A cheeky little idea and it sells wine

By DITA DE BONI

A chardonnay boasting a subtle hint of gooseberries, a cheeky little pinot gris, a shiraz that unfairly dominates the palette ... New Zealand wine has come a long way from Nan's sherry and bulk dry white at work dinners.

The buying and selling of wine here has matured alongside creamy textures and subtle oak influences. Supermarkets are charging towards just over half of all off-licence wine sales and wineries boast extensive cellars where private bin labels and special blends fuel a budding wine tourism industry.

But, as with all products, there are ways and ways to seduce a diversifying wine-drinking market. For every private-label connoisseur, several more need someone to weed down a baffling array of drinking choices to the right red, white or sparkley for everyday quaff or special occasions.

Enter direct-sell wine clubs.

More than 70,000 New Zealanders belong to wine clubs, drinking their way through around 10 per cent of domestic sales last year. Members are solicited through direct mail inserts in papers, magazines and flyers, and are hooked into the service through a wide selection of mid-to-high priced wines, 0800 numbers to answer every crisis du vin and recommendations from doyens such as Kiwi wine icon Vic Williams.

Large producers and elevated quaffers have traditionally decried the wine club as a seller of cheap and nasty plonk, a "dumping ground" for the unwanted product of large and small vineyards.

But several direct-sell clubs have upped their price range, and recent moves by large producers such as Montana and Corbans and several of the 350-odd smaller wineries to join clubs challenge the image and boost the reputation of clubs as an effective marketing channel.

The wine club administrator reaps the best profit from the direct sale, as there is no middle-man and there are few overheads, while retail prices roughly match those of the average liquor outlet.

But wineries also see dollars in brochure selling. Supermarkets are reducing the number of brands they stock ("category management") and ever-changing retail distribution is a problem for small-to-mid-size wine producers. So direct selling through clubs is one of the few remaining nationwide sales route.

The largest direct-sell wine club is Cardmember Wines, established in 1989 and now with 50,000 members. Cardmember and its Australian originator Cellarmasters - which has more than 100,000 members - were sold as one to Australian brewing giant Fosters in 1997 for $A160 million ($200 million).

Fosters' wine operation, Mildara Blass, now has the second-largest direct-sell wine business in the world, with recent acquisitions in Europe, Britain and Japan and the $A50m purchase of America's second-largest direct wine seller, California-based Windsor Vineyards.

The new acquisitions will not make profits for a couple of years - when distribution is improved - but the combined wine clubs produced sales of around $120 million - 40 per cent of its wine revenue - in the past financial year.

Around $20 million of that came from the New Zealand operation.

"The wines are not cheaper, but we are winners on service," says general manager and Australian expatriate Mike DeGaris.

"The key to an operation like ours is variety, customer service and convenience - using wine recommendations, education and what we believe is value for money."

With 200,000 cases of "booze" (as he calls it) sold every year at an average of around $12 a bottle, the operation dwarfs others in New Zealand. But it continues to chase new custom, using glossy brochures, celebrity endorsements and "most important - good paper quality on our flyers."

Cardmember has competition from equally well-established but smaller operations like Liquorland's Cellarmasters club, Parnell's Accent On Wine and a host of regional direct sellers selling an average of 40,000 to 50,000 cases each a year.

Taupo's Scenic Cellars stocks more than 2500 different wine labels at its picturesque store, but says direct sales to a mailing list of more than 10,000 wine fans provide the largest part of its business.

Wineries have traditionally sold wine through the mail, and all are gaining ground with a general increase in premium wine consumption.

But the largest competitor for wine clubs will be supermarkets.

Is Cardmember worried? Mr DeGaris: "Yes and no. Coles Myers in Australia tried to get into it and didn't get returns for a number of years.

"Yes, we're concerned because it is a highly competitive market. But we've got a few years break on people, we've established our credentials and we've got our marketing and distribution figured out."

Selling wine through the Internet is the next direction retailers - under siege from supermarkets - are planning to take.

Cardmember will launch a website within six weeks and parent Mildara has recently spent $A50 million on a 25 per cent stake in Australian online wine retailer Wine Planet.

"One reason we've succeeded is because the operation is technology-driven," says Mr DeGaris.

Other secrets of success are fast delivery ("24 hours within Auckland"), 0800 numbers, knowing clients and their needs and keeping breakage to a minimum.

Perhaps the wine clubs' greatest marketing coup is the "continuity plan," where customers nominate prices and varieties and receive a mixture of the wines they have broadly selected every three months.

Wine clubs around the world have been credited with helping the industry by enticing inexperienced buyers who prefer to have some of the decision-making removed.

"After five years consumers have generally left wine clubs as they are comfortable to go into shops and purchase wine," said Vince O'Donnell, an agricultural economist, to a forum of Australian winemakers last year.

Mike DeGaris agrees, saying only 400 to 500 members have stayed with Cardmember since its inception 10 years ago.

"There is a drop-off - membership averages around four years," he says. "But we've noticed many come back after a couple of years, possibly because of the convenience factor."

Wine Institute chief executive Philip Gregan says wine clubs succeed because "there is a group of consumers constantly searching for something new and different."

He doubts that wine clubs have expanded the market, but says they have made it easier for customers to find wines and for wineries to reach potential buyers.

"A lot of the wine clubs are also offering assurances of quality, and for consumers that takes away a lot of the risk of buying a bottle of wine."