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Winc Inc. Is Many Great Things To The DTC Wine Industry – But, Please…Don’t Call Them A Wine Club! (NYSE: WBEV)

Know this right off the bat- Winc, Inc. (NYSE: WBEV) is not a wine club. Confused because you already get wines from this disruptive company? Don't be. While Winc, Inc. may be considered a wine club in the literal sense, in more polite conversation, its clients refer to it as a comprehensive, integrated, user-friendly, and personal adaptation of the dusty 1990s version of a "wine club." In fact, other than the industry label, the similarity between Winc and other companies in the sector is zilch.

And it's an intentional result. Over the past decade, Winc has done everything right to change the wine club landscape. Moreover, they started at the right subject, its client, designing a better strategy focused on people's tastes instead of peddling leftover stock from wineries that need to move product before it turns to vinegar. But, that was only the first step to blazing a new trail in the industry. They went on to break all the pre-established rules of what a wine club should be, except making sure its client gets a secure delivery right to their doorsteps.

In fact, direct-to-consumer delivery is about all WBEV has in common with competitors. From product production to service to marketing, WBEV is a pioneer.

Not A Wine Club!

To reiterate, here's the thing Winc clients will never join- a wine club! Yes, clients get top-shelf, in-house produced wines personally selected according to their user profile, but nowhere will one see the term "wine club." In fact, refreshingly, none of WBEV's materials or pitches go anywhere near that term. Instead, they deliver a bright aura of positive vibes, ensuring that customers are reached through a message shifting away from the traditional ones scored by subscription-only companies like Naked Wines and Blue Apron to one of an omni-channel brand builder similar to Harry's Razors, Purple, and other forward-thinking companies focused on quality, value, and client focus. 

And it's a message and model generating substantial growth. But more than just winning through an omni-channel sales strategy, Winc is successful because they pay attention to the details that matter. Foremost, they listen to what its clients and markets say, leveraging deep data and digital expertise to develop brands online first, then refining its products through direct customer feedback. Then they take the next step to seed those products with consumers throughout the country and deploy those brands through a national wholesale distribution network and into premium retailers nationwide. Put simply, they engage in a strategy that makes complete sense. 

Even better, it's a strategy facilitating WBEV growth to surge. Moreover, it's connecting them with the next generation of consumers, Millenials and Gen X, which account for more than 75% of its DTC consumers. Better still, they touch their base well beyond the doorstep, positioning their products in retail markets that create a flywheel effect throughout their purchasing experience. In other words, its target market can see and feel the brand's message through its inviting, well-targeted ads. From there, they can taste.

Thus, even if an ad doesn't drive an immediate purchasing decision through enrollment, they'll at least be inclined to purchase Winc products offline at Wholefoods, Target, even their favorite bar. Hence, at the end of the wine-drinking day, that interest supports its wholesale business. It's a win-win business model. 

Converting Sales From Offline To Online 

And it's proving to be an intelligent move, noting that Millenials and Gen X consumers are showing a propensity to enjoy and purchase Winc products at their favorite bars, restaurants, and stores over and over again. The result- increasing conversion for online purchasing, especially after seeing Winc ads on Facebook, Instagram, Hulu, and other prominent social media sites. 

As a result, Winc is growing through different channels by working with the same Tier 1 distributors and retailers (Wholefoods, Target, Walmart) as Constellation, Diageo, and Gallo. However, it's embellishing its position through a digital presence that embraces customer feedback to develop products and connect with the next generation of consumers in a way that the behemoths don't and cannot do. Moreover, Winc has nearly a decade of data and institutional knowledge on optimizing a digital experience and leverages its learnings to perfect its brands. That advantage is expediting its market penetration.

Even better, its distribution partners realize how powerful data and a direct connection with consumers can be, watching at the same time a Winc strategy that is disrupting the status quo. What's that translate into? In short, a significant competitive moat for Winc to exploit even against large industry incumbents who have only nascent e-commerce offerings to date. Further, distributors want to stock and sell their products. 

Better yet, as a whole, Winc is made stronger against competing digital-first brands in the industry, like First Leaf, Naked Wines, and others, that have a strategy of disintermediating this wholesale channel instead of participating in it. Interestingly enough, that lack of interest also separates competitors from a market that accounts for more than 90% of US alcohol sales. But, their disinterest is a win for Winc. And by design, staying in contact with clients, markets, and trends is embedded into the Winc Constitution.

Still, Never Call Winc A Wine Club!

So, once the cork is popped, it's apparent that being different is good. And Winc is. But more than "simply" different, Winc is very different. In fact, they are one of the few new breeds of companies leveraging and combining the best of legacy wholesale distribution networks with the power of new technology to maximize DTC, data analytics, and a direct connection with the customer. And from a growth perspective, it's working.

Indeed, bets could be placed that almost every large portfolio holding company in the industry, including Constellation or Diageo, would start its business the same way if it had the chance to start over. Perhaps wishful thinking for them, not so much for Winc. 

It's precisely what they are doing, did, and have done to capture and continue to earn significant market share. The better news is that its mission is only getting started. Thus, as a wine drinker or investor, opportunities to toast WBEV's success are timely. Remember, drink responsibly, live, love, and laugh. But, please, don't call Winc a wine club. Instead, join the disruption in progress.


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