The Wine Society posts operating loss to protect members

The member-owned merchant has reported an operating loss for its latest financial year, having absorbed much of the cost of the 2024 budget rather than passing it on to members. At a dinner at Noble Rot Mayfair on 3 June, its chief executive Steve Finlan and director of wine Pierre Mansour set out a plan built on cash reserves, a widening range, fine wine and a newly launched AI recommendation tool.

The Wine Society has reported an operating loss for the past financial year. Its annual review showed that the mutual deliberately took the cost of last year’s duty changes onto its own books. “We can afford to take a little bit of pain, actually quite a lot of pain, into the P&L,” Finlan told guests, “but we’ve got to protect consumers, we’ve got to protect our members from the worst of this.”

The 2024 budget, he said, was “seismic, absolutely seismic”, costing the business somewhere between £4.5 million and £5 million in duty and associated costs within a single year. “These are fairly existential costs, and I don’t use that term lightly,” he added.

Where wine prices across the trade have risen by between 3.5% and 5% a year over the past two years, the Society has kept its own increases to around 1%. That gap explains why its profit and loss account, in Finlan’s words, “doesn’t look very good at the moment”.

The case for cash

Finlan, who joined from Marks & Spencer, made the argument for the mutual structure. Because the Society answers only to its members rather than to outside shareholders, it can run to a different measure. “The only thing we really care about is cash, cash in the bank,” he said. With what he called a “very, very healthy” cash position, the business can carry the loss for several years before retained earnings become a concern.

A board member of the WSTA, Finlan has been pressing for a more coordinated industry lobby alongside UK Hospitality, the Scotch Whisky Association and Diageo. Alcohol duty stood at £10.5 billion in 2010 and, on the trajectory of subsequent rises, ought now to be £14.5 billion. Instead, it sits at £12.4 billion, a shortfall that the trade reads as evidence that higher rates are not delivering the revenue the Treasury expected.

Investing against the grain

Rather than retreat, the Society has widened its range while others cut theirs. It has kept buying stock to mature over five to 10 years for later release, brought in free delivery on small orders and begun trialling full-case discounts, which are cheaper to pick from the warehouse than loose bottles. It has also expanded its own delivery fleet, accepting a small premium over DHL in return for greater frequency and member participation. The aim, Finlan said, is “more members buying more often”.

“We are a digital organisation now,” Finlan said, and the clearest expression of that arrived the following morning. The Society has partnered with the US sensorial AI platform Preferabli on a recommendation tool, ‘my wine match’, which went live the next day. It builds a detailed taste profile from a short series of questions and uses what Preferabli calls true 1:1 technology to suggest bottles from a range of more than 2,000 wines, the award-winning own-label among them.

“I am very impressed with the approach that Preferabli has taken in evaluating each product and the purpose-built algorithms that generate the recommendations,” Finlan said.

Preferabli chief executive and co-founder Pam Dillon has described the project as “imagining a world driven by individual preferences, using AI with a human touch”, and said she was “similarly impressed by the vision that The Wine Society holds for its members in building a digital experience that supports the many ways that people want to discover, including web, mobile and GenAI”. The platform was built by PhDs in physiology and applied mathematics working with the largest global group of Masters of Wine and Master Sommeliers, and its engine rests on a proprietary database holding hundreds of characteristics for each wine. For bottles not already analysed by that team, the Society worked with Master of Wine Sheri Sauter Morano, who found the collection had “a strong quality character overall” and a high “price-quality ratio”.

A second-stage, agentic AI tool is planned before Christmas, capable of answering a plain request, such as which wine to drink with fish and chips. Finlan said it was “already built, and it’s already in testing”. The website now generates 90% of orders, and email open rates have reached 67%, a figure he called “utterly incredible”. A digital team of three orchestrates the work of a new CRM provider, Braze, and two analytics partners, allowing the Society to run as many as 16 experiments at once.

Fine wine on the rise

Since 2020 fine wine sales have grown by 60%, excluding en primeur, and 78,000 of the Society’s 183,000 active members now buy fine wine, 5,000 more than a year ago. Mansour put much of that down to “drinking less but better”.

First Release, the in-bond programme launched three years ago, did about £3 million in its first year and is forecast to reach £8.5 million this year, ranging from a white Grenache from Ridge in California to recent offers from Madeira and Austria. The Society has also begun fine wine spotlights on individual regions, with South Africa next. Within it comes a Stellenbosch 2025 en primeur that Mansour described as “the first time anyone in the world has done en primeur from Stellenbosch”, an idea from buyer Victoria Mason that drew in producers including Meerlust and Kanonkop.

Head of fine wine Alex Turnbull, who joined at the start of the year, will launch an opt-in fine wine service over the summer. It will offer cellar advice and tailored service without any investment guidance, in keeping with a business that, Finlan said, soft sells rather than hard sells. The Society’s strength, he argued, lies between £30 and £120 a bottle, in wines such as Château Beaumont from Bordeaux, sold at £15 to £16 by the thousand case. It holds around £20 million of maturing stock, some of which it expects to release below cost simply because members love it.

Pioneers and the climate and nature fund

The Society’s Pioneers range, 60 to 70 wines chosen for their work in the vineyard and beyond, has begun to move. To qualify, a producer must be nominated by a buyer, hold a meaningful sustainability certification and keep average bottle weight below about 420 grams, among other tests applied by the sustainability team. Mansour expects the range to add around half a million pounds in sales by this time next year, the first real commercial response to the Society’s sustainability work. “I wouldn’t say it’s gone off like a train,” he said, “but all of the wines are selling more than they were before we pulled them together.”

Now in its third year, the climate and nature fund redirects the money the Society would otherwise spend offsetting carbon from its Stevenage base into supplier projects covering soil health, regenerative viticulture and biodiversity. The reasoning is that the climate benefit of such work outweighs straightforward offsetting.

The wines on the night

Dinner at Noble Rot opened with The Wine Society Champagne NV in magnum, made by Alfred Gratien, with whom the Society marks 120 years this year and whose wines see no malolactic fermentation. There followed Vulpes Wines Chenin Blanc ‘Velox’ 2024 from the Western Cape, the second vintage from former Reyneke winemaker Noushke De Vos, and Domaine Guillemot-Michel Bourgogne Blanc ‘Quintaine’ 2024, a Pioneer wine biodynamic since 1991. Two fresher Mediterranean reds came next, Anforas ‘Luis XIV’ 2024 from Catalunya and Álvaro Castro Reserva Dão 2022 from Portugal, the latter from a category Mansour called the Society’s fastest growing. All the wines represented tremendous value.

A mature Cornas from Paul Jaboulet Aîné was poured later in the evening.

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