Naked Wines : Annual Report 2024
WINE.L
Enabling independently minded wine drinkers to enjoy great wine without the guesswork
Naked Wines plc
Annual Report and Accounts 2024
Strategic report
Governance report
Financials
52 Independent auditor's report to the members of Naked Wines plc
I am excited about the opportunities ahead and confident in our plans to achieve them.
Maza
Rodrigo Maza
Chief Executive Officer
FY24: 52-week versus a prior 53-week period
All financial and non-financial information in this report relates to the 52-week period ended 1 April 2024.
We reported a longer, 53-week statutory reporting period in our comparative reporting period, FY23. Within the strategic report on pages 1 to 33, we provide both 52-week on 53-week and 52-week on
52-week comparable financial information to facilitate comparison with the current financial period. For reference, we call this 52-week constant currency comparative measure "52-week comparable" (or simply "comparable") when it is referred to in this document. See the reconciliation of the FY23 53-week reported results to 52-week comparable figures on page 111.
Please note that whilst the 53-week FY23 results to 3 April 2023 have been audited, the 52-week FY23 comparable numbers are unaudited.
Strategic report
Governance report
Financials
My three key priorities...
1.
Ensuring robust foundations
2.
Proud
to be
Naked
3.
Get Naked back to growth
Find out more:
Chief Executive's review
See page 8
Naked Wines plc
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Annual Report and Accounts 2024
Our business at a glance
For people who want to enjoy great wine without the guesswork
Financial performance summary*
Revenue1 for the 52 weeks ended 1 April 2024
£290.4m
Repeat Customer contribution
£65.3m
Repeat Customer contribution margin
24.7%
Year-on-year (52 weeks on 53 weeks)
(18)%
Year-on-year(52-week comparable)
(13)%
Year-on-year (52 weeks on 53 weeks)
(25)%
Year-on-year(52-week comparable)
(20)%
Year-on-year
Year-on-year
(52 weeks on
(52-week
53 weeks)
comparable)
(220)bps (200)bps
354.0
29.9%
26.7%
27.4% 27.0%
86.5
24.7%
340.2
350.3
333.4
290.4
84.9 86.2 81.7
65.3
46.4
202.9
FY20 FY21 FY22 FY23 FY24
FY20 FY21 FY22 FY23 FY24
Adjusted EBIT
£5.0m
17.4
14.9
Profit/(loss) before tax
(£16.3m)
2.9
(5.4)
In FY23, we reported a longer, 53-week statutory period. Within the strategic report on pages 1 to 33, we provide both 52-week on 53-week and 52-week on 52-week comparable financial information to facilitate comparison with the current financial period. See the inside cover for further details.
2.0
(2.4) (1.5)
5.0
(10.7)
(15.0)
(16.2) (16.3)
See pages 109 and 110 for definitions of alternative performance measures and pages 111 and 112 for reconciliations to statutory reported figures.
Due to rounding principles, numbers presented in £m may not sum to the totals provided. This can also lead to individual amounts being rounded to zero.
1.
Reference to revenue or total revenue refers to
statutory reported revenue unless otherwise stated.
2.
FY23 results show 53-week and 52-week adjusted
EBIT respectively.
FY20 FY21 FY22 FY232 FY24
FY20 FY21 FY22 FY233 FY24
3. FY23 results show 53-week and 52-week loss before
tax respectively.
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Naked Wines plc
Annual Report and Accounts 2024
Strategic report
Governance report
Financials
Revenue by geography
AUS
12%
(FY23: 13%)
US
45%
(FY23: 48%)
UK
43%
(FY23: 39%)
723,000
38.2m
75%
Active Angels
reviews1
Repeat Customer
(FY23: 867,000)
(FY23: 35.6m)
sales retention
(FY23: 76%)
1.3x
32%
91%
5-Year Forecast
of Angels on subscription
"Buy it again" rating
Payback
products Never Miss Out
(FY23: 90%)
(FY23: 1.7x)2
and Wine Genie
(FY23: 26%)
Our purpose
Our purpose is to satisfy independently minded wine drinkers in a way that:
"Naked wines is the best, the most reasonably priced AND SATISFACTION GUARANTEED!! And NO I am not paid for this statement and also NOT a relative to anyone in the company!!!"
US customer
Who is our customer?
What problem can we solve for them?
How do we want the customer to feel?
How do we do this?
Independently minded wine drinkers
They feel anxious (when it comes to buying wine)
Proud to be Naked
"I became an Angel a couple of years ago so I could educate myself on different wines. I ended up drinking hardly any myself but would give the bottles away as gifts... When I gifted Naked wines I would often get a text message at 9pm on a Saturday night, or whenever, with 'We're just enjoying the wine you gave us. It's delish!"
UK customer
"With Naked Wines nothing holds me back because I know that if I absolutely don't like it - I will have lost nothing by trying it."
Australian customer
"Joining Nakedwines.com has been an absolute game-changer for me! From the moment I signed up, I was greeted with warmth and enthusiasm from the incredible team."
US customer
Naked Wines plc
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Annual Report and Accounts 2024
Market opportunity
We see potential for market share gain in all our geographies
35m
Premium Wine Drinkers across our three markets
Who is a Premium Wine Drinker?
Our target market
US
Room for growth
19.3m
11.7m
in our target markets
UK
of our Best Fit Customers
4.6m
8.2m
Best and Good Fit Customers
are unaware of / have
AUS
never used Naked Wines
3.0m
How do we define our Best and Good Fit Customers?
Best Fit
Good Fit
1. Spend more than £20 / $40 on wine per month
2. Prefer to shop online
3. Open to subscriptions
4. Wine is very important to their lifestyle
5. Like to decide the wine they buy rather than being told by others
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Naked Wines plc
Annual Report and Accounts 2024
Strategic report
Governance report
Financials
US
Remains our largest market
The US wine market today remains, in large part, defined by the "3-Tier" system for alcohol distribution and sale (enacted after Prohibition), leading to a market with extremely high levels of consolidation in the production and distribution tiers.
As a result, access for independent wineries is challenging, while wine prices for consumers reflect the multiple margin pools of the 3-Tier system. Naked US has the strategic advantage of operating as a winery in the US, enabling us to sell our wine direct-to-consumer (DtC), removing those intermediate stages and costs. Through this model we have the ability to engage a community of craft winemakers, enabling them to bring a unique portfolio of wines of the highest quality and value to the market.
The DtC market is the fastest-growing part of the wine market in the last decade, with a step change in scale in 2020. The Directors continue to believe that Naked is a leader in the online DtC market, competing with smaller DtC players like Firstleaf and Winc, online retailers like wine.com and with the online operations of physical specialists such as Total Wine & More.
As a winery that is exclusively DtC, Naked is uniquely positioned to offer disruptive levels of value to consumers, and, with nearly 1,000 wines from 12 countries, we have a breadth of offer that far exceeds other DtC players.
UK
Strong online market growth
The UK market has a total of 6.5m Best Fit and Good Fit customers with the Naked Wines proposition. Wine consumption is fragmented across countries and styles, with domestic production remaining a small portion of the total consumption. The Naked business in the UK supports over 190 winemakers to produce over 1,200 wines in 22 countries.
The supply chain is dominated by the large supermarket chains which stock a mix of branded and own label wines. Majestic Wine is the biggest remaining specialist. The online/DtC space that Naked operates in has a range of competitors including Laithwaites, Virgin Wines and The Wine Society. The online sector has seen substantial growth in recent years, albeit all the main players have seen a reversal since the end of the pandemic.
As Naked's founding market, and now its most mature, the UK business is reliably profitable and cash-generative. We stand out in the UK for our long-established support to our winemaker community, including up-front funding, multi-vintage commitments and a regular feedback loop. Our wines are benchmarked for value against a mix of DtC and retail peers and our Angel pricing offers a discount of up to 33% against a comparable quality product.
We are building a strong network of strategic partnerships, including high- profile brands with like-minded customers, including Saracens rugby, Lloyd Webber Theatre Group and Gousto.
We are proudly committed to supporting Carmen's Kids - a charity founded by our winemaker Carmen Stevens. This raises over £450,000 annually for free school meals in Stellenbosch, South Africa.
Australia
A large per capita wine market and important testbed
Australia is a key market for Naked Wines, with 3m Best and Good Fit premium wine drinkers identified in the market. Naked plays a unique and important role in the Australian market as the largest pure play e-commerce wine retailer in Australia.
Our platform offers an important alternative to the retail duopoly dominating wine retail in Australia. In 2024, this duopoly continues to receive public scrutiny from competition, consumer, and parliamentary inquiries into price gouging, promotional fairness, and supplier treatment.
Naked stands out for its advocacy and support of small and independent winemakers. By providing wine drinkers with access to these wines without the guesswork, and at better value, we are in a strong position to win.
With a small team in place, and enough similarities in online consumer behaviour to the US and the UK, Australia plays an important role in the Naked portfolio as an attractive market opportunity in its own right, but also as a low-risk innovator and testbed for global innovation opportunities.
In the past year the Australian business explored ways to remove barriers to first purchase conversion with non-sign up models, scaled lead generation as a growth channel and established low-cost alternatives for customer service.
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Annual Report and Accounts 2024
Chairman's letter
Substantial progress towards profitable growth
I have had a unique opportunity of rejoining a company I know well, after a period of absence, and to work with a new team who are seeing the inside of the business for the first time.
Rowan Gormley
Chairman
I am pleased to report that your company is in much better shape than it was a year ago, and that we have made substantial progress in returning Naked to profitable growth.
This is not immediately apparent from the trading results which, although in line with expectations, reflect the company we were, rather than the company we are starting to become.
A tumultuous year
You will be painfully aware that Naked's prospects and share price have suffered post-COVID, and, as a result, I rejoined the Company as Chairman in July 2023.
It quickly became apparent that we needed to make some big changes very quickly.
• Board composition:
- David Stead and Melanie Allen stood down from the Board. We thank them both for their service;
Foundations laid
We have spent the last six months laying a solid foundation for the future on three fronts:
New management team
We wanted to find a CEO who combined the strategic clarity required to navigate a challenging period, the leadership skills to galvanise our team and the humility to recognise what makes Naked Wines special and to build on that.
After a thorough search, we found that person in Rodrigo Maza (Maza to his friends). We had the benefit of knowing Maza for a few months in his capacity as MD of our UK business and I have worked alongside him as CEO Designate for the past few months. I am delighted with what I see.
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Naked Wines plc
Annual Report and Accounts 2024
Strategic report
Governance report
Financials
In addition to Maza, we have recruited Paul Calandrella to run our US business. Paul's background is as a General Manager in REI and Amazon, and most recently as CEO of a B2C startup. This experience gives him some strong insights which I look forward to seeing him bring to bear at Naked.
Clearing the problems of the past
Work here has focused on three areas:
Our CFO, James Crawford, covers our funding position in detail in his review so I won't duplicate that, except to say that Naked Wines is a well-capitalised business
On the cost base, our goal was to get costs down and to reallocate resources to areas where we needed more depth. We have done both of those and the end result is
a business with operating general and administrative (G&A) costs £5m lower than 12 months ago AND properly resourced to drive profitable growth.
The inventory issue we faced requires some context. At the height of COVID, the team in place at the time entered into a number of contracts assuming that COVID levels of demand would persist for an extended period. This proved to be an incorrect assumption, which took an unhelpfully long time for the team to recognise and remedy.
This has been compounded by a US bulk market that has the highest oversupply ever recorded. There are several reasons behind this, the main one being that the US has had three harvests in a row without the usual natural disasters of floods, drought, fire and frost. This has meant that Naked's ability to sell off surplus inventory in the bulk market has been severely hampered.
What we have done about it
The good news in all of this is that the inventory is high quality and almost all from the winemakers we expect to keep working with for the long term. Where we have not seen a path to selling inventory before it is likely to deteriorate, we have bitten the bullet and cleared or written off that inventory.
I would like to thank our winemakers for their continued support through this process. While the results of a lot of our work remain to be seen, gross inventory (i.e. before any provisioning) has dropped 10% during FY24 and we expect it to continue to fall significantly during FY25.
Creating a platform for the future
I have had a unique opportunity of rejoining a company I know well, after a period of absence, and to work with a new team who are seeing the inside of the business for the first time.
This combination has enabled us to get a degree of strategic clarity which is hard for an incumbent team to achieve.
Maza has covered this in greater detail in his section, but the key insights are:
The last of these points is very important. Over the years we have over-relied on discounts, vouchers and coupons to attract new customers. Ironically, the reason our loyal customers choose to remain loyal is none of those - it is because we deliver great wine without the guesswork.
It is time for us to recognise that and invest the time and money required to reorient our customer acquisition around our unique competitive advantages. This will be hard, there are sure to be setbacks, but I am confident that it can be done and we have the team to do it.
Lastly, I would like, on behalf of the whole Board, to extend our gratitude to our CFO James Crawford. As announced last month, he has informed the Board that he is stepping down as Chief Financial Officer and as a Director of the Company in the autumn of 2024. This timing is consistent with the arrangement agreed with James when he rejoined the Board as CFO in 2022. James has accomplished his goal of stabilising Naked's liquidity position and adjusting the cost base to reflect a post- COVID environment. We are deeply grateful to James for the huge contribution he has made in growing Naked from a £40m revenue business to a £290m revenue business and wish him the very best in
his future endeavours.
Rowan Gormley
Chairman
Naked Wines plc
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Annual Report and Accounts 2024
Chief Executive's review
A business with significant potential
We start FY25 with robust foundations, we have clear goals, strategies in place to achieve them and a motivated team that's fully committed to their delivery.
Rodrigo Maza
Chief Executive Officer
I am excited and honoured to be appointed as the CEO of Naked Wines.
I could see the potential of this company before I joined, which led me to make the leap to wine after a 17-year career in the beer industry. I could see it during the time I acted as the UK Managing Director, when I was impressed by the engagement customers have with our brand, the strength of our relationships with amazing winemakers and the intense commitment of the team to our mission. And I can see it now as I step into the CEO role.
In my opinion, that potential stems from turning our strengths - our scale, our US business structure, our high-quality and good-value wines, our unique relationships with our winemakers and the high levels of loyalty from our long-term customers - into enduring and ownable competitive advantages.
Having worked very closely with Rowan these past months, I've gained extremely valuable insights and perspectives on the business and developed a shared understanding with him and the Board as to what success looks like and the strategy we'll follow to achieve it. It won't be easy, but that alignment gives me a lot of confidence as I embrace the challenge of getting Naked to reach its full potential.
My priorities
I want Naked Wines to be the most admired company in our industry. It's a bold ambition that will require us to have removed our liquidity constraints, to build a brand that does justice to the engagement customers have with our company, to partner with independent winemakers to amplify our portfolio and to get the absolute best out of an incredibly talented team. The bad news is that all these things will take time to build. The good news is that we have a strong foundation from which to do so.
My priorities, as the CEO of the
Company, are:
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Naked Wines plc
Annual Report and Accounts 2024
Disclaimer
Naked Wines plc published this content on 04 September 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on September 04, 2024 at 06:20:00 UTC.