Carménère taste off

Peter Hellman, Wine Spectator
Issue: February 28, 2010

When the Wall Street Journal started a wine club in September 2008, The New York Times was amused. Journal-branded wine, the Times opined, "might sound a bit odd to anyone who has heard conservative commentators lump wine-drinking with arugula-eating and other supposed signs of effete, snobbish, elitist liberalism."

But less than a year later, the Times launched its own wine club. "Looking for alternate ways to make money as its advertising revenues plunge," the Times self-reported last August, the paper was "getting into the wine business." A month later, USA Today announced that it too was starting a wine club. In just a year, America’s three largest newspapers had jumped aboard the wine club bandwagon.

And they’re not alone. Other media that have recently started wine clubs include the Zagat guide, Sunset, Bon Appétit and Food & Wine magazines, and even a sports radio station, San Francisco’s KNBR. It’s part of a growing national trend of wine clubs, all offering members regular shipments of selected bottles. There are "affiliate" clubs, such as the Feminist Wine Club and the National Rifle Association’s club ("Now you can support the 2nd Amendment with every wine you buy," trumpets its Web site). Other clubs are geared to individual tastes, like the Light and Sweet Wine Club, one of several clubs marketed by California-based Vinesse. An online tasting forum, Bottlenotes.com, asks readers to create a "personal taste profile," and then recommends one of eight clubs it offers based on your responses. Many wineries and retail wineshops too boast their own clubs.

But newspapers bring particular assets to the wine club game: Their logos inspire trust, they have an almost unlimited ability to advertise in their own pages without cost, and they offer the club operators deep and desirable subscriber lists. As Alice Ting, director of brand development at the Times, says, "We’re leveraging our existing infrastructure."

One appeal of the clubs is that they do all the work for you. "Supermarkets that sell wine typically have 450 to 500 different labels, while high-end shops may go up to 3,000," says wine marketing consultant Barbara Ensel.

"If you’re not real familiar with wine, that can be stupefying; you just want help in getting through that maze of brands. That’s the attraction of a wine club." The trade-off, of course, is that members are limited to what the club sources for them.

For Sherry-Lehmann, one of New York’s top wine retailers, the Times’ club (and the accompanying marketing blitz) was an unwelcome surprise. "We’re a large advertiser in the Times, and they’ve decided to go into competition with us," says Michael Yurch, Sherry-Lehmann’s president. "We are not thoroughly pleased with this. Of course, we won’t stop advertising in the Times. But I wish they’d sell cheese." Just before Christmas, Sherry-Lehmann started its own wine club "simply because we think we can do it best," Yurch says. A special insert in Sunday’s Times bragged, "There are numerous wine clubs out there, but with Sherry-Lehmann’s club you know who’s choosing your wine."

How do the clubs work?
Wine clubs have been around since 1874, when the London-based Wine Society was founded to sell leftover wine stocks from an international exhibition. Early members included Sir Arthur Conan Doyle and Alexander Fleming. Today, the Society boasts tens of thousands of members.

London’s Sunday Times, which, like the Journal, is currently owned by Rupert Murdoch, pioneered the newspaper-branded wine club concept in 1973. It was the brainchild of a young Bordeaux fan named Tony Laithwaite, whose company, Direct Wines, is now the world’s largest direct-to-consumer wine marketer, with, according to its CEO, annual sales in the hundreds of millions of dollars, mainly in the United Kingdom.

The newspapers don’t actually select the wines they’re selling. That’s done by independent direct wine marketers, such as Direct Wines, who operate the clubs.

Even though there are hundreds of clubs, most are run by a handful of these firms. While keeping a low profile, these companies handle just about everything-from supplying the wines to navigating the jungle of differing state regulations governing the shipping, selling, pricing, taxing and even labeling of the wines (no club can do business in all states, although the Wall Street Journal club ships to 32 states and the District of Columbia).

In the Unites States, Direct Wines has partnered with the Journal and with Zagat, and also operates 4 Seasons, an unaffiliated club. The Times’ wine club is operated by Global Wine Company, a firm based in Sausalito, Calif., that also handles logistics for the Williams-Sonoma and Omaha Steaks wine clubs. USA Today has partnered with My Wines Direct, based in Napa, for its club.

Both the Journal and Zagat wine clubs tempt new customers with an offer of an introductory 12-bottle case for $69.99 (plus shipping and tax). For quarterly or more frequent deliveries after that, the price jumps to $139.99. The Times offers two selection levels: a six-bottle Sampler for $90 and a Reserve level for $180. USA Today offers six wines quarterly for $69.99 per shipment. All three newspaper clubs run on a "continuity" basis, meaning that your shipments will continue automatically unless you notify the club that you want to skip a delivery or cancel altogether.

How do the newspapers make money? The CEO of an independent wine club, who asked not to be identified, said that the club operators typically pay the newspapers a "bounty" on the head of each new club member. The newspapers also receive a percentage of club revenues. The operators keep the lion’s share.

One wine club insider familiar with the Journal club estimates that the total cost of signing up each new customer (i.e., the media and marketing expended to induce them to join) is about $200, and that a total of 10 percent of wine club revenues ultimately goes to the newspaper. "Of course, customers will drop out," she says. "The secret is being able to add more than you lose."

According to Truman Rey­nolds, general manager of Pack n’ Ship, a California firm that handles logistics for dozens of wine clubs, all wine clubs tend to be secretive about their finances. "It’s incredible how they lock us down with NDAs [nondisclosure agreements]," he says. "You’d think they’re trying to protect the recipe for the unique secret sauce."

Neither the Times nor the Journal would divulge any financial details about their wine club operations. Paul Bascobert, the former Dow Jones consumer marketing chief who oversaw the creation of the Journal’s wine club would only say, "We’ve been pleasantly surprised with the number of readers who have embraced the club, and who have chosen to come back." As for the Times, Ting said, "It’s too early to give details, but we have been tracking pretty much at what we’ve been projecting."

Are these "the world’s best wines"?
When the Times announced its new club in full-page ads, it promised that "Just as readers expect The New York Times to bring them the world’s best journalism, wine enthusiasts will be excited to know that the New York Times Wine Club will bring them the best wines, from the finest regions around the globe."

If members are expecting deliveries of Domaine de la Romanée-Conti or Lafite Rothschild to their doors, they’re going to be disappointed. The wines offered by the Times basic club, for example, have an average price of $15 a bottle. Wine Spectator conducted blind tastings of 37 wines from all three newspaper clubs and Zagat, and found that many were good values, but few were outstanding and several were mediocre (See "How Good Are These Wines?" page 84).

There are big differences in how the various clubs source the wines. Global selects the Times club wines from small-but-on-the-map wineries, such as Brokenwood in Australia’s Hunter Valley and Bachey-Legros in the Burgundy commune of Santenay. "What we don’t bring in ourselves, we get by working with wonderful little importers," says Simon Littler, Global’s founder. "We don’t deal with wines made for us or in making up labels."

But that’s the strategy Direct Wines employs to supply many of the wines for the Journal and Zagat clubs. The current economic downturn has led to rivers of surplus California wine-easy pickings for big buyers like Direct Wines, which can then sell it inexpensively under proprietary labels. Just because the brand isn’t a household name doesn’t mean the wine inside isn’t good.
Direct Wines’ approach makes perfect sense to Tim and Nina Zagat, cofounders of their eponymous guides and wine club. "They’re going around and picking up entire vineyards that are not able to make it into the retail market on their own, and that gives them leverage," says Tim Zagat. "To the extent that our customers benefit from a very reasonable price, it’s great." The Zagats say that they taste each wine offered by their club. "Lots of them I never heard of, and I wasn’t keen on them until tasting them," he says. Eventually, Zagat club members will be able to rate the wines on a 30-point scale on the Zagat Web site, just as they do restaurants.

USA Today’s club chooses its selections with the help of reader tasting-panels conducted nationwide. The club asks for volunteers, who taste a variety of potential club selections. According to Trissie Rost, marketing director for the club operator, My Wines Direct, "We pour from wrapped bottles, and it’s a straight up and down yes or no vote. Then we reveal the wines and talk about them."

That said, two of the wines offered by the Journal and Zagat clubs bear the name of a renowned winemaking California dynasty whose business was sold early in 2009. Direct Wines, reputed to drive a hard bargain on wines it buys for its clubs, is likely to have bought the Sebastiani Sonoma Cabernet 2005 ($18 release price) and Sonoma Chardonnay 2006 ($13) cheaply. On the Zagat and Journal club Web sites, the Cabernet is priced at $14.99, and the Chardonnay $12.99. However, a savvy purchaser could do better on the Sebastiani Web site, where the Sonoma Cabernet 2006 ($18) and Sonoma Chardonnay 2007 ($13) are each available at $108 per case, or $9 a bottle.

Winery owners say that club operators do drive hard bargains, but that there are marketing benefits that make the transaction worthwhile even if the wine goes out the door at a discount. That was the case with the Trefethen Double T Chardonnay 2007, newly released as a lower-priced "little sister" to the winery’s regular Chardonnay. "I couldn’t afford to advertise Double T in USA Today, but the newspaper’s own wine club could," says Janet Trefethen, CEO of the 41-year-old, family-owned winery in Napa Valley. "They featured us on their Web site and we gave them an exclusive on selling the wine for two months. We’re not getting rich for what we’re selling it to them for, but we do get the positive advertising."

Should a newspaper that covers wine sell wine?
Regardless of where the wine comes from or how it is selected, the newspapers’ logos confer an air of expertise to the wine clubs. Both the Times and the Journal employ highly regarded wine writers. The Times club even prints articles by its wine critic Eric Asimov in the booklet accompanying club selections and online.

At the same time, the newspapers are quick to emphasize that their wine writers are strictly hands-off, to prevent any possible conflicts of interest. The Journal’s wine columnists at the time, Dorothy Gaiter and John Brecher, "were briefed from the beginning and actively involved to ensure that there is no overlap, either implied or suggested," says Bascobert. The Times took a different approach to avoiding conflict of interest: Asimov says that he first learned of his newspaper’s wine club by reading about it. Asked if he has sampled the club’s wines, he said, "I wouldn’t know which wines they are."

The ads for both papers’ clubs include fine print that carefully stresses the division between the clubs and editorial. The disclaimer at the bottom of every Times wine club ad reads: "While the Wine Club uses articles from the Times archives, the wines themselves are selected independently, not by Times wine critics or other members of the news department." The Journal’s fine print simply says, "WSJ Wine is operated independently of the Wall Street Journal’s news department."

The newspapers are walking a fine line, touting their expertise while keeping their experts silent. Readers who look to the papers’ critics for wine advice may not realize that those staffers have no part in selecting the wines offered by the clubs, especially when, in the case of the Times, newspaper articles come with club selections. "For a news organization, to endorse a product is very tricky," says Brant Houston, a journalism professor at the University of Illinois.

"You want to be totally transparent and indicate whatever firewall you have. But how many people read the fine print?"

Considering the current economic climate for newspapers, the publishers may feel they have no choice. The dire situation was made plain one afternoon last December as a gaggle of visitors was being shown the vast, airy newsroom in the two-year-old Times Tower in Midtown Manhattan. As the guests stared at a whole section of desks vacated by buyouts and layoffs, the publisher of the Times, Arthur Sulzberger Jr., swept by. Abruptly, he turned around and looked at the group appraisingly. "If we start charging for tours," he said, "maybe we can have another revenue stream."

Peter Hellman is a freelance writer based in New York.

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Mike Ratcliffe

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