Just how does Naked Wines decide which producers to work with and invest in? How was it able to invest over $5 million in producers during Covid-19 and put together a Restaurant Rescue Case? Wine director, Ray O’Connor MW, explains all to Richard Siddle.
Even after all these years there is still some level of intrigue about how Naked Wines runs its business. Are those promises of investing upfront to help winemakers around the world, using money from the monthly subscriptions of its Angels, well, too good to be true?
If Ray O’Connor MW had been spokesperson for Naked Wines in recent years, rather than heading up its buying team, there would be a lot less questions to be answered.
There are few straight talking, upfront, and transparent senior people working in wine as O’Connor. When he speaks you listen. Not that he expects you to. Far from it. It’s just the way he delivers his lines. In crystal clear, concise, short, sentences that are delivered as a matter of fact.
He also cares. He cares about the wines he buys and cares even more about the producers and winemakers that Naked Wines work with. He also cares about making Naked’s customers, itsAngels, happy, by working with winemakers to produce wine they ultimately want to buy.
Data driven buying
(Click here for video extract of Ray O’Connor on how its Angels ultimately decide which wines succeed and fail on Naked Wines)
But even if he didn’t the Naked Wines model is such that it is the Angels that ultimately decide which wines they continue to keep on buying. Not just in the number of ‘likes’ and ‘shares’ they give to certain wines on social media, but in hard data. What wines they buy, when, why and how much for. That ultimately decides what wines get bought, promoted and marketed on the Naked Wines site, stresses O’Connor.
“All of Naked is very data driven, over laid with our a compassion for wine and people who love wine,” he adds.
No wine buying decision is taken that is not determined by its Angels’ buying data. It cannot continue to invest in a winemaker if Angels don’t like their wines.
O’Connor will make the initial call on selecting which wines are going to be introduced to the Angels and sold through the site. After that its success or failure within Naked Wines rests with what the Angels think of it, what percentage score it gets of likes and “I will buy again” thumbs up.
“We look at what was the buy it again rating. The run rate and how many bottles were going through each week. How many hearts it got and people liking it and what sort of appreciation it is getting on our wine wall (home page). It’s the only fair way to feedback to a winemaker when we are looking at next year’s wines.”
Naked can then talk to a winemaker about potentially adapting the wine to match what the Angels are saying about it. It sometimes comes up, he adds, when selling the same producer’s wines in the UK and the US. What might score highly amongst Angels in the UK could rate badly in the US and vice versa down to our different tastes and preferences.
The rest of the wine industry might have woken up to the power of e-commerce in the last 12 months, but it is actually the data and what it can tell you about its customers and what they want that is so powerful, he adds.
Key to Naked’s, and any e-commerce model, is recruiting and then retaining its customers. That’s what keeps the Naked Wines’ board and shareholders happy. And why it is set to spent £40m, or 14% of its forecast sales, just on looking to acquire new customers in 2021 and add to the close to 700,000 it already has.
Naked estimates that over a 20 year period an average customer will return at least four times in sales the cost of signing them up. It, therefore, clearly pays to keep them happy and why O’Connor and his team is constantly analysing Angels’ insights and data.
Focused strategy
Naked Wines has delivered wine to thousands more customers during lockdown taking its total Angels around the world to near 700,000
O’Connor admits Naked Wines had probably been through too many changes in direction in recent years – [particularly the stop, start, uncertain relationship with Majestic Wine] – and that it is now on much firmer footing with a clear, focused strategy under chief executive, Nick Devlin and UK managing director, James Crawford. The view from the top is very much to “keep it simple” without losing the innovation and personality that has made Naked Wines what it is.
It’s a focused strategy that has certainly helped the business through the great uncertainty we have seen over the last 14 months.
Its sales figures for the last 12 months will have made everyone involved in Naked Wines happy for it saw unprecedented demand for its wines during Covid-19. Not just in the UK, but around the world and in its businesses in the US and Australia. In the first two months of lockdown it saw sales surge by 80%, with sales to new customers up three times. Overall sales were up nearly 70% across the group in the 12 months to April 2021, with the US up three times on the year before to top $150m.
All very nice for the bank balance and a good news story for financial markets on the back of its not so recent split from Majestic Wine in 2019.
Giving back
(Naked Wines’ Ray O’Connor on how its $5m rescue package helped wine producers hit by the pandemic sell their wines)
But rather than just keep its shareholders happy, Naked took the decision to see how it could use its business model to help those in the wine industry who have really struggled due to Covid-19.
It initially committed $5m for winemakers, who usually supply their wine to restaurants and hospitality, to apply for additional support.
It then went further and looked to its Angels to see if they would help on-trade wine importers that had lost most of their business during Covid-19 by buying a selection of their wines that would normally be sold in restaurants that Naked had chosen to go instead into a special Restaurant Case on its website.
It is now doing the same to try and support the South African wine industry by offering a special South African Rescue case featuring wines from producers who have been particularly badly hit by the pandemic.
On each occasion O’Connor asked producers and importers to send wines for his team to assess to see which ones would be suitable for Naked’s customers. It turned out to be a great way to source “excellent quality” wines that usually would not be available in the retail and online channels and instead are sold to top quality and Michelin star restaurants. “We found some incredible wines,” says O’Connor, particularly from Spain.
Naked was then able to package the wines up, with minimum margin, from different countries as special ‘Rescue Cases’ for Angels to buy. In all it came up with eight different ‘Rescue Cases’ to choose from.
It was all about acting quickly so that Naked could “inject cash” back into these producers’ businesses, stresses O’Connor, and, in turn they could go on to pay their growers, bottlers and all those down international wine supply chain. “It was basically helping the industry move on a little.”
Supporting the trade
(Ray O’Connor on how Naked Wines was able to work with UK importers to help sell their on-trade exclusive wine to their customers during lockdown)
Naked was then able to turn its attention to seeing what it could do to help those in the UK wine industry, particularly importers and distributors that had found their main channel of trade closed off through no fault of their own. That’s how it was able to go out to companies including Bancroft Wines, Berkmann, New Generation Wines and Alliance Wine, amongst others, to see if Naked could help sell some of their on-trade exclusive lines.
“One key piece to remember was that it was ensuring the prevalence of wine remained key,” stressed O’Connor. Yes, it was great for Naked and all the specialist retailers and supermarkets to do so well in lockdown, but it’s vital for the wine sector as a whole that the future of the hospitality sector, and those that support, it are still relevant when things get back to normal. “That matters to all of us,” he says.
That’s what its Restaurant Rescue Case initiative was all about. Doing what it could to ensure as much as many people in the wine industry had a future down the line. “We are all in this together,” he stresses. “So let’s just, in a sense, share the wealth. It was an anomaly and the right thing to do at the time.
It also proved a great way to introduce top class winemakers to Naked and its Angels customers – like Jesse Katz, who had just left his winemaker role at Screaming Eagle in California to go it alone. Naked was willing to invest $1m in him alone.
O’Connor estimates that Naked is now continuing to work with around 50% of the producers it came across thanks to its Covid rescue initiative.
Who it continued to work with all came down to the data and feedback it got directly from its Angels as it does with any winemaker that Naked Wines works with. Angels, he explains, are simply asked whether they would buy a wine they have ordered again by simply clicking ‘Yes’ or ‘No’ and the percentage score will determine their fate.
“There are just some styles, even though I could see the quality was very good…and I thought wecould help the [producer] out and the Angels said ‘we’re glad we could help him out, but we don’t want to see that wine again’.”
The initiative also, concedes O’Connor gave him and the buying team the chance to taste wines they would never normally come across, even when they can travel, as they were only being sold locally, particularly into the high end restaurants of northern Spain.
Supporting South Africa
(Ray O’Connor on how Naked Wines long term commitment to support South African growers & producers)
Naked’s and O’Connors’ attentions have now turned to South Africa and what it can do, with the support of its Angels, to help wine producers that have had to struggle through three national lockdowns that have prevented the sale, domestically, of wine.
But rather than a quick appeal, it wanted to see if there were more effective, long term solutions and foundations that Naked could help with. O’Connor canvassed the opinions of the producers it works with in South Africa and through them it has been able to identify and potentially support the growers and winemakers who really are at the sharp end and are in most need.
That long term support, for example, comes through Naked buying the surplus grapes its current producers are not getting from those growers and committing to future vintages. “It’s more about keeping things moving year after year,” says O’Connor.
In the short term it was able to pull together 7,500 cases of six bottles that its Angels bought within 24 hours, but its longer term commitment is to work with growers and their producers to ensure they have a long term future.
“It’s a country that so many people love – and the wines we love – and we should not take our eyes off the ball. This is going to have implications further [down the line] on and we need to take care of the communities that are involved in it.”
It has also been able to take that support direct to the people of South Africa by supporting winemaker, Carmen Stevens, and her Carmen’s Kids charity that helps feed and support what are now over 15,000 school children in her local community. Since 2015 Naked’s Angels have donated close to £1.5 million and helped provide 25m meals. It has even set up a charitable trust, to enable them to supercharge the amount raised by claiming Gift Aid on all eligible donations.
Naked Wines’ Angels have responded to the campaign to raise money to help feed struggling families in South Africa hit by the Covid pandemic
During the pandemic Stevens looked to expand the charity to feed families in the local area, by working with local food wholesalers and ending up with over 30 different community kitchens providing free daily meals to 18,000 people. Naked’s Angels have once again responded and have managed to raise over £780,000 within a matter of weeks. “It’s an exceptional amount of money,” says O’Connor. “That will go towards feeding more school children and their communities.”
Building Naked’s community
How Naked has been able to build up a unique bond and sense of community within its Angels is the “most significant standalone part” of the company that O’Connor believes sets its apart from other wine businesses. The fact it can put out an appeal to help a certain winemaker or region and be almost assured of a huge response is an amazing asset to have and one that O’Connor and Naked certainly don’t take lightly.
“The greatest independent asset is the community,” he says and the more they follow and get to know and engage with winemakers around the world, the more they want to help them. “It’s a priceless equity. If you put a call out for help, they are there.”
(Ray O’Connor on how Naked Wines has used online tastings to transform how it can bring its community of Angels together)
O’Connor has been able to play his part in forging even closer ties with Naked’s Angels during lockdown with the enormous success of what started off as a casual “Thirsty Toosday” online tasting at the beginning of lockdown. The tastings quickly took off to such an extent that O’Connor was joined by up to 6,000 Angels and more online, via Zoom, Facebook or Instagram Live all talking and chatting to producers. Even 13 months on and his tastings regularly top 4,000 Angels taking part and he has been able to link up with producers live from their winery and in their vineyards whilst harvesting all over the world.
“People were just blown away. It was this escapism where we are all looking at our four walls and then suddenly you are looking at a machine harvester in New Zealand,” he says. “People are in the chat room talking to each other about what they are drinking and so on. That’s what it is about. This community getting together. It’s nice. Long may it last.”
Over lockdown Naked has adapted and developed its online tastings and now works with the Online Tasting Club to sends out five small sample sachets of wine, that sit in a specially designed cardboard box, for the Angel to taste during the event.
He says he looked around to find the right partner as he both wanted the right lightweight, good quality, wine secure packaging but also needed the ability to scale up the number of packs it was sending out. “We are going to develop it, but the quality is excellent and wines showed up so well.”
O’Connor is also certain online tastings are here to stay. Particularly through the winter when people are more likely to be indoors and looking for fun, innovative and interesting things to do.
It also opens up Naked’s consumer tastings to so many more people than they can do in a venue.
“The internet…it’s the next big thing,” he laughs.
Sourcing wine
(How Ray O’Connor and Naked Wines source new wines and decide to invest in a new winemaker)
The heart and soul of Naked Wines rests in its ability to go out and find the right winemakers to make the wines its Angels want to buy. O’Connor says there are many ways he goes about that.
It could be based on a winemaker’s pedigree and what sort of track record they have. Are they in a region where they have a gap in their range? Are they part of a bigger producer and might be looking to set themselves up on their own? Or it could be through word of mouth, a recommendation or someone who has been on his “radar” for some time.
“It’s about finding winemakers that are pushing boundaries,” says OConnor, who is particularly attracted to investing in projects in new “untapped areas” with the potential to make “excellent wines where you get to make a social difference as well”. Which is all part of Naked’s sustainable principles.
Ultimately the appeal for a winemaker joining Naked Wines is it can help them “create their own success and grow them,” adds O’Connor. Become a “brand” in their own right as a winemaker, rather than being known working for someone else. What’s more Naked’s up front investment will make it a risk free opportunity for them to go out and make a style of wine in a region they really want to make wine.
“If you have got the winemaking talent, got the access to grapes and know somewhere you can make it, like a custom crush facility, then we’ll cover the rest, we’ll give you the money in advance,and pre-order from our customers because we will tell them your story. And then they’ll sell.”
So when Naked is looking for a new winemaker to make that commitment for it is looking for someone with “talent, an open mind, that is willing to think this way as well and engage with the customers”.
Not that Naked, he stresses, funds all the winemakers it works with. It may be they are established enough that they don’t need the support, but are looking for Naked’s commitment to buy their wines and the opportunity to engage in its community. Part of the buying process will be determining which way the winemaker wants to work and, if they do want funding, how they would like that to be invested.
Angels are judge and jury
Angels votes determine which wines remain listed with all feedback used to determine future spending and investment plans with winemakers, says Ray O’Connor
For all that there are still some in the trade all too willing to throw whatever stone they can at the Naked model. Quick to pick at any hole they can find.
O’Connor says he is clearly aware of that “noise” but is no way distracted by it. The proof, he argues, comes in the very high retention levels Naked has both for its winemakers, and in particular, its Angels.
“They are the judge. They could drop out, leave and go somewhere else, but they don’t. We see incredible retention and growth and equally incredible retention of winemakers. They can go to other businesses, but they stay and we grow them and they refer their friends. The proof is in the pudding and in the numbers.”
O’Connor’s task is to make sure those winemakers are making the “pleasurable, quality” wines that are the DNA of Naked’s range. But they also need to have a personality that wants to share stories and engage with its Angels.
“You are looking for the holy trinity of excellent quality and style, and then good pricing to support that and then a character, a personality who buys into the philosophy of what you are doing.”
Which often means walking away from what O’Connor calls “absolute beauts” of wines because that “holy trinity” does not add up.
He likens the winemakers he works with to “brothers and sisters that you are going to be clicking along with for the next 10 years”. “You want to be able to sit beside them on a bus driving between Sheffield and Hull with a hangover.”
Fine wine drive
Naked is looking to promote its own wine credentials, and those of its winemakers, with its fine wine collection that gives O’Connor the opportunity to work on exclusive projects that might take two to three years to come to fruition. A chance, he says, to talk to its winemakers about potential single vineyard or parcel wines that can offer something completely different.
“We started in July 2019 and it has grown and grown and grown,” he adds. It also gives the Angels a further opportunity to get closer to a particular winemaker who might only be producing a few thousand bottles of that wine.
It’s also become a great way to introduce new winemakers to the company, who Naked can work with on a specific exclusive project and then see what other opportunities there might be.
Keeping it simple
For all the talk of wine styles, buying strategy and keeping its winemakers happy, Naked Wines is ultimately a major e-commerce player fighting it out with every other online wine retailer there is out there. The last year has shown how competitive the online space has become, but also how much more savvy and demanding consumers are when shopping online.
Keeping its customers front of mind is very much the Naked way, stresses O’Connor. “They really don’t want to hear too much about the noise. It’s all about get the wines to be in good time, with good quality, good styles and good pricing and that’s it. You just have to keep it simple sometimes. We tell a lot of winemaker stories and we introduce a lot of new regions, but you can’t keep your eye off good service and that’s where you’ll get lifetime value of a customer and good retention.”
