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Naked Wines: Driving Out the Costs No One Can Taste
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Naked Wines: Driving Out the Costs No One Can Taste

Quality wine for less money? Is the premise even true?

Implied Expectations
Apr 25
Share this post
Naked Wines: Driving Out the Costs No One Can Taste
impliedexpectations.substack.com

This is the first of what will be a few posts about Naked Wines.

It was 2014 or 2015 when I first heard about Naked Wines. My wife and I received one of their vouchers offering $100 off a case of wine in an e-commerce box. I was skeptical but I briefly looked into it. I remember the pitch was that you become an “Angel” and automatically contribute $40 per month towards your wine purchases. I cynically assumed this was just a creatively-marketed business idea meant to get an interest-free loan from subscribers to fund their business upfront. “Clever, but why would I give them an interest-free loan? What’s in it for me?” I thought. I threw the voucher away without investigating further.

Fast forward to 2021—pandemic times. I’d seen some interest in Naked Wines as an investment and decided to give it a try as a customer first. Twist my arm. I signed up and ordered the Naked Wines Red Wine Discovery 6 Pack that had a given market price of $139.99. My $100 off voucher made it $39.99 all-in with free delivery and no tax. That was $6.67 per bottle—a price so low the wine didn’t need to knock my socks off; it only needed to be drinkable. My expectations were low.

As it turned out, none of the bottles knocked my socks off. But frankly, that would have been too much to expect at that price. But every bottle was drinkable or better. I become an Angel and have been ordering since, strictly of course, for due diligence purposes.

My verdict on the wine: most of the wine is good, and some is actually great, but you have to order enough to figure that out. We have had one bottle that was bad that we couldn’t drink, which Naked will immediately credit you for. I think that was an anomaly because we had had that particular wine before and it was fine/good. If you rate the wines the site will recommend wines to you. Also, most of the wine is on the young side. That means it can be good right now, especially if you open it a couple hours in advance and use an aerator or decant it, but it should continue to improve with some aging.

If you want a $100 off voucher and a 1.5L magnum bottle (claims to be worth over $94), feel free to use my referral link (https://us.nakedwines.com/invite/implied-expectations). I’ll get $40 of free wine too. If there is any chance of you making an investment, trying the wine first is obviously a prerequisite. They’ll also give you a full refund if you aren’t a fan so there’s no risk. We can swap notes.

Introduction

Naked Wines is the largest direct-to-consumer winery in the U.S. and operates in the U.K. and Australia as well. For the most part, I’ll be talking about the U.S. business and opportunity because that is by far the largest opportunity going forward.

Naked has a very unique model. On the consumer-facing side, it’s a subscription model where customers agree to contribute a fixed amount each month—the default is $40 in the U.S.—into their Naked Wines account. But this is not a subscription fee. Subscribers, called Angels, can use the balance in their accounts towards the purchase of wine. It is like a wine savings account or wine piggy bank. Unlike wine clubs, no wine is automatically shipped to you, so you don’t need to worry about getting wine you don’t want. You can pick and choose which wines to order, when to order, and pay using the balance in your Angel account and additional funds by credit card, if necessary.

Of course, there are benefits to being an Angel, which I did not take the time to understand seven years ago. The Angel funding gives the company the working capital necessary to partner with and fund the wine production by independent winemakers. So you can feel good about that. And in return for that upfront funding, Angels are offered the wines at significantly discounted prices. Typical discounts are 30%-50% from market value. You could call them wholesale prices.

On the winemaker side, Naked is a platform that enables winemakers to focus on making great wine, without financial risk, for a large pre-existing customer base who is primed to buy it. While arrangements with winemakers differ depending on their needs, typically Naked pays for the cost of grapes and production upfront, the winemaker makes the wine, and when it’s ready Naked makes it available for sale to its 964,000 and counting group of Angels. For the winemaker, the beauty is four-fold.

  1. They get to have their name on the label and establish their brand.

  2. They get to focus solely on winemaking instead of sales, marketing, distribution, finance, compliance, regulation, and operating a winery P&L.

  3. They avoid financial risk because Naked funds the production upfront and commits to buying the wine because it knows it can sell it to its 964,000+ Angels who have mentally pre-committed to buying it with their Angel funds.

  4. They get a more resilient stream of income because Naked represents a different sales channel than other traditional winery business they may participate in that is often more vulnerable to recessions, seasonality, or even pandemics.

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