year. A winery is a business and wine club helps make that business run smoother. There is enough variation in the wine business that a level of predictability is welcome.

How do wine clubs work? The basic idea behind a wine club is to provide some value to consumers so they will continue to buy wine. Overall, most wine clubs will have some or all the following features:

Regular shipments of wine; monthly, quarterly or another frequency
Shipments are usually chosen by the winery, ranging from 2 to 12 bottles
Discounts on purchases of wine and, in some cases, merchandise
Complementary tastings and tours
Invitations to members only events
First access to new releases
Access to limited production and library wines
Usually, there is no fee to join

A wine club is designed to create loyalty among customers by providing privileges and benefits that the general public does not get.

What does a wine club mean to consumers? This is a tougher question to answer. Above I talked about the benefits that wine clubs offer but this does not mean that all people value these. For example, member only events, while very nice, can be very costly for people who do not live close by the winery. Discounts on merchandise are often unused as but not everyone wants a polo shirt with a winery logo on it.

The value that consumers get will be determined by what is most important to them. For most people that seems to be access to wine and discounts on that wine. This is tangible value and is easy for people to quantify. However, for many people it is the intangible value that means more. A wine club can create a sense of connection with winery. You can get to know the people and almost be part of the 'winery' family. A person becomes part of an exclusive group. Intangible value is harder to quantify and even harder to create.

With the value of wine club being so subjective and based on what the consumer perceives, why would a winery want to have one? Wine clubs require a lot of paper work, they require a lot man power to get shipments out and there are always problems with shipping. However, a properly executed wine club creates value for both consumers and the winery. The primary drivers for a having a wine club are economic. A wine club ensures that a certain percentage of wine that is produced will be sold. Wine club members are great ambassadors of the winery. They tell people about this great winery they are part of, these new people buy the wineries' wine. In my opinion, the best advertising for a winery is personal reference and happy wine club members give great references...good wine certainly helps this along.

What makes a good wine club? You’ve probably already guess what I am about to say...value. Let me put a little different spin on this though. What is important is how the wine club creates value. To create value for its customers a wine club needs to make it stand out from other wine clubs. There are many ways this is done:

Have wines that only wine club members have access to...creates exclusivity.
Significant discounts on wine purchases...although this can have negative effects on those who aren’t club members.
Access to library wines...wines that have been kept by the winery in ideal cellaring conditions.
Levels of club membership to ‘fit’ interest level...this in my opinion is not a good strategy as it leads to people being dealt with differently within the club.
Limit to the number of members in wine club..the ultimate in exclusivity. Case in point, J. Richioli has a seven year waiting list. I am still 5 years away from getting on to it.
The ability to customize their wine club shipment...we do this at Loxton and while people love it, it creates a huge amount of work for us at each ship date

Do these things work? They help but ultimately what is most important to the consumer is the wine. The benefits of the club just help the decision making process but are rarely the reason alone for joining the club.

I mentioned earlier that mailing/allocation lists are not really wine clubs. Allocation lists are priority list on who can buy wine. The higher on the list you are the more priority you have. The more you buy, the more is made available to you. The way priority is set is determined by the 'type' of list. For some lists priority is set by the length of time you've been on the list. Others set the priority by the amount of wine you buy. Some will use both. With wine allocations there is usually no discounting involved and other benefits, if any, are limited. What allocations do is provide the consumer with exclusivity. It can be argued that exclusivity is valuable on its own but that is an argument that could go on for a while. Wine allocation lists, in my opinion, create more value for the winery than the consumer.

So why be part of wine club? More importantly which one do you choose? The answer to why is that it brings some value to you, whether it discounts or some other benefit. To which wine club you should join depends on what you are looking for. The initial decision that needs to be made is variety or specificity. If variety is what you are looking for the a retail store wine club will suit you better as it will likely offer you wines of all styles from many different regions. If you want to limit the variation In wine you will receive then a winery based wine club will probably work better. Winery based wine clubs will tend to focus in on a smaller number of varieties and specific regions. Some of the larger wineries will fall in between as they can offer a larger number of varieties but usually from a smaller number of locations. If you do commit to a winery based wine club commit to it for a year (most will ask that you commit for a number of shipments or a period of time). After a year, decide if you want to stay or switch to a new wine club. If you join a retail store based wine club you can usually tell after three shipments if they are selecting styles that match your taste. Also, I recommend that you don’t join more than 3 wine clubs at a time. It's easy to lose track of them and helps to keep expenses down!

It should be pretty clear now that my position on wine clubs is that they can work when they create value for both consumer and winery. Wine clubs offer some consumers a way of being part of the wine industry without having to get your hands dirty. What I have described is really how wine clubs work throughout the US and Canada. I really don't know if the concept exists in wineries elsewhere in the world. I'd be very interested to see if there is such a concept in Europe or South America or Australia. On a personal note, I was wine club member at Loxton Cellars before I started to work there...don’t worry that is not a requirement of most wine clubs :)

John Andrews is a software product manager during the week and is a professional Tasting Room staffer at Loxton Cellars in Glen Ellen, CA on the weekends.

Replies

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Reply by Chris Carpita, Jun 16, 2008.

When I think wine clubs, I get this image in my mind:



Wine clubs are generally good for the enthusiast, but they shouldn't happen at the expense of all other patrons.

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Reply by Mark Angelillo, Jun 16, 2008.

Great information here, John. Thanks for getting the word out -- should help us navigate much better. Now I need to go about picking my favorite wineries!

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Reply by Philip James, Jun 16, 2008.

Thanks John - I really think a lot of the perceived value to a consumer is wrapped up in the intangibles: things like the newsletters, the personalization, the christmas card. All these things make the user feel special, supportive and like an insider.

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Reply by oceank8, Jun 17, 2008.

Earlier I mentioned my beef with wine clubs: sometimes the discounts are so extreme it makes me angry and I, as a non member, don't buy any wine. I feel that this tends to be the minority though.

That said, I will say that I actually like wine clubs when executed properly. I agree with what you have said and find it funny that I fit very nicely into all your categories. I am a member of three wine clubs and all for very different reasons. The biggest thing is I HAVE to really like the wine! I am a member at Leonesse because I live about 10 min. away, they have great wine, and a wonderful restaurant. I get a discount on wine both in the winery and in the restaurant (with NO markup on restaurant wine!). I can bring up to 4 people a day for free tastings (normally costs $10 per person). They also have great member only events. I am also a member at Carlsbad Coastal Winery because they make excellent wine. They are a small establishment that I live about an hour from and I know some of the people that work there, it makes me feel apart of the in crowd. My third club is with a wine retailer. I try to get in there at least once every two weeks and I buy most of my wine there. I get a small discount and there are many fun events. The main reason I joined this one was for the purpose of variety, I am able to try many things that I might not have otherwise. I enjoyed reading your blog and agree with all your reasons for joining wine clubs.

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Reply by John Andrews, Jun 17, 2008.

I agree with all the comments here ... my goal was to outline how clubs and allocations work and why people are part of them. Some clubs do better jobs than others. As people have indicated, well run clubs make people feel part of something special. Poorly run wine clubs create animosity and push non-club members away.

However, my feeling is that most clubs don't really offer too much that is really 'special' or different from other clubs. What I am saying is that, for me, ultimately the wine is the most important thing. If I can get wine I really like and get it at a discount then I'm happy.

I was hoping to hear about wineries in Australia, Europe, South America or South Africa ... does anyone know if they have similar concepts?

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Reply by nobledrinks, Nov 10, 2009.

I mean that clubbing is great - The clubs are a platform where people meet, enjoy their favourite drink and gain knowledge about it. The clubs meet on a regular basis one evening a month for special tastings :-) I actually started some in Aberdeen, Scotland. If you are interested, look at: http://www.noble-drinks.co.uk :-)


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