Pandemic online retail boom and surge to independents pays off for Naked Wines Australia

Alicia Kennedy, Managing Director at Naked Wines

Naked Wines Australia, a company that connects everyday wine drinkers to wine makers in Australia announced an increase in local sales, totalling $84.2 million, up by 42%.

This sees the Australian results sitting in line with the company’s global results achievements.

These results have been driven by evolving consumer purchasing behaviours, catalysed by the COVID pandemic; with customers creating an online shopping boom.

They examine the impact of every dollar they spend, with a strong purchasing stance to support local businesses and communities, with retention and repeat purchasing at a high.

Alicia Kennedy, MD Naked Wines Australia said, “These results show for Naked Wines shows a growing community of independent winemakers and Angels (our customers).”

“Naked Wines has been able to achieve another standout year for the business, growing even further from what was already a landmark result in the previous year.”

“As we continue to grow our market here in Australia, we also continue to grow and push our mission; to disrupt the wine industry through a strong direct-to-consumer (DTC) model.”

“This continued digital acceleration has seen Naked Wines hold its position as the fastest growing and most popular DTC wine business, and the largest in the world.”

“This business model is in demand to meet a shift in consumer needs and provide independent winemakers a selling model with a difference for the industry more broadly.”

“The pandemic continues to be a variable and evolving factor for all businesses.”

“Naked Wines’ conviction to continue backing local independent winemakers, in addition to honouring all our commitments and fair prices to consumers is no small feat.”

“This has given the business clear vision and focus during the continued disruption. The mission and role challenges us with much pride as a standout example for the industry.”

“Overall, our results show, the challenging environment has our businesses set up for the future, we have a bigger and better business than before, with customer growth and sales of the best independent Australian wine surging,” said Alicia Kennedy

Major trends driving Naked’s growth

The effects of the COVID pandemic on Naked Wine Australia’s business are now clear, with the company being in an enviable position to capitalise on online purchasing.

“Customers flocked online to buy wine during the COVID-19 crisis and they happily found a home at Naked with an established and reliable retail platform they can trust.”

“These trends endure post lock down as Australians realise that our business model and platform gives customers direct access to winemakers and their products,” said Ms Kennedy.

“Wine lovers can connect more deeply with those winemaker stories and where their wine comes from – we can see this strategy producing impressive customer retention figures.”

These trends are generating repeat business in Australia.

Results show an increased demand for Naked’s offering and an increase in contribution from the Australian repeat customer base, which grew 44% in the last year.

The business believes consumer interests will also continue to be strongly shaped towards local purchasing due to the known issues plaguing the industry off the back of the summer 2019 bush fires, followed by the smoke taint quality challenges.

“The business has also seen greater interest from consumers as they take on an understanding of how current ‘big bottle’ retail conditions and major market forces can negatively affect the bottom line of smaller independent winemakers.”

“Being independent means your margins are squeezed, with little wriggle room, and you are susceptible to changing market conditions, with less of an ability to quickly bounce back.”

“This is when independent winemakers need really honest, reliable support from an ethical purchaser that isn’t using these conditions to take advantage of price. We know this is why the wait list for winemakers to make a home at Naked is only growing.”

“There has never been a better time to be a business selling independent Australian wine, and there has never been a more important time for independent winemakers to get that consumer support and understanding of the retailing conditions that don’t favour them,”

Looking to the future, Naked is focusing on growing their customer base in the longer term with investment in new customers growing 89% in the last year to $10.1million.

“What’s most encouraging is that we have seen a continued strong performance in our Repeat Customer base in the first two months of FY22.”

“We believe that whilst many people will have undoubtedly tried us for the first time throughout the pandemic lockdowns, the experience is one they see true value in.”

“The best wines, at the fairest prices and at the same time being part of a movement that backs independent Australian winemakers vs lining the pockets of big bottle shops.”

Naked Wines Australia disrupting for the better

This last year also saw Naked Wines release a major rescue fund for independent winemakers facing tough times due to the China wine tariff action.

The initiative, Stop The Squeeze, is the only lifeline of its kind for the independent industry.

“We launched the rescue fund and business pledge to honour all commitments to its winemakers, not to drop contracts, commit to fair prices to winemakers and customers, and deliver a AUD $5 million rescue fund for winemakers feeling the grip of the tariff hike.”

Stop the Squeeze is the latest in numerous greater purpose campaigns for independent winemakers from Naked Wines Australia including;

  • Raising more than $329,000 to help Australian winemakers and their rural communities devastated by bushfires as well as,
  • Establishing a COVID relief fund of AUD $5 million, which has so far benefitted more than 40 independent winemakers globally.

“For winemakers already operating on small margins and being constantly squeezed by big bottle major supermarket chains here in the domestic market – impacts such as COVID or China’s import tariffs have the potential to be a slow death to their businesses.” 

“When you have a bigger business, or are owned by Coles or Woolworths, you have breathing room financially and ease in weathering these disruptive market storms.”

“But if Australians want to see a truly local and diverse wine industry, then they need to step up and support it with ways that truly mean something for independent winemakers.”

“This includes going direct to the producer’s cellar door when you can, or buy online with direct-to-consumer models, so as much profit as possible can be passed on to the winemaker.”

“We are never going to stop using our platform to support and advocate for independent winemakers in Australia, being a disruptor ‘for good’ and showing consumers how they can support independents now, tomorrow and always.” concluded Alicia Kennedy.

Naked Wines Australia business results at a glance

Sales at value of $84.2 million. Sales increased 42% from last year ($59.6 million).

The local Naked Wines Australia business results show. It was the least impacted geography by COVID-19 in comparison to the US and UK segments of the global group.

It is showing strong normalised retention trends in sales. Repeat customer contribution profit grew 44% from $12.6 million (FY20) to $17.9 million (FY21).

Investment in new customers grew 89% from $5.37 million (FY20) to $10.1 million (FY21). Naked Wines has 61 of the best winemakers from across Australia and New Zealand.

Emerging and award-winning winemakers who have worked for household labels like Penfolds, Wolf Blass, Vasse Felix, Henschke and Yalumba – all now producing brilliant wines for themselves in part thanks to the unique business model of Naked Wines.

Six new local winemakers have joined the Naked Wines stable including Ben Riggs, Josh Pfeiffer, Hamish Thomson, Paige McArdle, Phil Moraghan, and Andrew and Jamie Pike

Naked Wines’ global full year results

  • Globally, strong performance in FY21, with growth across all geographies.
  • Total sales +68% to £340.2m driven by the channel shift to online sales due to COVID-19, investment in customer acquisition and favourable customer retention and frequency trends.
  • Strong growth in all three geographies, particularly the US segment, where sales grew 78% to £161.7m. US now represents 48% of total sales and is now our largest market.
  • Investment in New Customers of £50.0m compared to £23.5m last year, delivering a 5-year Forecast Payback of 3.0x
  • Repeat Customer Contribution profit of £84.9 million (+83%) and an enhanced margin at 30% (+320bps), reflecting the +53% increase in active Angels, scale efficiencies and the geographic mix shift to our higher margin US business
  • Adjusted EBIT of £1.5m and loss before tax of £(10.7) million reflecting the +113% increase in Investment in New Customers in the year.

Globally, we supported winemakers while continuing to build our platform. The unprecedented channel shift to online transformed the online wine market, and marked an inflection point.

Naked grew its base of active Angels by 53% to a total of 886,000, with improved retention rates and enhanced our appeal to top wine making talent.

  • Partnered with 235 winemakers (FY20: 211) across 19 countries
  • Supported independent producers through this year’s challenges
  • Provided financial support for 36 winemakers through our $5 million COVID Relief Fund
  • Launched a AUD $5 million “Stop the Squeeze” campaign to support growers and producers in Australia who have been challenged by the Australia / China tariff disputes
  • Delivered quality (91% ‘Buy-it-again’ rating) and customer service levels (91% 5* star) through a period of significant growth