Naked Wines and the Australian wine revolution

Naked Wines and the Australian wine revolution

Despite owning no taxis, Uber is the biggest public transportation company in the world. Likewise Airbnb, which despite being the largest provider of accommodation, doesn’t own any hotels. 

Now, the sharing economy is spreading to the vineyards, and Naked Wines Managing Director, Greg Banbury, reveals how the Australian arm of the online startup he founded with eight others 10 years ago, including Richard Branson’s former right-hand man Rowan Gormley, is bridging the gap between its 45 winemakers and consumers in a unique business model.

“We've got a very specific purpose – and that purpose is to revolutionise the wine industry,” he says. “One of the ways we describe Naked Wines is, ‘it's a dating agency for winemakers and wine drinkers’ – we’re connecting someone who loves the product, our angels, with someone who loves making the product.”

Naked Wines’ consumers are called ‘Angels’ – after the rich New Yorkers who used to fund Broadway shows by fledgling writers – directly support independent winemakers by paying $40 a month in return for exclusive access to delicious hand-crafted wines at low prices.

Banbury was a co-founder of Naked Wines in the UK, along with eight of the old Virgin Wines team lead by Gormley. The business launched in Australia in 2012 and he took the role of Australian Managing Director in April 2016.

“In Australia, we’re putting the power back into the hands of the two most important people, the wine drinker and the winemaker,” he says. “There's a bunch of dead costs in the production of wine that the consumer ends up paying for.”

The idea of a ‘naked’ wine is one where the all the things you pay for but can’t taste are stipped away. The winemaker is freed from all the things they might not be good at, like spreadsheets, selling, attending trade shows, hiring sales people – all of which go into the cost of the wine but don’t add to the flavour.

Banbury explains how they knew that if they did a good job from the outset – facilitating that winemaking process by funding the winemaker, and taking over the “boring stuff in the middle, like building a website, doing the logistics, shipping it to the customer's door, handling the customer service” – and they did it well, they’d have a booming business, with loyal, returning customers.

“The great thing about the model is that it's very authentic,” he says. “You genuinely can make wine for a lower price if you work with winemakers the way that we do. There's no one clipping the ticket on the way through and there's no risk – you're only really paying for the juice and the winemaking talent.

“It's a ground-breaking new model and only possible because of the internet. Up until now, the wine industry has just made wine, put it in boxes, stuck it in a warehouse, and then tries to sell it later.

“We're going straight to the winemaker and selling it all before the winemaker has even made it. So, by the time it hits the site, the customer is excited about the wine because they've been part of the process.”

Banbury claims the main benefit on the winemakers side is that they're guaranteed orders, are paid on time, and have ongoing communication with their customers.

“Naked is completely different to traditional retailers,” he insists. “When winemakers work with us, not only does the money turn up on time, the wine is delivered on time, and thousands of our customers talk to them directly through our website on a monthly basis.

“When you have loyal customers, it can grow very quickly, and when you talk to our winemakers, they say, ‘this Naked thing is what I dreamed the wine industry would be like, but it never actually turned out to be that way’.”

In 2015, Naked Wines was acquired by Majestic Wine – which Gormley is now CEO of – for $98mn.

The last 18 months have been all about growth for the Australian arm of Naked Wines, which is based in Sydney’s stunning Northern Beaches. The business shipped more than 300,000 cases of wine last year – that’s close to four million bottles – and revenue is on track for $47mn in the latest financial year.

“That’s a lot of wine,” Banbury laughs, “and it’s growing. We’re growing at a rate of about 30% year-on-year.”

Banbury states the focus over the next few years is proving Naked can grow, explaining if it was to stop investing in growth, it could be more profitable in the short term, “but that that's a fool's game”.

“We get a great return on our investment, so if we keep investing into growth, then we can fund even more winemakers.”

Liberating winemakers is something Banbury is passionate about, and Naked works with three different types of winemakers – those who currently work, or have worked, for other small or big name wineries, including award-winning Caroline Dunn, who is probably the most awarded female winemaker in Australia, and used to make Wolf Blass.

It also works with fledgling wineries, those “rags to riches kind of winemaker who had raw talent, but didn't have the money to produce any kind of quantity of wine,” as Banbury explains.

“But now they're making a really good living, with tens of thousands of cases every year, and that's all because of Naked Wines' angels.”

While Naked doesn’t put restrictions on winemakers to say they can't work for anyone else, it ensures the particular wines it funds are only available to its Angels who fund it.

“Hitting 70,000 angels has been a pretty exciting milestone for us,” he adds. “We don't sit here going ‘we want to be a $1bn dollar business’, instead we focus on liberating as many winemakers as we possibly can.”

“We’re at 45 – if we can get to 100, we've made a good start. But there are probably 1,000 to 2,000 winemakers in Australia we could potentially either help or enable them to make wine the way that they want to make it – and that's a good thing for the consumer who wants to drink wine made by a real person, not a supermarket.”

Banbury says Naked’s best customers come from referrals, usually from other customers because they've been to an Angel’s house for dinner, and the host has handed them a bottle of wine and said, ‘I know the winemaker’ or ‘I helped make this wine possible’.

“They get the full story,” he explains, “and those people then, in turn, become our best customers.”

Naked Wines’ website currently boasts approximately 200 wines ranging from $8-$30 dollars, with most of them in what it calls the ‘sweet spot’, costing $12-15 a bottle, which Banbury claims is comparable to $30-35 bottles of wine in the bottle shop.

“We believe there's not a bottle of wine in the world that costs more than $20 to physically make when you take in fruit, winemaking, oak, glass, label, screw cap etc,” he says. “20 bucks really is the max, and that's with really top quality fruit.

“There's no reason that any bottle of wine should cost more than $30– anything over $30 and you're paying for a name or a brand, or scarcity or stuff that you can't taste.”

While delivery logistics within Australia is obviously difficult due to its size, Naked decentralises its supply chain, with warehouses in NSW, Victoria and Western Australia, meaning Angels in major cities such as Sydney, Melbourne and Perth all get next day delivery.

With customer experience at the forefront, the website has just launched a tastebud matching algorithm, and it’s also about to launch live chat in the mobile app.

“We love innovating and pushing the envelope,” adds Banbury. “Once you become an Angel, the loyalty factor is very important and we're always looking for ways to improve the customer experience.

“We also put a lot of effort into the culture and the ethos of Naked, and I think people like working for a business with a purpose. We're trying to stick it to the big guys. Everyone loves the fact we've built a really viable business and are going up against the likes of Coles and Woolworths, and that's really a lot of fun.

“We want to revolutionise the wine industry – and we've only just started.”

Naked Wines
Greg Banbury