zabolotnov.wine
Practice and preach. How I ran a wine retail store in a Russian province for 5 years
March 26, 2023
Many personal trajectories in wine business started either from foreign languages (especially the Romance ones) or from hard work in restaurant industry, but mine was different. I was a web developer who, in the late 2000s, happened to be employed by a Russian wine website with a goal of becoming a major national wine media. Although these ambitions totally failed, for a while I was in a team of wine writers and wine critics, and with some of them I still maintain connections for more than 15 years. Being an active wine consumer whom appealed the aesthetics of the subject, I eagerly seized the opportunity to learn. But, apart of all that knowledge about wine that I was exposed to, there was one thing that totally captured my attention. It was wine ratings.
A decade and a half ago, the world of wine ratings was quite different than now. There was, basically, a triple or so of international sources that were both well-known and reputable, although some of them were already considered more rigorous than others. The disagreement on Pavie 2003 was still perceived as an extraordinary occurrence that made all members of the community reflect on themselves and on the criteria of wine evaluation. The now-ubiquitous picture of a wine store full of $10 wines with 95-point shelftalkers from the ‘critics’ you never heard of was unimaginable in those times. Of course, the idea that if your scores are higher than others, your scores will be published more often, is quite obvious, but how eagerly the trade caught up this ridiculousness is frustrating. Sometimes I think that’s a pity that one cannot forbid a person to rate wines.
It was 2011 when I took my first, part-time job connected with wine — I approached a small alcohol retail company that was operating in Kaliningrad, my hometown and a former German city of Koenigsberg, with a proposal to form their wine assortment on the grounds of reputable wine ratings, most of all Wine Spectator. The proposal was accepted. Soon it became a full-time employment, and my duties were sheer: apart of procurement and BTL things, to hire and to fire sales personnel and, most important, to train them in the field of wine. I devised a modest course on grape varieties and appellations — based mainly on Jancis Robinson’s Purple Pages and a bunch of books available in English. Everyone who was in the academia knows that the best way to learn something is to start teaching it.
Eventually, in 2016, I was appointed by the owners to a position of a company director — a person who is legally responsible for everything, but doesn’t have the financial benefits of the owners. From aside it might look like a successful career, but I can assure it was not exactly the type of company you would like to dedicate your life to.
What was more important for me, the whole wine project within the company seemed to me not successful at all, although nobody wanted to vocally admit it. Despite all the efforts, the sales of the promoted wines with ratings and tasting notes on shelftalkers remained so insignificant that they were effectively dissolved in the sea of cheap vodka and that domestic produce of worldwide lager brands that for the unknown reason were much worse than their European counterparts, albeit owned by same international companies. For me, the problem was in the legacy image of the shops (and their ongoing unintentional positioning as round-the-clock FMCG outlets because the owners wanted to retain all available sources of revenue). The owners, however, were sure that the town simply didn’t have audience for that kind of wine. For me it was clearly false as other local retailers obviously managed to sell wines in that price category — although without ratings, shelftalkers, competent salespeople and other ‘intellectual’ stuff that was not taken very seriously by my employers.
My farewell with that employer, of course, was a matter of time. I guess it is already clear how different we were in our values; and I couldn’t stand a patronizing attitude from the people who consider Kiyosaki’s Rich dad, poor dad the pinnacle of philosophy. I decided to quit and open my own wine store almost spontaneously, during the long night ride behind the wheel after an especially unpleasant interaction with one of them — unnecessarily unpleasant, without any practical purpose, what made me particularly irritated.
I had a vision of my ideal wine shop, and I didn’t want to compromise it in favor of other stakeholders’ greed, so I decided to be on my own. First of all, it will be a wine store, maybe with some peculiar spirits, but definitely without cigarettes, other tobacco products, snacks and other FMCG stuff — all of that that generated the flow of revenue at my previous job. We will sell, almost exclusively, wine; it is necessary not only for the positioning of the store, but for employees’ identification, and for the reason that they will not distracted from wine by serving the customers who are not interested in our key advantages.
The joy of independence, of being able to not persuade anyone anymore, outweighed any fears of failure or the benefits of using someone else’s money. In June 2017, I chose the name Vinifera and registered the company. (It was a message to those customers who knew what Vinifera meant; the second layer of meaning was that we didn’t sell that sweetened quaffer made from the hybrids like Isabella which were extensively planted in Soviet times).
The main competitive distinction of Vinifera was to provide customers with reliable, consistent and useful information on virtually every wine bottle available in the store. In a regular wine shop, customers usually choose a wine without having any prior information about it. If they have any related knowledge, they make a consideration on what they know about an appellation, a variety, maybe even a vintage; but then they look at a label and gamble. You definitely know that feeling of helplessness in front of a wine shelf when all that you have is a label, an appellation and a price, and you are forced into the game of chance by the lack of information. For some wine regions like Rioja or Marlborough, this gamble is relatively safe; for middle-priced Bordeaux, it is a guarantee of frustration.
Consistent wine ratings were the starting point for that approach. As an internal rule, we defined an order of priority, with Wine Spectator at the top, what ratings we put on shelftalkers, and deviated from it only in those rare cases when after tasting a wine we decided that one particular rating is more valid than another. If a bottle had a credible rating, we posted it no matter how low it is; it was a reminder that, say, 82 point wines are also perfectly normal. Occasionally we received bottles with vintages different than we expected from suppliers, and several times their WS ratings were below 80. If we couldn’t return them, we put a shelftalker with a rating on it and offered a discount.
There is a frustrating lack of open talk on the credibility of wine ratings and the qualification of wine critics (or ‘critics’) in the English-speaking world. I suspect not the least reason for it is that the US is a particularly litigation society, and people tend to keep their opinions by themselves just because they either don’t want to receive a lawsuit or would like to keep good relationships with everyone. I won’t also share my strong opinions on the personalities here, but in Vinifera we clearly divided wine ratings into three groups: those we print on shelftalkers, those we usually don’t put on shelftalkers but can share in our newsletters and social media with caution, and those we ignore. Our own wine ratings and tasting notes — which were made on our staff panel tastings — we attributed to the second category.
What can seem unusual and at first sight contradictive to the strict consistency rules it is that we also used the ratings for the wines from the vintages not matching with what we had in stock. However, the shelftalkers with ratings for unmatching vintages had clearly different design, with both vintages of a tasting note and an actual bottle highlighted, so a customer would without any doubt understand what it is. The rule was to use a non-matching vintage on a shelftalker only within a five-year margin, and only if there was no credible rating for the matching one. We also had a huge detailed vintage chart on a wall, with ratings that correspond to integral assessment of how good a year was in a particular area. A customer (or, more likely, a salesperson) can look at a rating for an unmatching vintage, at a year of an actual vintage, than at the vintage chart to compare the two years, and make a reasonable assumption about what a rating for the actual vintage, to a certain probability, could possibly be — in a fairly Bayesian way.
A lot of wine retailers in the US use wine ratings in the completely opposite manner, not as a means of ranking wines in a store as consistent as possible, but as an overwhelming flow of stimuli for a customer — or with other words, not as information, but as entropy. The usual practice is to put on a bottle a highest possible rating regardless of credibility, and not to mention any ratings below 90 points at all. That approach (which we can call “everything is the best”) leads, of course, to deterioration of customer experience, to numerous frustrations and to the decrease of customers’ trust to a retailer. It doesn’t increase sales even in a short-term perspective (what increases it is proactive communication, with integrity and genuine benevolence, and active verbal promotion of the wines that will objectively satisfy and exceed customer expectations both in terms of quality and price, and precise marketing activities); in a long-term perspective all consequences are very obviously negative. What keeps this practice alive it is maybe the unbearableness of a notion that it is totally okay if two different wines of the same price will vary in sales by one or even two orders of magnitude, and some wines on a shelf can mostly accentuate the advantages of their rivals, as long as it maximizes a wine store’s revenue. Among professional salespeople I sometimes encountered the attitude that ‘we should sell this bottle no matter what’ even if it was inexpensive and the last bottle of its kind, although this was completely pointless from any rational point of view — and it was one of several reasons why I preferred not to hire the employees with prior sales experience. In the eternal and inevitable conflict of interests between customers and producers a successful retailer should genuinely align with customers. (Which particular bottles are sold and which are not is irrelevant to the ability to pay to the suppliers in time, it is merely the revenue that helps, and you anyway need to have the overall stocks that cost several of your monthly turnovers. By the way, it is fun but also sobering to simulate the run of your business on a computer using the Monte Carlo method. And it is definitely more insightful than the attempts of describing it analytically in equations).
The defining idea of Vinifera’s assortment policy was to select about top 5% of total Russia’s import in terms of the value to price ratio, covering all possible regions and styles of wine. Russia has an established three-tier distribution system similar to the US; we signed contracts with almost all national importers and came to agreements about discount rates (since you are socialized within the industry, it isn’t very hard to find out what is the highest possible discount from a given importer). The real nightmare was logistics. Kaliningrad is an exclave with no connection to mainland Russia, and there were numerous complications with both Russian and Lithuanian customs; most transportation providers simply refused to work with any kind of alcohol. There was also a ferry line, but the usual queue required a month of waiting, and cargo aviation, which was insanely expensive. Local distributors used their own trucks, but their prices and available range of wines were below acceptability by Vinifera’s standards. It was a never-ending quest of trial and error, official inquires and even lobbying attempts via a local chamber of commerce, but most of the time we painfully waited for a ferry for a month.
In 2021, 21% of our revenue came from French wines, 20% from Italian and 16% from Spanish ones; in terms of quantity Spain was dominant — as the mean price for a Spanish 90-point wine in Vinifera was about two times lower than for a French one. On our highest tier we had Mouton, Angelus, Yquem and Sassicaia, sometimes other positions like that, but not DRC — it would be way too much for our city; on the lowest tier, we had wines that were modest but somehow interesting, the kind of wines I would also gladly drink on parties or with everyday meal, usually from Spain, Portugal and Russia. It is worth mentioning that during the last ten years or so the boom of quality winemaking in the south of Russia (the Don valley and the Krasnodar region) had happened, and we had seen Russian wines of outstanding quality and complexity made from both international varieties and indigenous ones, like Krasnostop Zolotovsky, Tsymlyansky Chyorny or Sibirkovy.
Russia’s alcohol legislation favors big players; import and distribution are overregulated with complicated and costly licensing and the mandatory use of government-operated information systems. Retail is also monitored by the government by digital means: when you sell a bottle, you have to scan a QR code on a bottle’s excise label, which is sent to the alcohol regulatory agency, and cash registers send their own data stream to the different controlling body. Therefore, it is impossible to legally sell a bottle purchased from a private collection as it doesn’t have an excise label — which in turn can’t be obtained without a manufacturer’s certificate. Some European wine boutiques employ scouts to search for rare and old wines in foreign stores, but in Russia it would be a serious offence. As a result, it is virtually impossible in Russia to buy or sell older wines legally, and we had to regrettably miss many opportunities of the secondary market.
We didn’t have resources for a costly importer’s license, but there were wines not available in Russia we were very keen to sell. For example, the ones made from Elbling, a very old, now-obscure early-ripening white German variety, suitable for cold climates. By the 14th century, to the end of Medieval warm period, Elbling vineyards were ubiquitous throughout Germany. On pre-WWII maps of the Koenigsberg region, an area that is totally unsuitable for winemaking today, one can find several ‘Weinberge’, what means ‘vineyard hills’. They were without any doubt planted with Elbling back in the medieval times. I managed to taste several Elblings, and selected a range of them from one particular producer from Mosel — very earthy and mineral, reminiscent of Baltic seawater, with a touch of green apple and armor-piercing acidity. A friend of mine also owned a small wine trading company with an importer’s license, and he agreed to import these Elblings specially for Vinifera. Although the initial idea was to sell the wines of the same grape variety that once grew around the city, they rapidly became popular just because people liked their distinctive character, both lively refreshing and melancholically chthonic.
From the point of view of business processes, Vinifera was distinctive from traditional offline retail as virtually all sales — more than 95% of revenue — were to the customers we knew by name. A membership card with a progressive discount had to be offered for a customer even before their first purchase is complete, it was free and issued in the matter of minutes after filling a brief questionnaire, and almost everyone accepted it. The primary purpose of the membership card was not clients’ loyalty — it was personal data which essentially allows us to provide the most relevant offers for our customers based on the knowledge of their personal preferences. Sales is not a zero-sum game: being able to provide to a person a selection of wines that he or she is truly interested in maximized both their genuine satisfaction and our revenue, by outperforming our competitors. People very readily shared their details with us, much willingly than we initially expected, and we in turn took their personal data very seriously, trying to be always useful and never annoying.
It was surprising that in the market there was no software solution that readily met our needs. Traditional CRM systems employ a ‘deal’ as their main entity and reflect a process of leading a customer towards it through the ‘sales funnel’ — an approach suitable for large b2b sales or if you sell real estate. For managing relatively small but frequent sales you need completely different processes and data structures, and it was the reason I decided not to customize any existing product but to write our own CRM from scratch using the skills from my previous life. With Django, a Python framework for building database-driven web applications, for the first time in many years I genuinely enjoyed coding.
This self-developed CRM retrieved the data from POS software and allowed to select various subsets of customers by their usual or maximum price of a bottle, by keywords in their history of purchases, by the wines they already bought or, on the contrary, not bought yet, by the number of days since their last visit or since they opened our newsletter, and sent them text messages or email newsletters through the APIs of certain cloud services. For example, for a new arrival of Piedmont wines we could initially sent a detailed newsletter to all clients; then, after a day, we could select a subset of customers who didn’t open the newsletter, who hadn’t received any text messages from us for a month, and who had words ‘Barolo’ or ‘Barbaresco’ in, say, the names of at least 5% of the wines they bought within the last year. Then we might send them a very specific message, addressing them by first name, about our new Barolos and Barbarescos, mentioning ratings, prices and most vivid descriptors. The more specific was the subset, the higher conversion rate it usually had. The genuine personal attitude was automated, but not faked. What of course was also important it’s that we could quantitatively assess how well we performed in reaching out our customers and how they reacted to it, and set appropriate target KPIs for our customer relations.
Perhaps from customers’ point of view Vinifera’s main distinction was not the wines or shelftalkers but how we talked to people. To start with, all kind of platitude retail phrases such as ‘Can I help you?’ (a question that implies a subordinate attitude and by no means invites to a productive conversation) were explicitly banned. However, to be proactive, to approach and to talk a lot to every person who came to the store, in a friendly and equal manner, was mandatory. If a customer is reluctant to engage in a conversation and doesn’t look familiar, one always can propose a short tour through the store, paying attention to the most interesting positions in terms of value to money. If he or she have been in the store before, it’s always relevant to show what arrived recently. After all, all the shelftalkers with ratings and tasting notes were mostly a tool for a team to facilitate a dialogue with a customer and be more competent and relevant. One requirement was to behave neither subordinately nor defensively, but practice the equal-to-equal manner, which is unfortunately not very common for the service sector. Another trick was to always tell to customers more than they asked, conveying the distinctions and values of the company through the conversation. The wines in the store were selected for a reason, and we needed to share this reason with customers. (Of course, for that you need a culture of good internal communication within the team — everyone was highly encouraged to share their own tasting notes and facts they learn in a corporate chat.) The notion that we offered not wines per se, but information, expertise and pleasant customer experience was indeed very well implemented in Vinifera, even to the amusing excesses when people asked our advice which wines to pick from competitors’ bargain sales.
When I look back, the whole idea of opening a wine store with that kind of positioning, without having substantial finances, in a provincial Russian city seems at least questionable, but the decision I made back then was not driven by economic feasibility. It was a conscious choice of starting a very difficult game which objective I can now articulate in an almost existential way — to do what I want in a place I like; in other words, to reclaim my rights on my own life no matter what others want me to do. It felt like a protest, a challenge with a touch of personal despair. At some point I was honestly surprised that Vinifera survived and sustained.
To a certain extent, I was very lucky with the people who decided to work with me. A former editor of a top regional media, who left it for political reasons, applied for a sales position and, after getting into wine very seriously, wrote amazingly talented texts for newsletters and social media. Another person who applied for work in sales studied physics at Russia’s top university and worked at a plant (including grapes) nursery in Central Asia, later used his background to dive deeply into wine chemistry. He was making a huge work analyzing wine ratings and all possible information in order to choose the most interesting and valuable wines from importers. Most of the time, it was only the three of us who worked in the company, maintaining and advancing its operations while taking shifts to serve customers.
From the other hand, we managed to succeed in the oversaturated market, in a stagnating economy where people got poorer while wine became more expensive year after year, because we had no other option than to constantly outperform both previous ourselves and our competitors. I think the decline of economy that continues in Russia for the last decade may be the reason why a lot of small businesses in Russia, especially in the service industry, were so good in what they were doing. Living in the Bay area, I miss Russia’s restaurant scene.
However, in any other sense I’m not nostalgic at all. The most of what I could write about my experience of political issues, the relationships between an individual and the repressive system, and the lamentation about the fate of my country would be, from one hand, platitudes, and from the other hand, ridiculous in comparison to the experience of Ukrainian people, especially of those who happened to live in the occupied territories. Moreover, with an opportunity to emigrate, I was in a much more privileged position than the most of others. During my not yet so long emigration, I’ve come across a lot of marvelous people and fascinating books that I wouldn’t have ever encountered in my previous life, and it is only the beginning. But Vinifera, a sophisticated wine retail store in a former German city populated by Russians, was a life-shaping experience, a school of perseverance, humbleness, and gratitude.
Ilya Zabolotnov
What else to read
The Colloidal Counter-Enlightenment. Why you should read Clark Smith’s Postmodern Winemaking