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Future aspirations

ideas
strategy
membership

#1

Hi Team,

Quick question. What is the aspiration of the wine society in terms of targets for the next couple of years?

Just taking a look at the accounts and it seems as if TWS achieve its goal of broadly breaking even. They make a 20% gross margin and then this gets consumed (broadly) by admin and distribution costs.

Basic thinking would suggest that if you were able to double sales volumes (assuming no increase in revenue/bottle), you would be able to:

  • Increase discounts with suppliers.
  • Spread fixed costs over greater revenue
  • Potentially stock a greater selection if you had more throughput

So basically decrease the cost of bottles (or at least offset inflation).

Obvious downsides for TWS would center around capacity (website, warehouse, logistics, staff etc.) and working capital.

And so then thinking about strategy, is there a clear view of what TWS would like to achieve over the next few years? Is the current system sustainable/optimal?

And then if there is a desire to increase volume throughput I suppose there are two ways to get there; increase purchases/member and/or increase members. I for one would love to hear what ideas are in place.

I’m sure members may well have some great ideas once we understand the basics.

Thanks again for all you do!


I love the Wine Society website, but
#2

There are some answers to your questions on this thread:


#3

Are you in fact asking for the marketing plan?:smile:

Also, this only works if you are continuously using the same suppliers/producers. TWS only purchase from vintages they agree are worth it.


#4

I might be wrong but I didn’t think that was the case. e.g. my understanding was that Kanonkop had made the society’s exhibition Pinotage for an awfully long time. Equally there have been a number of the society’s own label wines that regularly make the best sellers list.

All things being even if you doubled the number of members, you’d imagine you’d double the volume of those wines sold each year.


#5

Just trying to understand the TWS strategy so that members might be able to suggest some ideas that may or may not be adopted but which would ultimately make our society more successful.

For instance, reading Steve’s comments from the Pre-AGM ask me anything,

“I mentioned in an earlier question that I do not want us to grow for its own sake. In truth, we have to grow in order to sustain the investments required to help us survive and compete - new warehouse, new web-site, better communications tools, better data and analytics – we have to make these investments and we are unable to make them without an overall growth in membership. That said, we have another reason to grow and that is the demographic make-up of our existing member base – we are all quite old! Just to put this in context: our biggest and highest spending sub-set of our membership base has an average age of 66. (about 40,000 of the 141,000) The next biggest sub-set (about 35,000) have an average age of 59. All those interested in a Society that is secured for the future would support us in planning for our future!”

I don’t fall into that highest spending cohort, and account for only about 0.02% of the society’s annual revenue but its interesting to think how these two facts could be combined - old members spend the most and they are struggling to get new members.

So logically, the direct question is how do you get old younger members. one suggestion would be to suggest something like a “wine trust fund” where ownership falls to the child at 18. You’re then in a position to encourage older members/high spenders to spend more on long ageing wines (possibly EP) and at the same time you develop a loyal membership with people in their 20s. I’m almost certain you’d have to think about tax however as just one hurdle!

This would be very niche, but it would add incremental members into the society in the targeted “high value” demographic… whilst all members would benefit from economies of scale. Win-win as Alan Partridge would say.

Equally, if you back out from the accounts that the “average member” spends GBp 700 and the society is making an average gross margin of 20% or GBp 130/member per year…

That would suggest that if every current member was given a “free membership” to give away to someone a year and they were incentivised to regularly use TWS as an “average member” then the society would still earn GBp 110 on that initial year membership and GBp 130+ going forward. In fact the breakeven point would be if just 15% of those “free memberships” given away became “average” members TWS would at least break even and at the same time grow (which actually reduces that 15% further due to economies of scale).

But if at the end of the day, and coming back to the original question I had, was that working capital, storage or logistics became the bottleneck then the equation changes due to Capex requirements.

So to your question, basically, just interested in how our society works and plans to remain afloat!


#6

I like that suggestion


#7

This may sound good in theory, but in practice I’m not sure it would necessarily lead to the ‘loyal membership’ you envisage…besides the youngsters are unlikely to be able to afford the same wines themselves in their 20s.

Nothing to stop individuals just doing that already, and just earmarking the wine for their children in due course.

I don’t think there’s a tax angle really, unless you are talking serious amounts of money. You can give away £3,000 each tax year with no inheritance tax implications, plus another £5k per child on occasion of marriage, and you would need quite a sizeable estate to have IHT payable anyway.

The money to buy the wine would presumably already have been taxed as income too. Wins isn’t subject to CGT as a ‘wasting asset’ so the gain on the disposal would not be taxable either.


#8

Hey @MarkC,

The reality is that no one really knows if they would stay active members or not but you’ve got to imagine that:

a) At least some proportion stay active members.
b) if their parents/grand parents have considered setting them up with a “wine trust” then you can pretty much guarantee that they’ve also sorted out junior sipps, isas… and are generally more affluent which may mean that the GBp85 VCP through their 20s is not that much of a financial stretch.
c) worst case they probably just store what’s there on which the society will collect a storage fee (which I assume must include a small margin; although I may be incorrect), and that helps other members by spreading costs.

Most membership models do work and it becomes laborious to change. Think of the effort that banks, telephone companies, gyms etc go to to recruit membership and that’s because the reality is that most people dont change once they are subscribed. The TWS is obviously different due to there being no monthly membership fee.

As I say, no one really knows how it would pan out but it may well create a niche product that:

a) Some members would like to see and make use of.
b) might increase membership in the 20-35 year age range.
c) may encourage higher spend from the 50+ age range.

This latter point should be taken in the context of point a. It’s not in conflict with the spirit of the society and is hardly trying to make a quick buck of members, simply providing a service that they may like.

On the tax front, I could imagine it could increase faster than you’d think.

Lets say into a portfolio.

  1. Birth year wine(s).
  2. Lets say a case of 6 declared vintages before the age of 20: GBp 2,000
  3. Start a Claret VCP from age 10 GBp GBp 8,000
  4. A case from a “special” vintage every 5 years.

You can quite quickly get through gift limits… and as I say, if you’re gifting a wine portfolio then there are likely to be larger sums involved.

It’s pretentious, over the top and a full on first world issue but you read in forums all the time about people looking for “birth year” wines and large formats etc for their kids, so its not totally off the charts.

I’m hardly pitching it as a finished idea but just saying if we better understood what the goals and constraining factors are for TWS, I’m sure some members would be able to suggest offerings that might help both members and the health of the “business” side of the TWS and by extension all members.

To be clear, I love the service and ethos of TWS but in the spirit of the opening title of the thread… what improvements wold we like to see.


#9

Its always nice to see people’s ideas on how the society could prosper in the future…it means they care!

On this…

Website probably wouldn’t change that much tbh
Logistics - mix of fixed and variable costs with two having their own fleet and using 3rd parties…means you increase either option
Staff - after a certain level where they can be classified as fixed costs (ie you need a certain amount of staff to run the society if there are 100 or 100000 members) then you are adding variable costs in (additional cust service/goods out staff etc for each new x members
warehouses are expensive, both to build and run. you have to make sure that your growth plans will cover these costs…having a warehouse sat only 25% full for several years is not going to do the figures any good :frowning: Sometimes outsourcing space can be more cost effective in the short term…or the model that many have been asking for - improvements to members storage options - is acted upon ?

to summarise - a small/medium increase in membership may actually end up costing you money as you have to put more resource in and that resource is at low efficiency


#10

I too like @Byrneand idea but would approach with caution on the return calculations

Items that are gifted have less personal attachment than those that are purchased. ie if you buy a membership you made a decision to do so and to use the society. gifting - unless very well thought out could simply end up costing as the recipient may purchase once or twice then fade away back to their traditional route…supermarket or the like.

You may also find that the cost to maintain / encourage / retain the customer increases compared to those that purchased a membership


#11

I think @MarkC is right on this one…not sure (compared to other ideas) that this one has legs

couple of points:

  • I can gift my wine purchases to my child (upto tax limits)
  • my wine is effectively in trust…its part of my estate - and with no tax benefit (purchased with £ post income tax)
  • most parents who do this are doing so with a potential increase in value of some of the wine portfolio - a key aspect to the spirit of the society is that people don’t use it for personal financial gain, they use it to get great wines. Whilst you do see TWS wines in auctions, I would imagine may of these are from estates of those sadly passed rather than those looking for gain.

might just be a lot of administrative work for very little gain.

other option…as under 18 is to run an ‘account’ for the child like a bank account, where it is the parent named acting on behalf of the child. this would then transfer at 18…but I don’t know if this transfer is allowable within the rules of the society…it certainly isn’t allowable for an under 18 to have a share (let alone purchase wine!). also, who’s to know if their child will like wine…:anguished::face_with_monocle:


#12

I do like the idea of running a separate reserves account for a child, somewhere to put birthday wines in etc. If it wasnt possible to legally own the account in trust, it might work if there was an option to split your own reserves then transfer ownership of certain wines to the new member when they turn 18.


I love the Wine Society website, but
#13

[/quote]
to summarise - a small/medium increase in membership may actually end up costing you money as you have to put more resource in and that resource is at low efficiency
[/quote]

This was actually the gist of my original question; what is the sweet spot that we would be targeting


#14

This definitely solves a lot of the headaches.


#15

This certainly isn’t in the bucket of how do you grow TWS membership and revenues 3x. Apologies if it came across like that. Just a throw away idea after reading that the key issues for TWS; being that the biggest spenders are 50+ and they struggle to get young members who have the highest “value” acquisition cost. If you look at things like port bonds (which I think are an ok proxy), then there is a market.

The reality is though you’re probably going to use those tax limits on other stuff; probably direct cash donations. Additionally, as i metioned, you could quite quickly blow through those tax limits.

Agreed. But ideally if you actually intend the wine to be drunk by your kids you actually want that “off” your estate ASAP. If its for you then its not an issue.

This may be the case and the reality is that we’ll never know. You could say the same about any TWS purchase. I read a fair amount of wine forums, and whilst there may be a financial aspect to it, I’d argue that most are looking to develop a cellar to leave as a legacy.

I suppose one interesting way to test demand would be to look at the profile of members who participated in the recent port EPs. Of course can be drunk young, and who knows what life expectancy expectations are but this could be indicative.

It could well be and you can do a cost-benefit analysis. It’s not just admin costs either. Projects take up time from other strategies and opportunities.

Its not a perfect proxy but if you look at junior ISAs, as a parent, the main thing that you would hope that these would encourage would be to develop a culture of saving and investing. Of course the 100k that they kick out at 18 is a massive win but the reason why Fidelity and Vanguard etc really push these is that those accounts convert into full time ISAs. Often kids dont then contribute in their 20s but there are a proportion that do and for those that then come back, where their JISA (now ISA) is held is usually their first stop. I appreciate that a wine fund for kids is way, way down on the list of priorities; and so it should be but it was just meant to be an idea on how to develop more memberships in the 20-30 year old range and also cater to some of the more affluent, ageing members desires to pass on a legacy.

#not the best idea in the world ever
#first world problems
#not perfect
#not for everyone


#16

I am a long time member and have given my 2 children memberships both when they were 18. They hardly used them at all when they were in their twenties but now one of my children says the society is the best value for wine he can find. My other son lives in America for the moment so does not use his membership. But perhaps there is a lesson here: it is very difficult to attract the young market for membership even if it is given away. I think the society should go after the thirties and above and also consider married couples or people who are partnered. My view on membership is to make it as easy as possible. I have approached people even in their thirties to become members, saying I will sponsor them, and they do not follow up. They think they can get better value by shopping at various wine shops and supermarkets even though I can show them that they can get better value at the society by approximately 20% on wine from £6-£10 per bottle. Many people in their thirties work long hours and are not available for delivery. The society has overcome this but I don’t think it has been well advertised or well understood by prospective members. I think the society should continue its efforts to get new members as it is the basic format. It is the equivalent of footfall through the door of a retailer. Fancy gimmicks such as wine trusts will not work as they will cost money and in fact there is no pain in asking a member to contribute £20 to one’s child to become a member. So the conclusion to get new members is to refine the process. Maybe the society ought to advertise on Amazon as younger people use it to buy and to get their goods delivered through it. Certainly the society should be considering these more radical ideas to increase membership and to get the younger generation interested. I got hooked on the society when I was in my late thirties and have used it ever since except when I have lived abroad. I am in my seventies now. I am at a spend level of about £1200 a year which I would imagine is roughly average for my age demographic. I used to spend more and kept up to 1000 bottles of wine in the store with the society but a recent but a recent illness has forced me to give away and sale much of’s assets. I do value the society very much especially some of the new ideas which have come in recently. The new administration is on the right track with new ideas to promote and increase the value of the society to its members through readings, trips to vineyards, discussion groups and Internet wine tastings. In conclusion, the society is on the right track to increase its relevance but just needs to increase its confidence in going after the right demographic in membership and then doing so knowing that it will be successful in that endeavour.


#17

Your experience is similar to mine in introducing others to TWS. I’ve sponsored a couple people, neither of whom took up membership. I’ve also given away two memberships as gifts, and neither of them are ‘active.’


#18

I must be unusual as I was gifted membership in my early twenties and have used it extensively throughout and since :smiley:

This is a great point. I’m in delivery heaven at the moment as my wife is on mat leave but before that it was hard to arrange, and often I sent it to work which resulted in longer arms on the tube home. The society vans are better but the time slots are no longer selectable, it would be nice to have other options, even if it meant paying for it - we get our weekly shop early in the morning or late at night, when we’re in, but I appreciate it’s not quite the same.


#19

What about ‘click and collect’? I used it a few times - it’s delivered to a shop 5 minutes’ drive from my house. Is this not an option in your area?


#20

It’s not quite close enough to be useful (and I don’t have a car).

I’m also not 100% comfortable with leaving fine wine in a hot convenience shop all day…