Profit in a wine tube

One US company has used wine tube technology to build a thriving subscription service. Jeff Siegel reports.

Vinebox's "Home for the Holidays" pack
Vinebox's "Home for the Holidays" pack

What are the chances of success for a subscription wine service that only sells its product by the glass at $8 a shot? And that doesn’t let customers pick their own wines? And has to cope with the US’ byzantine wine shipping laws? And doesn’t offer any wines from California? 

So far, so good, if the subscription wine service is Vinebox.

“It’s certainly an innovative idea,” said Jeffrey Slater, a North Carolina marketing consultant. “And it provides a novel way of sampling wine – which is often the problem for new wine, as well as beer, drinkers. How do you find out what you like?”

Vinebox’s key to success in its short four-year history may be its surprising ability to work within the highly-regulated US wine market – yet still offer the same glitz, convenience, and value that leading subscription companies like Dollar Shave Club for Men and cosmetics service Birchbox do.

“The key to a successful subscription box service is to find the issues that cause consumers pain and to address those issues,” said Anne Janzer, the author of Subscription Marketing: Strategies for Nurturing Customers in a World of Churn. “So buying razors was expensive and inconvenient, and the razor subscription boxes solved those problems. “Where’s the pain in buying wine? It’s confusing and can often be difficult. If Vinebox can make wine buying painless – less confusing and easier than going to the store and trying to figure out what to buy – then it can be a successful subscription service.”

Making subscription boxes work

Vinebox’s business model follows the success of subscription services like Dollar Shave Club and Birchbox, whose goal was to find something consumers needed, but didn’t necessarily enjoy buying. Razors, for example, were expensive, required a trip to the pharmacy or supermarket, and had to be replaced regularly. Shave Club and Harry’s Shave Club offered products of the same quality as the major manufacturers, but which cost substantially less, while arriving every two months.

Their success was telling. Both Gillette and Schick started their own box services, while multi-national Unilever paid $1bn for Dollar for 2016. The subscription model has been so successful that it has sprung up everywhere from food to clothing to pet supplies. 

Can this success translate to wine? So far, Vinebox has seen a 144% increase in new subscribers during the pandemic, compared to the same period last year, said a company spokeswoman. Vinebox does not release any other financials.

“We saw a new wine consumer,” said Matt Dukes, who founded Vinebox in 2016 with another attorney, Rachel Vodofsky. Dukes had been an attorney with a decided non-lawyerly interest in consumer packaged goods and brand building. “So we decided to flip the script,” he said. “I wanted to see if we could build a brand more holistically. We saw a need for messaging that addressed a more female, younger, Millennial audience. They wanted to be able to try different wines without breaking the bank, to find out whether they liked Chardonnay or Pinot Grigio.”

The Vinebox selling point is the 100 ml tube. “It’s the perfect size for tasting,” he said. The much more common 187 ml bottle contains more than six ounces, which was too much wine for what the company wanted to do. 

Consider one of the biggest problems in getting consumers to try a new wine: The waste. Who wants to pay for an entire bottle if they don’t know if they’ll like it? The 100 ml bottle seemingly solves that problem. Since it’s just enough for a taste, it almost doesn’t matter if the consumer doesn’t like the wine. It’s over and done with, and they can move on to the next wine. And, if they do like it they can buy a full bottle costing $25 to $80 (and their subscription includes a credit towards the bottle). But they can only buy a full bottle if they are subscribers.

The tubes give the company a marketing edge thanks to their distinctive shape and size, as well as the promise of nothing more than a sample.

In addition, Vinebox can ship nine tubes with each box and make the pricing work. Typically, a box costs $72, making each tube about the price of a glass of wine at restaurant. Using a 187 ml bottle would alter that pricing dynamic, forcing the company to offer fewer wines per box or pushing the price out of reach of the target demographic.

“This approach allows consumers to do a tasting flight that they might normally not know they can do or not know where they can do it,” said Slater.

Understanding the supply chain

So how does Vinebox get from wine to 100 ml tube to consumer? The company works with European producers whose wines can be purchased at retail, either in the US or in Europe. There are no private label wines or wines made in the US (although a sister company, Usual, does make four California private label wines). 

All told, Vinebox offers 128 wines a year through the quarterly box program. The boxes change seasonally, so spring features a rosé box and there is a Christmas box for the holidays. One box might offer several vertical tastings of the same wine, while another could offer several styles of Chardonnay. The company also sells gift cards and offers gift and corporate programs.

About half the wines the company buys are bottled from tank; the other half come from 750 ml bottles that are opened and transferred to the 100 ml tube. This work is done at two facilities in Europe, with a third to begin working with Vinebox next year. Dukes said Vinebox has to break down the 750 ml bottles since some European producers must age their wine in bottle to meet appellation regulations. Sometimes, though, the company purchases full bottles that don’t have an appellation requirement.

Tyler Kennedy, Vinebox’s vice president of wine, has not had any trouble finding European wineries to work with, said Dukes. In fact, almost the opposite has happened; producers welcome the opportunity to sell to the US market without have to contend with US import laws, three-tier system restrictions, and the like. Vinebox, added Duke, works with only top-notch producers and not low-end, bulk wineries.

In fact, understanding those restrictions has been an important part of Vinebox’s growth. The company, said Dukes, stays firmly with the framework of the US’ myriad alcohol laws. For example, it only sells wine to 37 states. It also doesn’t use the legally questionable workaround common to so many other wine clubs, which says the purchaser takes possession of the wine in the state where it is sold instead of the purchaser’s home state. This fiction supposedly avoids out-of-state retail restrictions, but state regulators occasionally disagree.

In addition, it is a licensed wholesaler in California and Washington state, which means it can import and distribute the wine, further cutting supply chain inefficiencies. Said Dukes: “We take three-tier very seriously in all of its forms. There are just too many restrictions for us to ship to every state.”

What does the future hold?

Despite Vinebox’s success, and those of subscription boxes in general, many questions remain. Is the business model profitable enough over the long term? Birchbox, for all its initial glamour and fame, has fallen out of favour with analysts and has endured several rounds of layoffs since 2018. Its problem has been moving customers from its inexpensive boxes to higher-priced, regular-sized cosmetics purchases.

Also worth noting: Cratejoy, a website that tracks subscription boxes, lists almost 2,500 wine boxes and clubs. Can Vinebox thrive in a crowded marketplace, and especially in a crowded marketplace with a higher-priced, non-essential product? Razors are one thing, but an $8 glass of wine?

That cost bothers Slater, who wonders if Vinebox can continue its momentum, given the pricing, for what is essentially a luxury product – and especially as the pandemic continues and if the  recession starts to hurt consumers even more.

“At some point, will consumers just go, ‘I can buy a quality bottle of wine without Vinebox?’ There are already a lot of quality wines in the marketplace, and it’s hard to miss when you’re paying Vinebox prices.”

Still, one subscription expert thinks the Vinebox model stands out from other subscription efforts.

“Yes, it does” said Darryl Hall, Founding Partner, at Big Innovations, a subscription consultancy. “There are already plenty of alcohol subscription box businesses doing well… wines and all variety of liquors. Many have been at it for years, but none overwhelmingly rule the space.”

Hall said one Vinebox edge is that wine consumption, like razors, is predictable. That means sellers can package the product for relatively dependable consumption over the terms of the subscription. When all the 100 ml tubes are empty, it’s time for the next box to arrive. “This fit is why alcohol box businesses succeed and even thrive,” he said. “Relative to many other subscription model possibilities, where entrepreneurs try to force a fit. In this case, it makes natural sense to both buyer and seller.”

Which Vinebox is counting on.  

Jeff Siegel

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