The merger between Naked and Majestic offers a new opportunity to change how consumers see wine.
Consumers can be a difficult bunch. For instance, however much we as an industry try to sell the romance, excitement, joy and cultural uplift contained in a bottle of wine, many wine drinkers remain resolutely unmoved.
In our experience of researching the wine category in the 30 major consumption countries around the world, it turns out that quite a large proportion of the populations we talk to don’t really care that much about wine: for them, wine is a relaxing drink which should support an occasion rather than dominating it.
This can come as quite a shock to those who are highly involved in the product (ie most people in the wine industry) and who discover that not everyone shares their worldview. Clearly obsessives do exist in the consumer population, and it’s always encouraging to see them crop up in a survey: they are the ones who will spend more money in the category (even if they aren’t that well off) and will perhaps radiate some passion to a wider group, perhaps encouraging a slight upward shift in spend or volume consumption.
Some of these obsessives have been carefully nurtured. In our 2014 study of USA Millennial consumers, we discovered that one of the most significant common threads in highly involved Millennials was the fact that their parents served them wine at the dinner table when they were growing up. While this family marketing effort is fortunate for the industry, it’s clearly not enough. The question remains: how do we get a mainstream audience to care enough about wine that they will be willing to spend a few pounds or dollars more on a better experience?
This long-term question floated to the top of my mind a few weeks ago when Majestic Wine Warehouses, a 211-strong chain of wine shops in the UK that has been around for over 30 years, announced the takeover of Naked Wines, a 7 year old start-up online wine retailer, for £70 million.
The two businesses have some interesting parallels. In its rapid growth days of the 1990s and early 2000s, Majestic managed to foster a generation of people (including me) who cared about wine. They correctly identified a pattern of shopping behaviour which would grab many adherents: well-stocked but no-frills shopping spaces with decent car parking, the opportunity to taste before purchase, with the help of clever (but not overbearing) staff.
Naked Wines has had rapid success with a new model of buying. Consumers are not just invited to buy their 12 bottles, regularly, but be activist investors as well: they contribute money towards a group funding scheme which supports winemakers to make wines exclusively for the group. This last element has proven very effective at engaging those younger, better off and naturally curious about the world, and it has got people to care about wine in the way we in the industry would probably recognise.
Now that the two businesses are becoming one, and Mr Gormley has been installed as the merged company’s CEO, the big question in UK wine trade circles is how the two models will work together. Our UK tracking data suggests two businesses appeal to similar types of wine drinker, albeit in very different ways. Both retailers are targeting higher-income AB customers with above-average engagement with the wine category. According to Wine Intelligence Vinitrac data, both Naked and Majestic customers have something of a male bias, though Naked does a marginally better job of attracting under-34s – at least as a proportion of its overall base.
Most customers of both retailers admit to buying wines from supermarkets, though it’s interesting to note that there’s slightly more antipathy to the multiple grocers among the Nakeds. Majestic customers correlate strongly with Waitrose and Marks & Spencer shoppers. Both groups like to spend roughly the same amount on a bottle of wine, and drink as frequently, though Majestic shoppers are more attuned to promotional offers than we find with Naked’s clientele. Both groups say they are experimental in their tastes.
But the crossover isn’t what it might seem. According to Vinitrac data, only 5% of those who buy most of their wine from Majestic rate Naked’s service, and only 11% of Naked customers have anything nice to say about Majestic – though admittedly both groups are extremely frugal with their compliments for any rival retailers.
So now that they are more affiliated, how will Majestics and Nakeds get along? Clearly there will be some who reject the other’s way of doing things, and even with careful handling by the respective marketing teams, some will leave.
The positive spin, which I generally share, is that each will adopt some of the more useful (to them) habits of the other group. For the Naked customer, it might be the ease of collecting Naked Wines deliveries from a local shop rather than waiting at home for it and having a local space in which to do tastings and meet other members of the Naked “Angels” community. For Majestics, it could be an introduction into a different way of engaging with wine, where they are not simply the consumer, but rather the investor, participant, cheerleader and community activist.
Author: Richard Halstead