Wine startup adopts a direct approach

After rebranding, it gets to know its clients, reworks production, co-founder says

In 2012, a startup called Club W set out to help millennials find and buy decent wine on the Internet. With bottles from a few boutique vintners, a slick Web platform and a simple recommendation algorithm, the Los Angeles company had a promising plan.

It didn't work quite as hoped. So when the company's founders tried again, they decided to get their hands dirty.

If there was ever a product in need of what Silicon Valley calls a discovery engine, it's wine. Consider the numbers: About 25,000 different wines are for sale right now, with 14 percent having hit the market in the past year, according to reports. Not even the most soused wine steward can keep up, let alone everyday drinkers who, if lucky, find a label they've tried before.

"There are a lot of people who are intimidated," said Kristie Petrullo Campbell, a wine consultant and former sommelier at Manhattan's Jean Georges. "If they go into a wine store and a salesman comes up to them immediately, they just close up."

Winc, as Club W rebranded itself, intended to demystify wine and shrink the supply chain, not unlike Warby Parker's eyeglass play or the boxable foam mattresses of Casper. It cut out distributors and retailers and offered an online rotation of 50 to 100 wines based on a short survey, including questions such as: "How do you feel about salt?" and "Do you like citrus?" Prices clumped around $13 a bottle, and members who took four bottles a month got free shipping.

Co-founder Brian Smith said Winc thought of itself as a tech company. "Wine clubs at the time were crusty," he said. "Yet, wine as a product is really fun. Approachability was at our core."

Two problems with Winc's plan slowly became evident. Among serious wine folk, its approach was considered more glorified marketing than true expertise. Second, the competition was already fierce, with no shortage of rivals aimed at cracking the same digital code.

Web-based wine shops and monthly clubs were rampant, some of them run by sommeliers or vintners themselves (and one run by Martha Stewart). At least two companies built businesses remarkably similar to Winc. Plonk Wine Merchants, an online store, started a monthly subscription service promising artisanal, boutique wines from around the world. Bright Cellars, based on a recommendation algorithm from two MIT grads, followed in 2014.

Winc needed an edge. In marketing-speak, the company wanted to have a deeper dialogue with its tribe of wine drinkers. It wanted to be more authentic. It needed, in short, to make its own wine.

Venture capitalists urge tech companies to bravely pivot from a business plan if it's floundering. But there are pivots, and then there are pivots. In this case, a small crew of entrepreneurs steeped in the soft art of search engine optimization and graphic design went fully vertical, all the way back to the literal roots of the business.

In the summer of 2015, Winc hired seven vintners, headed by Ryan Zotovich, who grew up in a central California winemaking family. True to the mission, the team's first offering was named WKND, a sparkling wine. It was a bold move, but there was a data argument to be made. Winc had amassed a modest but growing pile of intelligence about what its customers liked. If handled correctly, it could use those cyber-clues to inform its production and generate a greater share of "hits." At least, that's what Winc's co-founders told their investors when they pitched the plan -- over a few glasses, of course.

"We had this very direct connection with customers that doesn't really exist in the wine business," Smith explained. "So we're able to kind of reverse engineer wine production."

Since Winc's first bottle was sealed, hits have been more frequent. Its Chop Shop Cabernet Sauvignon is a consistent top-seller, and its Summer Water became a cultural phenomenon, selling roughly 36,000 cases to date. "Our story -- that authenticity, that narrative -- is coming through," Smith said.

Today, Winc claims to be the fastest-growing winemaker in the country and has amassed $310 million in funding, much of which came from Bessemer Venture Partners, known for backing Blue Apron Inc., LinkedIn and Pinterest, among others. Make no mistake, though, it's still a small player in Big Wine.

Regulations forbid the company from shipping to eight states, leaving a large share of the U.S. market out of reach. And delivery itself can be a problem, with FedEx requiring recipients to be home and provide an adult signature to take possession.

This year, Winc will bottle about 300,000 cases with roughly 100 different labels. That's a drop in the barrel when you consider California's annual output of 285 million cases. The company declined to discuss revenue, but an average transaction price of $20 a bottle would equate to about $72 million in annual revenue.

As it ages, Winc is growing bolder. In September, it started selling a $38 Syrah dubbed Baseline, the first of what will be a line of high-end varietals. Smith claimed it's one of the best wines coming out of California this year.

"I hesitate to use the word 'esoteric,'" Zotovich added. "But it's nuanced."

SundayMonday Business on 02/18/2018

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