With a vision to democratize wine for every wine drinker in the US, Underground Cellar’s founder and CEO Jeffrey Shaw and COO Jeff Hardy are focused on building a unique and disruptive platform for buying wine. Leveraging gamification principles, Underground Cellar gives you upgrades to the wines you buy, giving customers access to more expensive and rare wines. This has expanded into free wine storage in their Cloud Cellar, which they hope to build more community and a trading platform around. Dig into how it got started, the value proposition for wineries, and where they are going in this episode of XChateau! Underground Cellar offers listeners a discount code for $100 off your first purchase of $150 or more with promo code: XChateau at undergroundcellar.com.
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Detailed Show Notes:
- Jeffrey Shaw’s background
- Fell in love with wine in college, wine tasting, etc.
- Had a small exit with his first company and wanted to do something in wine
- Started 6 companies simultaneously (based on a statistic that 5 out of 6 companies fail in the 1st year) to find 1 to focus on, dropped the rest after 90 days except for Underground Cellar
- The goal is to “democratize” the wine experience and convert wine drinkers to wine collectors for life
- Jeff Hardy’s background
- Tech background, worked at Google and Yahoo!, building smaller startups focused on small and medium-sized businesses
- Underground Cellar’s model
- Curate wines into collections (e.g., Napa Valley Cabernet)
- People don’t buy specific bottles, but into a collection with different price point wines
- 50% or more of the bottles you buy are upgraded to more expensive bottles
- Collections can include rare wines (e.g., a Heidi Barrett signed bottle of Screaming Eagle)
- Cloud Cellar - everyone can store up to 500 bottles for free
- Upgrade determination
- an algorithm helps determine the number of upgrades
- Focus on lifetime value received as a customer
- Goal to “democratize” wine
- Three elements of wine that can be democratized - knowledge, money, and relationships/access
- Underground Cellar tries to educate in easy to understand, more approachable ways
- Upgrading allows customers to experience higher levels of wine
- Ability to source some scarce, valuable, and hard to find wines enables access to these wines
- Target market = everyone
- Wine aficionados - enticed by the rare wines available (e.g., the signed bottle of Screaming Eagle)
- New wine drinkers - want great value, like the process of being upgraded
- Wine lovers building collections - want variety for their collections, which is inherent in the collections
- Supplier benefits
- Wines are never discounted
- Underground Cellar can buy small lots of wine
- Can buy less popular varietals, etc.
- Promotes the brand and story on social media (~12k followers on Instagram) and email (~250,000 email subscribers) => wineries have said that foot traffic and sales spike after being featured
- Cloud Cellar
- Get unlimited duration storage for 500 bottles for free
- Let’s people buy wine when they usually couldn’t due to weather/shipping constraints or for space/storage constraints
- 85% of customers use Cloud Cellar, most storing ~1 case - most customers use it to buy wine at any time
- Future: people can start to trade with one another on the platform
- Marketing channels
- Use social media, direct mail, radio
- #1 channel has been direct referrals - people like to share their upgrade stories
- Offers a “Give $50, get $50” referral program
- Future: the potential to add wine as a reward in Cloud Cellar, similar to Robinhood referrals where you get one share of stock
- Barbara Corcoran is an investor
- Initially approached Mark Cuban via email, but he doesn’t invest in alcohol
- Approached Barbara afterward to prove Mark Cuban wrong
- Technology platform
- Built from scratch in-house
- The new upgrade model was not supported by other platforms
- Needed to de-couple wine buying from wine-shipping
- 60 employees currently, including data scientists and business insights analysts
- Future for Underground Cellar
- With 84M people in the US as wine drinkers, lots of room to grow
- Want to get the experience out there to more people
- The goal is to make the experience fun and exciting
- Want to build community within Underground Cellar and turn people into collectors
- Promo Code for listeners:
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