Wine clubs and what their success says about the wine business

The one thing that has seemingly not slowed, despite the recession in the wine business, is the growth of wine clubs. Everyone, it seems, is offering them: Wineries, of course, but also newspapers and magazines, wine retailers, discounters, and even non-profits and charitable causes. Zagat, the restaurant guide, has a wine club, and a club even advertises on the blog. And, believe it or not, there are sites that rate wine clubs.

The Wine Curmudgeon did a post several years ago about what to look for in wine clubs, and most of that advice still holds. Clubs, by themselves, are neither good nor bad; it's up to the consumer to figure out whether they're getting a deal or not. Are the shipping charges fair? Do the wines seem to offer value? I miss the old Virtual Vineyards wine club, while there are several others that I don't want to even get junk mail from.

Most importantly, read the fine print. That's where you'll learn that the New York Times' wine club is run by another company, and doesn't really have anything to do with the newspaper or its wine critics. Or that the wine club rating site noted above may make recommendations based on whether it is "compensated" by the wine club it reviews.

Having said that, the growth of wine clubs raises a larger question. What's going on, and why is it going on now? More, after the jump:

Wine clubs, in this sense, means those that aren't run by wineries (which have also seen substantial growth). Call them retail wine clubs, where a third party that isn't a winery selects the wines and offers them to consumers on a regular schedule. That's because, while it makes perfect sense for a winery to do a club, it's more puzzling about why a company like Zagat or Virgin would want to do it.

The answer is four-fold:

• Because it's a lot easier to ship to consumers than it used to be. The 2005 Supreme Court decision that allowed wineries to sell directly to consumers also, as states tried to figure out how to conform to the ruling, loosened some retail-to-consumer shipping guidelines.

• Because wine club members seem to have oodles and oodles of money. The demographics for many of the companies that sponsor wine clubs rival those of the wine magazines. USA Today, for example, which has had a wine club for a couple of years, says its readers have a median household income of more than $90,000 and that 78 percent have at least a college education.

• Because wine clubs are profitable, even during the recession. The numbers are little hazy here, since the best research has been done with winery wine clubs and they are different from retail wine clubs. Still, winery club sales grew 19 percent in 2010 and are expected to increase again this year. Sales for the wine business overall, meanwhile, have been mostly flat for the past three years.

• Because wine clubs are less confusing than traditional retail sales. Wine clubs promise to send consumers wine they like, and the consumer doesn't have to do anything but sign up and OK a credit card charge -- without dealing with snotty sales people or wandering through endless aisles of merlot. In this respect, it almost doesn't matter if the wine is any good, since it's so much easier to buy. Which, sadly, says way too much about the wine business.

The moral of all this? That wine clubs are another sign that the wine world is devolving into two separate and distinct classes -- the 95 percent of wine drinkers who don't have the demographics the wine clubs want, and the 5 percent who do.

The photo is from LotusHead of South Africa, via stock.xchng, using a Creative Commons license

Comments

[The Sediment Blog]

One more key reason why wine clubs are successful - consumers trust the "master brand", the Zagat, Virgin or New York Times which "fronts" the club.

They trust that brand, more than they trust their local wine merchant, to offer wines which will suit them.

Which really says something...

[Tom Wark]

"• Because it's a lot easier to ship to consumers than it used to be. The 2005 Supreme Court decision that allowed wineries to sell directly to consumers also, as states tried to figure out how to conform to the ruling, loosened some retail-to-consumer shipping guidelines"

I'm not sure where this has happened. Today retailers may only ship to 14 states.

[Barry Kinman]

Absolutely no objective evidence for the conclusion that all these clubs are doing so well. I suspect the opposite based upon dozens of conversations with dozens of wineries, all clubs are down like everything else.

[Larry Chandler]

What exactly is the point of this post? That people who buy wine have more money than people who don't? That wineries (and other wine club operators) prefer dealing with people who will buy lots of wine than people who will buy only an occasional bottle or two? That people who see a market will try to cater to it? That blogging has become so easy that people with nothing to say can create a forum to say it?

[Bobby Cox]

I sure like wine clubs wineries manage because they give those varieties "that won't sell because no one knows them" a chance. A winery I sell grapes to sent out a bunch of Roussanne. A variety that their distributor would have cut their wrists and bleed out before they put it in their book.

[Jeff Siegel]

Thank you, everyone for the comments, even the one that called me an idiot. We encourage discussion here. A couple of thoughts:

-- Tom W., always a treat to see you here, wine blogger extraordinare that you are. In fact, after Granholm, Texas loosened its direct shipping laws, which was a huge deal and opened up one of the largest markets in the country. I recall, there were only a half dozen or so reciprocal shipping states before Granholm?

-- Yes, today's clubs may not be doing well, Barry, But, as noted in the post, there is little evidence one way or the other, and the evidence that there is, based on winery clubs, shows they are doing very well.

-- Nothing wrong with making money, Sediment Wine Club, and nothing wrong with targeting people with money. It's funny. I always get this sort of comment when I mention the very high demographics of some wine drinkers; I wonder why.

[The Sediment Blog]

Errr... we're not a wine club.

We just drink the stuff, and write about it.

[Christopher Miller]

There are many serious complexities and inconsistencies in wine sales and distribution laws/codes and plenty of 'scofflaws' out there ignoring those laws.

Interesting times right now, there will continue to be many fits and starts in this battle but eventually the consumer and producer will get their share of power in this equation...Right now the battle is being waged in back rooms with lawyers and executives of giant corps (Diageo, Southern, Heineken...) and State Authorities.