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Naked Wines brushes off CEO woes for first standalone tasting

At least, this was the message from yesterday’s tasting in London Bridge, where the company held its first tasting as a solo venture since breaking from the Majestic group, which also then included Lay & Wheeler.

Yesterday, buyers led by wine director Ray O’Connor MW and buying director Matt Smith presented some 100 wines – several of which came on board via the company’s $5m Covid Rescue Fund, which was set up in 2020. Today, 13 of those producers are still on the books.

Like many businesses in 2022, it has been a roller coaster for Naked. This summer, the company took home the IWC’s Online Wine Retailer of the Year award. Around the same time, it lost nearly 40% of its market value after it acknowledged that lockdown-boosted sales and heightened customer acquisition is likely to see a significant drop in 2023.

Shares took another tumble last week after one of Naked’s directors, Pratham Ravi, resigned after just three weeks on the board.

Naked has come under fire in recent years for putting too much focus on growing subscriber numbers, via heavy marketing and acquisitions discount – and not enough on profits. During the pandemic, its model reaped the rewards, with a jump in revenue of 80% to £157.1m for the half year ending 28 September 2020, boosted by lockdowns as customers stayed home and ordered via delivery.

Despite the summer’s profits warning however, Naked’s subscriber numbers have continued to grow. The company now has 350,000 Angel investors in the UK (up from around 260,000 pre-Covid) and 964,000 globally across three markets: the UK, USA and Australia.

Portfolio growth continues, too. Naked had 450 wines on its books before 2020, rising to 620 in 2022. A further 100 are being planned for by the end of 2023. Still, however, O’Connor insists that profit, rather than subscriber growth, is now the company’s focus, with yesterday’s 100% Naked tasting marking a new era and a fresh start for the company.

“After Covid, we suffered the same bump as everyone else. Like Netflix and Ocado, the retail economy landscape and consumer sentiment has changed widely. There was a wobble in the market. But actually, when you take a step back, you see that we have cash in the bank. We’re actually we’re doing pretty well,” he said.

The company is also focused on expanding its quality portfolio. Once potentially known for “soft, easy-drinking, non-complex” wines, O’Connor says that extensive research has been done during Covid to expand the portfolio in a more focused direction.

“We put our heads down while Covid happened and did lots of research. Before, I think we focused on those easy-drinking styles, because we knew that’s what people want to drink. Now, we can expand those wines which show typicity and sense of place. We’re very proud of what we’ve come up with,” added O’Connor.

These include wines which were picked up through the company’s Covid Rescue Fund. The team tasted through “hundreds of wines”; and where quality stacked up, they were able to take the wines on full time.

Boschkloof from South Africa and Ramon do Casar Treixadura from Ribeiro were examples of wines which often “sell to Michelin star restaurants and lost markets overnight. There was just a complete lack of dining in 2020. We were able to pick up and help a lot of excellent producers”, O’Connor said.

The team has also made a push into new territories, such as Lebanon, Moldova, Greece and Georgia – including Solomone Tsitska-Tsolikouri-Krakhuna 2021, a 20% quevri wine notable for its “approachable, slightly phenolic” style.

There is also a focus on exotic affordability. The company is selling its only Pinot Grigio – from Moldova – for £7.99. The Serena Cordero Pinot Grigio is “expressive, clean and fresh”.

In 2022, 14 years after it was founded by Rowan Gormley, Naked still has a unique proposition, which continues to resonate with consumers looking to find off the beaten track wines. The model of a ‘wine piggybank’ is also an ongoing hit. Customers typically ‘invest’ £25 a month into their Naked account, which can then be redeemed at a time of their choosing. In the meantime, investments are used to fund independent winemaking projects.

“The DNA of the company is really about customer service,” says O’Connor. “If someone doesn’t like a wine, there are no quibbles. Customers can pause due to the [rising] cost of living, as they’re not obliged to pay. On the other side, it’s my job to identify wines of the right quality and standard and bring them on. Personality is important. Winemakers don’t just have to be a cool, South African surfers. But they have to be willing to communicate. I bring in wine. Then, it’s up to customers – and the winemakers – what they want to try.”

Harpers can confirm that Naked Wines intends to give an update on its operational and financial strategy in October. This is likely to focus on future plans, which will drive “improved profitability, investment returns and cost restraint, [and represent] a change from the plans outlined at year end”.

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