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Remember Patrick Buckley, who I interviewed? He came up with an idea for an iPad case. He built a store to sell it, and in a few months he generated about a million dollars in sales. Well, the platform he used is Shopify. If you have an idea to sell anything, set up your store on Shopify.com because Shopify stores are designed to increase sales. Plus Shopify makes it easy to set up a beautiful store and manage it. Shopify.com.
Here’s the program.
Andrew Warner: Hey, everyone. My name is Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious upstart and the place where you watch entrepreneurs as they teach you how they built their businesses so that you can go out there, build your own company, and do what today’s guest is doing, share what you learn.
Big question for today is how does a company that was launched in an attic become a $100 million a year business? Joining me is Adam Strum, founder of Wine Enthusiast Companies which sells wine and wine accessories and publishes Wine Enthusiast Magazine. Adam, welcome, it’s good to meet you.
Adam Strum: Thank you. Delighted to be here. I think you really encapsulated the history of our business, where we started, humble beginnings, as you mentioned, the attic, and where we are today with over 200 employees and over $100 million in revenue. But we did that . . . I’m very proud to show my daughter here, who’s on the scale.
Andrew: Yeah, let’s take a look at that.
Adam: There she is sitting on the scale in the attic. That’s my wife, very happy to see that the baby is weighing in. Today she is our Internet Manager, Director of Internet. Now, we’re out of the attic though. It’s about our fifth facility. We have a 200,000 square foot facility here in Mount Kisco where we ship major wine cellars to consumers all over the world, wine racks, corkscrews, glassware. We also have a media business. We are influential in the wine world. We have over 700,000 readers of our magazine, Wine Enthusiast. Maybe some of your viewers, your visitors, may be aware of our logo, which appears not only on our branded goods, which we manufacture all over the world, but also on our magazine which is authoritative. We have a whole staff of journalists. We have an office in Rome, an office is Boudreaux, an office in San Francisco, and they rate and review and visit wineries and give consumers direction about wine.
Andrew: Adam, this is all, is this a bootstrap company that you built in the attic?
Adam: We started in the attic. My dad was in the wine business. He sold wine. I started in wine as well. When I got out of university, I sold wine. But wine was a very different business in those days, in the late ’70s and early ’80s. It was really a nascence neophyte business. Very few people were interested in wine. You wouldn’t see wine on TV. You’d see a cocktail. Today you see wine proliferating magazines, newspapers. Everyplace where people have panache and style wine generally seems to appear. The interesting thing is we identified a need, a niche, early in 1979. My wife was a television producer. I was in wine sales. We could afford to start a little mail order catalogue. In those days, we produced and processed orders with memory typewriters, computers weren’t even invented. The orders were processed, and we started in an attic in our home. First year we had 100 orders. This year we will probably have 750,000 orders. That’s a little bit of transference, I think, Andrew.
Andrew: Let me see if I understand this, though. There we go, our cameras froze for a minute, but they came back up. Is it bootstrapped? Is it all your own personal investment in the business? Or did you guys take out, take any outside funding?
Adam: Yes, it was really bootstrapped. Little by little, we were able to float money early on with these large wine cellars. In some ways, it was self-financing. Our customers self-financed us early on, I have to admit.
Andrew: What did you start off selling? I see that you’ve got wine. I see wine accessories on your website, as I mentioned, and you held up the magazine. What was the beginning?
Adam: The real power of our business is wine accessories. We identified this niche that there really wasn’t a place to buy a corkscrew, to buy a wine glass, to buy anything to protect wine. So that was our unique advantage when we created product. We were really pioneers in this area. It’s sort of intimidating for many people to pull a cork out of a bottle. If you went to many homes in the ’70s, and even today, if you had a bottle of champagne, many people don’t have the appropriate vessel to serve champagne in or a sparkling wine. That is where we got our start. That was our niche.
Andrew: You started out in direct sales, catalogue sales, accessories. What did you see? What was the opportunity that you saw that led you to start the business?
Adam: Well, I was selling wine. Every once in a while, we would look for a corkscrew and they were nowhere to be found. The first thing we did, my wife and I working out of our home, is we put a little ad in a gourmet magazine, a sixth of a page for a corkscrew, and that was really the beginning of the Wine Enthusiast. After that, we identified the most affordable way to market and reach consumers was via direct mail. This was the beginnings of the catalogue direct marketing industry. That was, they were interesting times.
The first year we had 100 orders. I was working still as a salesperson because we had to put bread on the table. My wife was commuting into the city, she was a TV producer, TV commercials.
Andrew: How did that first corkscrew ad do? How’d it perform?
Adam: Fairly well, fairly well. It was an interesting corkscrew. They called it the Screwpull, it still exists today. It wasn’t our own. Today, more than 90% of the products in our catalogue we manufacture and develop on our own. At that point in time, it was someone else’s genius. It was actually an inventor in Texas called Herb Allen. It was the guy that invented the oil rig, by the way. This was one of his minor achievements, this . . .
Andrew: What was it about this corkscrew that was so impressive that you said I’ve got to sell it?
Adam: Excellent question. The answer is it was very easy. Many people were very challenged at pulling a cork out of a bottle. There aren’t many businesses where the closure complicates the consumption of the product, and wine was one of them. I identified with that. This is really the real nascence of the business.
Then in the early ’80s, we identified a need for storing wine. People started to collect wine.
Andrew: Oh, I’m sorry. Let me slow it down. I want to take this story very slowly so that I can fully absorb this. You know how I am. You’ve heard my interviews. You know how I am about business. I want to understand every part of it.
Adam: There’s a lot to say. Go slowly, okay, right?
Andrew: You saw this corkscrew. You said, “People are having a hard time opening up a bottle of wine. We’re going to sell it in a magazine.” Does it make a profit for you, that first one? What is it about that, how did that first ad do?
Adam: Gosh, this is really challenging my memory here. I don’t remember it really making a profit. I remember it encouraging us to continue. I remember encouragement.
Adam: Because there were people, because people ordered . . . it was kind of exciting to open the mailbox. It’s almost like opening it today and finding an order or two there. Every day we’d rush to the post office and this is . . . you know, there are so many analogies between that and e-mail and texting and things like that today. We rushed to the post office every day to find a couple of orders. It was thrilling, of course. Fortunately we both had careers so we could afford to indulge ourselves with this not exactly highly profitable venture.
Andrew: Okay, I know what you mean. When I even see the PayPal order come in by e-mail today, even if it’s one or two, you go, “Yeah, this is kind of fun. Now how do I make that happen again and again, faster and faster for more people?” Is that what you were feeling?
Adam: Precisely and, you know, we wanted to offer more things. We also were encouraged by the customers. We had a couple of nice letters and people were, “Wow, this changed my life.” There were older people, who were slightly arthritic who could never open a bottle of wine. This corkscrew made the difference between pleasure or pain, I guess. That would be a good way to put it.
Andrew: Okay. You’re selling it in a small little ad in a magazine. What’s the next step? Is the next step a catalogue?
Adam: Next step was a very, very small catalogue. I’m very proud. It’s hanging on our wall here, our first catalogue. Developing a logo, the little guy, at that time we called him Lord Winston. You guys may have seen it. He’s gone through a few different iterations. Let’s see if I can get this up on the screen there. There he is, the little guy. He’s been modernized. He used to have a circle. He’s transcended the 30 years we’ve been in the business.
Andrew: Why was creating a logo, why was having Lord Winston so important for you that that’s one of the first things that you did?
Adam: First of all the brand, the Wine Enthusiast, obviously, was a powerful thing that people remembered. Having him adjacent sort of spoke to the image and prestige of the . . . but it’s a little whimsical. Those of you may see, he’s a little wimp. He’s got his little cowlick. He has kind of a British look to him, not a lot of hair. He was the, we tried to make it approachable. That was sort of the idea.
Andrew: I see, okay. You’re saying that it was important for you to start off by communicating this prestige around wine but also making it more accessible. Which is why for a very long time he had the ascot but he was also a fun looking character.
Adam: We took it from an ad. I don’t if you remember, from an ascot to a sweater. That’s, I’ve never really discussed this before, you’re doing a fine job of interviewing. This is . . .
Andrew: I only know that because I read an article about that. Apparently it was so big, such a big deal, that somebody wrote an article and included in the article about you. That he just took off his ascot that was a big deal.
Adam: Wine is a sexy business, Andrew. There’s sports, entertainment, fashion, and wine. Everybody, when we go to parties, people want to talk to us and ask us about our business. If I were selling tires or toilet paper, I don’t think they would be as interested. We’re very fortunate in that regard that we . . .
Andrew: You start a catalogue. How do you know what to put into that catalogue?
Adam: There was certain categories, of course. Glassware, we wanted to have that. We wanted to have a unique proposition for the glassware, which we did. We wanted to have carrying. We thought about ourselves. Generally, as a client, we wanted to have a way to carry wine, a way to chill it. There were so many things you could do with wine. You could dice it, you could slice, you know, but the real thing that really propelled the business was when we discovered the power of wine storage. We were selling small racks in the beginning. But then, the real thing that drove our sales were these multi-thousand dollar wine cellars, self-contained cellars. We managed to create an exclusive with a French company called Eurocave. That was really the beginning of moving out of the home, so to speak. We couldn’t inventory them in our basement or attic, although we did move to the basement. We were shipping the things through our kitchen, and the neighbors were complaining when the trailers were backing up our driveway. We moved to a, finally moved out. I still didn’t resign my job in sales because it was pretty lucrative.
Andrew: I’m sorry, let’s pause it here. I want to fill in the gaps so far of what you’ve said. This is an exciting story. I don’t talk to too many people who start off in an attic and end up with a $100 million a year business. When you did the catalogue, how’d you know who to send it to? Did you buy a list somewhere?
Adam: Rent, there’s a huge methodology in renting lists. They’re for one time use. Obviously, there weren’t a lot of lists available for wine consumers, but what there were, were epicurean lists. I think some of the first lists we used in those days were lists like Williams-Sonoma. There may be some . . . so, our first mailing was 20,000 catalogues, and I think we tested five lists.
Williams-Sonoma, you rent their list for one-time use. It’s a lucrative business for them. It’s not as lucrative today. It’s diminished today, that business. It was a way to reach people who had a potential, a preponderance they might be, there’s a likelihood they might purchase. The real, the percentage of return, 1% is considered successful in direct mail. For every 100 catalogues, if you get one order, you were a happy camper. That’s where it was.
Andrew: It was tough even back then and competitive even back then, because there’s so many people in the space, that had already been discovered and become competitive in the ’70s. How did you get your catalogue to stand out?
Adam: It wasn’t really competitive. Even the wine business, it was sort of competitive because there was less consumers of wine. Our business wasn’t competitive. The competition was to either have it or not, to create the benefits and communicate the benefits to the end user and facilitate them in sticking their hands in their pockets and pulling their wallets out and their credit cards out and purchasing. In those days, the channel was the phone. We weren’t placing orders on websites in those days. It was the phone and the mail, those were the channels. Today, I hate to flash ahead quickly, but it’s kind of interesting and your viewers might enjoy hearing this. The catalogue isn’t a channel, it’s an ad. It’s a targeted ad which drives people to the web, to the phone, and to retail stores. Those are the channels — the phone, the Internet, and the retail. The catalogue has just become an ad. In those days, it was a channel of sorts.
Andrew: All right. And 20,000 catalogues is pretty expensive. How much money did you invest in the business?
Adam: Wow, gee, I don’t think it was that expensive. The whole catalogue was about 12 pages. I think maybe there were like 15, 20 products in there. How much money? Oh, I don’t, maybe $10,000, which was a lot of money in those days. This was in the 1980. The real turning point was when the brokers were laughing at me, the brokers who were renting names. I said, “Maybe we’ll go to 30,000 or 40,000 catalogues next time.” They said, “Oh, that is ludicrous. You have to do a minimum of 100,000 to have an efficient press run and things like that.” When I told my wife, Sybil, my partner in this business, she said absolutely not. She was very frightened. No way, we can’t do a 100,000. I persevered in that. We managed to secure our first bank loan, $25,000. Yeah, I remember our business plan was pretty cool actually. I still have it.
Andrew: What was it about the business plan? What was it about the model that you think made sense even back then before you got started?
Adam: Wine, it’s really all about wine. Wine consumption is growth. The wonderful thing about wine is, it’s been unabated the growth in consumption. Even this year, 6% increase on a large base. In the last 30 years, wine has never, even in the depths of recession in ’07, ’08, wine still eked out a 1% consumption increase. There were so few people drinking wine. It’s a healthful beverage. It’s a civilizing beverage. Once people identified it and how delicious it is, there’s so many benefits to wine that more and people become converts. That’s what has happened over the years.
Andrew: I see. So the big realization was that wine growth was going to grow. It lived up to that expectation.
Adam: Absolutely, and that was what we told the bankers, who were very frightened, of course. We had to really work hard to convince them.
Andrew: Do you remember how effective that first catalogue was?
Adam: I think we had 100 orders.
Andrew: A hundred orders from 20,000, so you didn’t even hit the 1%?
Adam: No, we didn’t. Maybe it was more, I don’t remember. We hit about 1%, yes. We actually did some shows. Actually, now that I remember, 15,000 of them we mailed, 5,000 we went through some little wine shows. Consumer wine shows that were around and handed them out, you know. I don’t know how effective that was.
Andrew: Did you break even on it? It sounds like you’re saying you believe you did.
Adam: We did break even. We had one big sale. One of our first sales was from a guy, a very interesting fellow. Actually, our first sale was from Senator Heinz, of the ketchup fame in Pennsylvania. I remember that check. I was very proud of that check. It was a few hundred dollars, and they bought a lot of the accessories. We had a couple of large orders which turned the tide for us. Convinced us to do the next book, which I think was a quarter of a million, you know, 250,000.
Andrew: Everything that I see about catalogues, it feels like such a complicated science of knowing what to place where, how to mix the right products. You’re saying when you launched in 1980, it wasn’t that way yet. It wasn’t . . .
Adam: Well, I don’t want it to mean the . . . it is a very sophisticated business. The real thing is the circulation, the database marketing. It’s so akin to e-mail marketing today. Actually it’s the grandfather of e-mail marketing. The merging, the purging, the psychographic research, everything you do to find. Particularly with us it’s a niche. The likelihood of someone drinking wine is remote, whereas the likelihood if I was selling toys or clothing, there’s a stronger likelihood although that’s more competitive. A niche business is really, it’s less, of course, as you pointed out, Andrew, it’s less of a niche today. Wine is a highly competitive mainstream business I call it. We’ve managed to keep our edge because we diversified.
Andrew: So, you’re trying different products. How long did it take you to figure out that wine cellars were the hot product to sell? Wine storage.
Adam: It was risky because they’re expensive. We didn’t believe that anyone would plop down a few thousand dollars for it. But when the first few orders came in, we were, obviously, very elated and thrilled. Thousands of dollars, that was, you know, a windfall for my wife and I. To see these orders it was just astonishing. At that time, I have to give credit to Bob Parker who is a famous critic. He identified the 1982 Bordeaux vintage as vintage of the century. Of course, there are many vintages of the century, but this was one that he really hung his hat on and helped propel him. Because of that, people were getting delivery of those wines. They had no place to put them. We identified that, and we were able to provide them with these Eurocaves, which we were importing. We were actually bringing in containers of them in our next little location above the center of a small village called Pleasantville. We were pretty astonished at how well they were selling.
The other thing is, that I do need to bring up is, some of the people who might want to start businesses who are listening to this, we had the benefit of drop shipping another type of cellar from a factory in California. What I mean by that, these were custom cellars, larger one, wooden. So the consumers would pay us, and then it took eight weeks for this cellar to be delivered. Of course, we deposited that money right away. I don’t know how kosher that was. I might probably shouldn’t be saying this. It was too tempting not to. That was the float that we lived on, and it helped us build our business. Even the French, the Eurocaves, they gave us credit which was very nice, unusual. That helped propel and grow the business.
Andrew: I see. So you get to sit on the revenue that’s coming in before you have to spend it to buy the product that people paid for.
Adam: Exactly. Then it was delivered eight weeks later, and then we had 30 days to pay those guys. We actually had a 90-day float. It’s kind of interesting, I haven’t discussed this in so many years. It’s a wonderful walk down memory lane.
Andrew: I love it. I get so excited to hear stories like this.
Adam: Almost everything is analogous to today. I guess the next big defining moment in our history, we kept growing and moving to different locations. It’s really a similar story the next few years, of course. The wine cellars were doing very well. We were growing to 5 million. Five, ten million that was a lot of money, you know, from those days.
In 1986 or ’87, I identified that there was really a dearth of education for wine. I mean, I wanted more people to drink wine like Robert Mondavi. Of course, more people drink wine, I have my own selfish motives, but I certainly thought it was a worthy cause. We went to, there was only one other wine magazine. I thought they were doing a pretty poor job because they were only speaking to a very elitist audience of consumers. I thought there was a dearth of knowledge. We decided to launch a magazine in 1980 called Wine Times. That was an ill-fated name but a good idea. A couple of years, I wasn’t really a magazine publisher. I didn’t really know how, but I kind of liked the idea because I’ve always enjoyed writing. I went out. Robert Parker wrote for us and Hugh Johnson. The two top wine writer names in the wine field came aboard. They wrote columns for us. That got a little attention. After a fashion, I finally figured it out that I needed to sell ads.
The amazing thing, I think actually I’m missing the key point here is that we had this wealth of data of consumers who buy wine cellars and glassware and wine racks. So we had their addresses and names. Hence, it was the synergy. It was sort of that was the terra, terra being the soil. That was the earth. Out of it a flower grew and that flower was the magazine. We were able to use that data to get people interested in learning more about wine through our magazine. The magazine, I’m very proud of the magazine. We have the magazine and the catalogue.
The original brand, here’s a catalogue with a wine cellar on it. You may be able to see, I’m trying to figure out how to work this out with the camera. See the wine cellar is Gift of the Year, but then also we have our and then, of course, Wine Enthusiast.com, and then we have our magazine comes out 14 times a year.
Andrew: Let me pause the story here. I don’t know if you noticed, but I keep looking down here because I’m taking notes on what you’re saying so I can come back in and fill in the gaps. Here’s one of the gaps that I’d like to fill in. You said five to ten million in sales, which, of course, back then was a lot. Even today, I’ve got news for you, it’s a lot of money. Let’s go back even smaller, the first million. Do you remember when you and your wife brought in the first million in revenue?
Adam: Yeah, I think it was ’83.
Andrew: What was that like and what did it?
Adam: It was shocking to tell you the truth. Neither one of us, we come from solid middle class. I can’t say we were rags to riches or we were poverty, you know. We come from middle class families. It was quite a special thing to sell a million dollars. That doesn’t mean that was our profit. They were far more meager than that. But it’s a landmark.
Andrew: How did you mark that landmark?
Adam: Come again?
Andrew: How did you mark that day, or what did you do afterwards? How did you feel?
Adam: I felt like I should resign, quit my job, I was selling wine. The crazy thing is this, up until 1986, I was still selling wine even though we were working out of our house and we were selling these cellars. It came to a point of diminishing returns. I was the original — I coined this phrase — “wine storage consultant”. I’d sit at the phone. These collectors would call and I would consult with them on which wine cellar to purchase. Then I’d leave the phone and run out to call on some wine shops to sell them some Gallo which I was selling. I would probably make a 30 cent commission on the cases. Finally, it dawned on me. I think maybe I ought to be sitting home and selling these multi-thousand dollar wine cellars instead of schlepping, which is a word we use in New York, around Westchester trying to sell a few cases of wine. So, I resigned . . .
Andrew: Why did you keep your fulltime job schlepping wine for 30 cents a pop of profit? Why did you hold on to it for so long? There was some thinking there.
Adam: It was a familiar thing. The family that I worked for, that I really adored and still do to this day, my father had worked for them. I happened to be a pretty good salesperson. Actually, I was the top salesperson. It was pretty lucrative, to tell you the truth. I was making, you know in the early ’80s, the top sales, I was making like $50,000 a year, which was a lot of money. It was kind of hard to give that up. It’s kind of risky. Who knew? This was all new to us. We wanted to start a family. My wife had resigned from her career. She was helping me with this business. We had our child that you saw, our first daughter in ’83, Erica, who you saw on the scale and is now our Internet Marketing Manager. She didn’t come here right away. She worked at a SEO firm for a while. Anyway, I digress.
Andrew: How did you and your wife celebrate those early wins? Was there a special restaurant that you used to go to? Was there something that you would do?
Adam: We really weren’t, let’s see. Did we travel? We went to Europe, first year trip. My wife had already traveled around the world, but I hadn’t.
Andrew: Here’s the other thing that I wanted to come back and ask you about.
Andrew: The magazine, why start the magazine? Was it just to educate your customer so that they would be more into wine and buy more products later? Or was it because you were hoping to make money off the cover price. You said it wasn’t advertising, so that couldn’t be it. Why?
Adam: If I tell you the true story, you won’t believe it.
Andrew: Oh, I’d love that then.
Adam: I never put this on the air, but, okay, I’ll tell you what happened. In 1986, I was invited out to lunch by a publisher of another magazine, a leading wine magazine. You probably can guess who it might be. At that time, we were major advertisers, as a matter of fact, we only had the catalogue. During the course of the lunch, this other publisher pumped me about my business. Asked me about the cellar business and blah, blah, blah, and I naively, he’s about 10 to 15 years older than me, divulged a lot of data. I thought we were going to get some ink. I thought he was going to write about us, you know?
Adam: It was foolish of me, but I did it. We were one of their bigger advertisers actually. We advertised in the early ’80s. Suddenly, about a year later, out rolled this other publisher’s exact knockoff of our catalogue, which of course pissed me off to no end. So I said, “Well, screw you, I’m going to start a magazine.” I was as dumb, as foolish, about starting a magazine as he was about starting a catalogue. Ironically, and this is an interesting story. I viewed the magazine as a catalogue, so I put my own ads in the magazine, of course, which is doomed to failure. I really didn’t have the relationship to sell the media. He did something just as silly. He took pages in his catalogues and put ads. He didn’t sell ads. He gave ads away to some of the people in the industry, which was very foolish because with catalogues it’s a cost per inch game. When you’re mailing millions and millions of catalogues, you have to justify each inch of space. There’s the paper, the postage, the printing. You don’t have that today, but, you know. It was cost-per-inch analysis, and he didn’t do that because he didn’t really understand that business. Both of us were kind of foolish. They say never get in another guy’s game.
Eventually I got it. I figured out how to be in the media business and how to sell ad media. Then in the early ’90s, there was a recession occurred. He failed, he was having some problems and he dropped his catalogue. By then, I had gotten the wind under my sails and I was enjoying it. The publishing business gives you power. It’s a sexy business and it’s fun. I enjoyed it, and the accessory business although it’s the driver and the economic engine of our business, we’re selling tchotchkes. It’s accessories. I’m mixing a little New Yorkisms here. That’s really, it was a fun business and it was a halo for our business, which turned out to help us with our branding and the image of our firm.
Andrew: I get that. You said that you got it. What did you get about the magazine industry, about running a magazine of your own that suddenly turned things around?
Adam: Excellent question. I think the essence of it is it’s all about people. This may sound cliche. Relationships are everything. You build relationships. You build trust. Selling media is selling a concept and people have to believe in you. People start to get it. They saw our catalogue business. They said, “Wow, he’s selling to all these, he’s selling these wine cellars, he’s selling these glasses, he’s selling these wine racks to consumers. He must have a following of people that might potentially buy my wine.” Hence, we created credibility. That’s what I meant by getting it. Getting it meaning we had to get out there and call on these people and develop a rapport and a relationship. There’s nothing like selling a schedule of media. It’s great for the advertiser and it’s great for whatever the media might be — TV, radio, magazine in this case.
Andrew: Is it advertising that is a driver for everything else because you can get more subscribers?
Adam: Advertising is the principal revenue stream, however, of course, our circulation has exploded this year to tell you the truth.
Andrew: But when you got it, when I asked you why you got it, I thought you would say, “I knew how to write articles or how to demand articles from my writers that would excite my audience and get buzz.”
Andrew: But, no, you talked about advertisers, why? Why is that so important? Why was that the I got it point?
Adam: Of course, we hade sort of created a personality cult in our magazine early on. We had Walter Cronkite, Joe Torre. Morley Safer was one of the most exciting. It sounds a little old but he’s still on TV. He did something which is very defining for the wine list that totally revolutionized and changed wine consumption in America. He came up with a story called the “French Paradox.” You may have heard of this. What he identified was a substance in wine called resveratrol that the French, even though they eat these very, very rich meals — tripe, rich foie de gras — their incidence of heart disease is very low. Yet, in the United States, it pales in comparison to the heart disease in the United States. Yet, it’s because of their consumption of wine that was the paradox. This story aired in 1992. This is an amazing business story actually. In 1992, on “60 minutes.” The next month the sale of red wine, this shows how powerful network TV was in those, grew 40%. There was an explosion in the sale of red wine, 40%. The E&J Gallo winery, their leading wine was a wine called Hearty Burgundy, which is a pretty good wine made of Petite Sirah. They couldn’t keep it in stock. It was flying out the door. The network TV was very powerful, particularly “60 minutes.” I said, “Well, we’ve got to get him.” We interviewed him. We were the first to get him on our cover. It attracted attention in the wine industry.
Andrew: I see. So when you say you got him, it’s not so much, you don’t need to get him to be a writer for you. You don’t need him consistently. You just need him on the cover. It’s getting the right people.
Adam: Well, interviewing him, we interviewed him, yes. Well, that’s a harbinger, one of the defining moments in the American wine business, the French Paradox. Some of your viewers might be interested in knowing about that. There were others, but that was really a very potent and profound one. It associated wine and health. After the fact, you seemed smart. If you were holding a glass of wine . . . I have a delicious glass of Tuscany, Super Tuscan which is a blend of Cabernet and Sangiovese here. Wow, delicious, what a nose.
Andrew: What makes you such a good salesman?
Adam: I think one of the things about being good in sales is, of course, listening. I’m not the greatest listener obviously, but it’s the common touch. Paying attention to other people and listening to them. Listening to their desires and needs. That’s one of the things about . . .
Andrew: Do you have an example of how that helped you out early on when you were selling ads or when you were selling wine storage?
Adam: Well, that’s interesting, ads and wine storage, both high end products but very different. With the wine cellar, the thing you need to do is identify the benefit. The motive, you take a motive and you give it to the buyer. There are four motives for buying a wine cellar, pride, pleasure. I mean the pride of, ego, of showing off the wine cellar. The pleasure of drinking delicious wine. Properly stored wine is more delicious. The profit of the wine, appreciates in value. Let’s see, what is the fourth one? Pleasure, pride, profit. I don’t even remember, sorry. We have our sales force. I haven’t been selling wine cellars in a while. It’ll come to me. But they’re, you know, pleasure, pride, profit . . . oh, well.
Andrew: But all of that is you selling benefits. How are you able to, how did listening help you make a sale? Or what was it about you specifically?
Adam: The thing about listening is, because we had a lot of diverse, different types of cellars, you would identify the one that was most appropriate for that person. It might be in one part of their home. If it was in a living room, you would want beautiful wood furniture. If it was in a basement, you wouldn’t need to have a glass door. So there were different, I tried to find out each niche, each room that someone might put a wine cellar in. That was the way you marketed it and you developed it. That’s what the consultation was all about. To this day, we have 50 guys out there selling wine cellars. I like to train them. I like to run sales meetings. They’re a lot of fun.
Andrew: That seems like a bit of salesmanship. Just the fact that you called yourself, not a salesman, not an operator, not the boss even, but you said that you’re a consultant, a wine storage consultant. It’s a bit of salesmanship. How did you use descriptions like that in your . . . sorry?
Adam: Nobody wants to be sold. They want to be helped. They want direction. That’s really what people want.
Adam: People are fearful of making decisions and they want you to give them direction.
Andrew: I see. Is that your daughter getting ready to head out?
Adam: Yeah, she’s getting ready to leave. They’re going on a ski trip her and her boyfriend and she, they’re going up to Stowe, six-hour drive. As you probably know, we just got dumped on here with about two feet of snow.
Andrew: Oh, yeah.
Adam: A tough time. Actually yesterday was a very interesting day for this interview. I’m telling you, we couldn’t open the business. I came in. Somehow my wife and I and one salesperson, we turned on the phones and I actually was a consultant again. I hadn’t done it in 20 years. I really enjoyed it. We were taking calls because we have 600,000 or 700,000 catalogues hitting now with a sale. I didn’t want to lose that revenue. Not that I handle it all, we do have an overflow service. Of course . . .
Andrew: The calls were coming in. You didn’t want to lose them. You jumped on the phone.
Adam: We came in. We got in. We opened the phones just the storage lines, just the wine cellar lines. The others we rolled over. I sold quite a few wine cellars. It was a lot of fun during the snowstorm.
Andrew: Why did you stick with the magazine business after, what you’d call it? Wine Times, when Wine Times wasn’t doing well, why did you stick with it?
Adam: It was the brand that wasn’t doing well. The magazine was doing fairly well.
Andrew: How do you know that the brand wasn’t doing well but the magazine was?
Adam: It wasn’t the right thing. We should’ve used our own brand, which we ended up doing. I don’t know. In retrospect, that’s a good question. It certainly, Wine Enthusiast resonates. It’s tough. We registered it. We just finally got our registration in China and Hong Kong for that. That wasn’t easy. Intellectual property rights is not the first thing on people’s minds in China, as you know. The interesting thing is I’ve been going to China since the late ’80s. I’ve seen the changes there and Europe.
I had an opportunity to go to China for manufacturing for the commerce business for manufacturing products there. I go to Europe to sell ads for the publishing, media business. That’s what I was talking about the convergence of media and commerce, which is a very important thing today for everyone.
It’s very difficult. You look at media companies that are struggling — The New York Times, The Wall Street Journal. Suddenly they’re selling things. They have to. They need another revenue stream. It’s pretty fascinating when you look at the Times, they have their own section of all these things they’re selling. Of course, they all have wine clubs which is another interesting thing. I think it’s great, of course. Because when you see a bottle of wine in a newspaper that circulates 2 million like The Wall Street Journal, The New York Times is 1.1 and 2.7 on Sundays. Even if the reader isn’t buying the wine, subliminal impressions are being made about wine to them on a daily basis. I just love seeing that. Love seeing pictures of wine. It’s a memory. I appreciate The Wall Street Journal and New York Times and Zagat, everyone seems to have a wine club.
Andrew: You’re saying, you stuck with it because even though the title wasn’t a good one the magazine did well. What do you mean by well? How did you define that in the early days?
Adam: Doing well? The magazine was sort of an after thought. My wife kept wanting me to drop it. I refused to do it because it was my baby. Define doing well. That’s a good question. I don’t know if we even did a million dollars with the magazine. It’s sort of like a little after thought.
Andrew: Maybe it wasn’t that then. Could it be the prestige that it gave you as the publisher and the business as a whole? How did that manifest itself? How did you see that?
Adam: Publishers are a personality cult. I hated the other guy. I didn’t like him. I wanted to stick it to him. He wanted to stick to me. I wanted to stay in the business. A lot of it has to do with that. Magazine publishers are, a lot of it is about personality, to tell you the truth. He did everything in his power to destroy us. He went to all the advertisers and said, “Don’t advertise with them.” I don’t want to tell you some of the, I think, unscrupulous things he did. They told me. But you know what? By doing that, he created attention. Why is he so worried about it? I’ve got to pay attention to these guys. Why? That helped us, actually. By him complaining and telling people not to advertise, it brought attention to us.
Andrew: What are some of the benefits that a publisher gets? Or at least that got that back when paper was king.
Adam: Thank you for asking. Boy that is a real . . . I’m privileged to. I have access to visit Philippe de Rothschild one day and go to Mouton or go with Piero Antinori in Italy. Of course, I knew Robert Mondavi for many years until he passed away and Ernest Gallo. All the greats of wine, I was treated royally by everyone. From the humble beginnings of my dad, if my father, my father passed away when I was 19. He was a wine salesman. If he ever saw this, he would flip out. I’m very fortunate to be hobnobbing with these people. I respect them. I admire them. Of course, I adore wine. Wine is my passion, that’s the name of my company, Wine Enthusiast. It’s propelled my family to a wonderful position in life. We’re very proud of wine.
Andrew: Did you ever say to yourself, I’m done. I love wine but enough already. I need to have some beer. I need to just get away from the whole thing. My dad did this. I did this as a career. Sure it was a passion, but now I’m exhausted from it.
Adam: You have some good questions. The wine business is so evolutionary. There’s always changes. There’s always something interesting happening. Look at Malbec today from Argentina. Who would’ve dreamed? That’s Argentina ten years ago. The New Zealand fabulous Sauvignon Blanc. Everything is, the flavors, the textures, the nuances of wine, it’s a very delicious thing. Of course, if I drank a little less wine, I probably would be lighter and fitter. I use to be a pretty good tennis player. I’m probably 20 pounds more than I should be.
Andrew: I’m checking you out here on video. You look pretty fit. I didn’t know what to expect.
Adam: I try to stay in shape, but it’s not like the old days. I’m getting up there.
Andrew: What I mean is, a lot of people have a hard time staying passionate about a business for a couple of months. You stayed passionate for 30 years about this business and during years when things weren’t going so well. The first thing that you did wasn’t a hit. It wasn’t really there to inspire you. You were allowing yourself to be inspired by it. Why, how do you do that?
Adam: It’s challenge talks. Pretty recently it was pretty challenged here, because we moved into a vast new facility in the summer of ’07. The business took a major hit. Who’s going to buy a wine cellar when they’re afraid of losing their jobs? It’s a very challenging time. We’ve recovered. Not our top line, our top year was ’07. Our profits, we’re having record profits this year. These are challenging times. Like all businesses that had to persevere during the recession. I mean, there’s so . . .
Andrew: How did you survive the recession when you’re selling expensive luxury goods at a time when people are looking to Groupon to save $10 bucks on a local happy meal?
Adam: We were always cutting edge. We had a website. We were one of the first commerce websites with AOL in 1995. We were doing transactions, do you believe this? It’s pretty astonishing when you think about it. We were actually taking orders. We always tried to keep ahead of the times. How did we survive the great recession?
Andrew: Yeah, what did you do?
Adam: We did some things that were very difficult for us. We had to lay some people off that had been with us for many years. We also had to cut salaries. People, I felt as if we were paying people fairly well here. They were loyal, the good people. The crazy thing is, I probably shouldn’t be saying this but, of course, I will. YPO has a thing about it. Young Presidents Organization, I’m actually now kicked out because I’m an old person. Sometimes when you let people go, you wonder what they were doing all these years. Of course, it’s is a family business and we weren’t publicly traded. Every quarter we weren’t being under the microscope. We let things slide. In some ways the recession was good for us because we were able to identify the really strong people. There was some dead weight. I hate to say it, but you try to be kind and there were people here that really were not doing much and we’re paying them six figure or more salaries. It really changed our business, and our profits really skyrocketed. With family businesses you have that. Generally, you’re not as hard nosed, as ruthless. I just saw “Wall Street” last night, the new one, thinking about ruthlessness. Anyway, I shouldn’t be bringing that up.
Andrew: You cut costs. What else did you do?
Adam: That’s a good question. Actually I have to give our president a lot of credit. We have a president here. He developed a new line of cellars, a more affordable line called N’Finity, which came in at about $1,500 to $1,700. Our Eurocaves were about $3,000. We needed a mid-priced line. They really took off. They helped us. Profitable, we are manufacturing them in Asia. Also, I took some of my manufacturing out of China because China was becoming too expensive. I flew to Indonesia. I went to Java and I found a phenomenal factory there. They have a culture of woodworking there to create these spectacular mahogany racks. Cut our costs about 30%. We had to do some new resourcing.
By the way, Andrew, throughout the whole recession, our magazine business held up. I don’t know why, but it held up fairly well. People needed to market, I guess. The wine business was, I mean, a lot of people would say it was affected. See, wine is an affordable luxury. The housing market could collapse, which it did of course, but you can always go out and buy a $10 or $20 bottle of wine and still feel good about yourself, no matter how broke you are. And that’s the nice thing about wine.
I have a crazy thing to tell you actually. Do you know that one of the fascinating things about wine is you can walk into a store, a Trader Joe’s, and buy a bottle of wine for two bucks, and at the same time stride confidently into an auction in Hong Kong and buy the same 750 milliliters of fermenting grape juice, recently a bottle was sold for $234,000. That was Chateaux, of course, I’m talking about Chateaux Lafite Rothschild from the 19th century. Same 750, and then the other one I’m talking about is two bucks. It’s kind of interesting, same quantity. That just goes to show how artful wine is. It’s the marketing, it’s the winemaker, that’s why it’s a fascinating business. It really is.
Andrew: Let me ask you something. Do you ever feel a little bit out of place in this industry considering that you’re a New York salesman with Yiddish sprinkled in your language and everyone else is so highfaluting, they’re like a Lord Winston back when he had the ascot.
Adam: Well, not really.
Andrew: No, why?
Adam: The heritage in the United States, for example, the people that produce, the vast majority of people that were the great vintners are Italian Americans, like Robert Mondavi, Ernest Gallo, the Sebastianis, the Martinis. The people that sold the wine were the Jews. The distributors, many of the distributors are owned by Jewish families. Which, you know, I don’t want to create stereotypes, but people do gravitate towards what they’re parents did. Wine needs to be taken off of its pedestal. It’s not a snob, it’s a beverage. It’s a delicious healthful beverage. When you’re talking about spending $234,000 for a bottle of wine, you can afford to be a little snobby, an elitists, but not many people can do that. It’s really a consumable. It’s a delicious wonderful consumable with an artful history behind it.
Andrew: You don’t ever feel like maybe the outsider in this business, like people are saying, “Look at the schlepper who’s going to sell you a corkscrew and maybe some storage. What is he doing here? Oh, my,”‘ and then drop their monocle as you enter the room.
Adam: No, because they view me as someone with power and rightfully so.
Andrew: Why? Power because of the magazine?
Andrew: I see.
Adam: We move the market. As you may know, in the back of our magazine, we rate wines on a 100 point scale. We have thousands of . . . we rate 20,000 wines a year. I have journalists . . . one of our journalist is in Argentina, covers Argentina and Spain. We have a full-time office in Rome with Monica Larner and Bordeaux. We have Roger Voss in San Francisco. We have Steve Heimoff and we have a second in the northeast. We have a journalist writing and rate tasting and reviewing. It gives us power, but we don’t abuse it because we’re fair. All the wines are rated and reviewed blind. I can’t tell the journalist . . . the journalist could give one of our advertisers the worse rating that’s going to print. I’ve lost a lot of ad sales that way. Then on the other hand, they might give someone a good rating and they might want to advertise with us. They might advertise with us because they realize there’s value to advertising. There’s merit to it and there is. We built many . . .
Andrew: As someone who’s been in this business for a long time, what do you make of Gary Vaynerchuk? You know that guy, right?
Adam: Well, Gary, we actually honored. We have a, I haven’t told you about our events business, which is a very big part of our business. Some of your listeners might want to see. Go to WineEnthusiast.com, which is our commerce site or WineMag.com, which is our magazine site. There are tons of videos there. Now I want to tell you about, we have an events business. I’ll get to Gary in a minute. The consumer business, it’s always held at a cultural venue. We have thousands of people that come to these events. In New York, it’s in Lincoln Center, in Chicago the Field Museum, in Atlanta the Aquarium, fabulous. The Aquarium’s amazing. The Opera House in San Francisco, the Building Museum in D.C., and we’re just going to Miami. You have these spectacular cultural venues. Thirty of the top restaurants in each city, 70 wineries and jazz, and we get 2,000 people and we do this in five different cities. That’s our consumer events.
Then we have this phenomenal event called Wine Star Awards, which is the Academy Awards of wine. I’m the MC. We hold that at the New York Public Library in the Ballroom. It’s a very historic place. This year we have our Man of the Year, Lifetime Achievement Award winners, trying to see if I can find an ad for that to show you. Last year, Gary, won our Innovator of the Year. This year, the Innovator of the Year is a guy named Alain Juppe, who is the former Prime Minister of France. He’s now the mayor of Bordeaux. Under his tutelage, the city has a renaissance. I mean it’s the most spectacular. It was kind of, I hate to use this word, a seedy place ten years ago until Juppe came in and became the mayor. Now, it’s a stunning place with promenades and historical. It’s just a beautiful, beautiful city. Of course, it’s a jewel of a city and it’s the center of the Bordeaux, which is the wine capital of the world.
Andrew: Now, I can see by the way how having a magazine adds a halo effect to the catalogue. As a catalogue merchant, you wouldn’t be associating with the mayor of Bordeaux. You wouldn’t be connecting with all these people and they wouldn’t be connecting with your brand.
Adam: Definitely not. They wouldn’t care about me at all. The magazine gives us power and I enjoy it and anyone would. That’s media, all media does that. Why do you think Rupert Murdoch loves to be in business?
Andrew: Of course. Why are you here on Mixergy? Why are you fixing your Skype so that you and I can have an hour conversation while your daughter is about to go out of town?
Adam: You might have enjoyed hearing about our catalogue business. Kind of interesting. Here is the Wine Star Awards. All of these, we have the, Man of the Year, Winemaker of the Year, Retailer of the Year, Restaurateur of the Year, American Winery of the Year, Lifetime Achievement Award is going to Baron Eric de Rothschild, the famous banker, owner of Chateau Lafite-Rothschild and philanthropist. There’s 12 awards and this is a beautiful star.
Andrew: Do these guys, they come to event, in person for the award?
Adam: Oh, yeah. It’s a $1,000 a plate. Four hundred people come. It’s sold out already. It’s January 24th.
Andrew: Is that a profit maker or is that all going to charity?
Adam: This is for charity, this is for a non-profit. Consumer events are for profit. This goes to a non-profit. This is, it’s just a fantastic, it’s stunning . . .
Andrew: It’s hard to think about a non-profit event as a businessman, but what I’m thinking is, bottom line it doesn’t cost you any money. It’s free promotion and it’s a free way to associate yourself with good people.
Adam: Yeah, we have certain ways to monetize it, to tell you the truth.
Andrew: Like what?
Adam: Like what?
Adam: Well, we do congratulatory announcements or acknowledgements in our magazine.
Andrew: So they buy, the winners will buy these, no?
Adam: Not the winners, the people who want to thank the winners and congratulate them.
Andrew: I see.
Adam: There’s ways to monetize it. It’s principally a non-profit. We do have a foundation, by the way. We give a lot of money. We give a lot of money to cinema to tell you the truth. We love cinema.
Andrew: To the movie industry.
Adam: Yes, to aspiring directors and actors. We sponsor the Italian Film Festival here in New York. We like the cinema.
Andrew: What percentage of your business comes from advertising and what comes from product sales?
Adam: Oh, I don’t think the advertising, maybe 10%.
Andrew: Ten percent from advertising, so it’s still the wine accessories that are the bigger part of your business?
Adam: Yeah, cellars are the driver.
Andrew: What percentage is wine cellars, and what percentage is everything else?
Adam: It’s about 50-50. That’s an excellent question. The thing about the wine cellars is they are an all-year-round product. Of course, we are a gift giving business. It’s the end of the year, it’s very heavy, our business is very heavy. We just had a fabulous year. I mean, highly profitable. It was not our top volume year, but it was one of our most profitable years, because we did some intelligent things. Also, we increased our margins. We gave our clients better products and better service, which, I mean that’s a watchword for any business that you interview here. The wine industry has had steady growth. Boy, you really got to the origins of our business. I haven’t had an interview like this ever.
Andrew: Believe me, I would have spent a whole hour just on the first five years, maybe up until the 1986, when everything turned around. I’m that into learning how businesses grow. How about this? Let’s finish on a high note.
Andrew: What are some of the perks of success?
Adam: Well, I enjoy making money. I’m a capitalist, you know. It’s a fabulous thing to have money. I do travel. Most of my travel has, there’s always a business aspect to it. The beautiful thing is, I mean, even if, wherever, I was just in Brazil. It’s kind of interesting. First, I did a very interesting trip. I went to Peru and then I went to Machu Picchu and then I flew to Rio. Then I flew to a very fascinating area called Puerto Alegre, which is on the Uruguayan border. This is where the Brazilian vineyards are.
Adam: It’s a vacation sort of and we’re at a wine spa, but at the same time Wines of Brazil were so thrilled that we were there, they took us on a fabulous trip. I learned about their wines. I was very impressed with some of their wines, particularly their sparkling wine and their Cabernet Franc was great. I actually ended up writing a column about it. I mean, wherever we go, there’s usually a vineyard somewhere. Not Antarctica, but virtually everyplace you go there’s some sort of vineyard that you can participate or get involved with.
Perks of business. I mean, you know, I have a vineyard in my home. I planted a little a vineyard. I have ten acres here in Chappaqua. We live right down the street from the Clintons, actually. That’s pretty nice, we see them. I planted 150 vines. It’s just a vanity vineyard. I’m not really going to make wine probably. But it’s just so beautiful. I lit it up, I spot lit each vine. You really don’t know what the benefits of being successful. It’s so exquisite. I’m very proud of my home, I have beautiful home.
I have a wonderful apartment in Manhattan, in Chelsea, that both of my daughters are living in now which is in a very hot neighborhood. The Highline and the Turret on 23rd Street, and it’s fun. I love the theater. I can go to the theater anytime I want. I love Broadway. I like to sing. If you really want to go back, before I started my business, I used to go to retailers and write songs about the wine and sing it to them. It’s true.
Andrew: At retail events, you would sing to . . .
Adam: No, not the events. I would call. I would write a song. If I had a new product . . .
Adam: Like Sangria, I’d write a song about the wine. I’m not going to sing it for you now.
Andrew: This is when you had the full-time job before you quit?
Adam: This is before I went into business. Yeah, I would write a song about the wine and I’d bring some cheese and wine. I’d taste some wine and I’d sing it with a sombrero and sangria. If it was a German wine, I would have a Tyrolean hat or something. It was fun and they always bought it from me.
Andrew: So, you’d walk into a wine seller’s store with a sombrero and sangria or whatever the drink happened to be and you would sing to them and they would buy.
Adam: Yeah. To make a sale, first thing you have to do is get attention.
Adam: Okay. I obviously did that. The second thing you do is you neutralize the buyer’s mind by becoming familiar with someone. Then the third thing, of course, is the close. You ask for the order. Some people forget to do that. You don’t want to do that. You need to ask for the order in the end. That’s really the culmination of what you work so hard for. But there’s pleasure derived in making the sale and the pleasure is, it’s exquisite. It really is. It’s a beautiful thing.
Andrew: Did you ever, when you were going into a store, about to sing, did you every say to yourself, “What am I doing here? I got to. . .” No, you love that. Did you ever think, this guys going to laugh at me. He’s never going to buy from me again. No?
Adam: They never laughed. They loved it. I mean, who the hell, what kind of crazy guy would do that. Young guy, I was very young, in my early 20s. I came in, they had boring lives. I hate to say this but they . . .
Andrew: That’s even harder to walk into a place where people are calm and ho-hum and boring and be the guy who’s doing that. I’ll tell you why. It sounds ridiculous for me to pick on this one thing and ask questions about, because it’s tough to even make a sale. It’s tough to call somebody up and say, “Hey, I have something. I would like you to take it from me and give me money instead.” That’s hard for people. It wasn’t for you? Because you grew up in a family where selling was just so common, is that what it is?
Adam: Well, my father was a salesperson. I really got my selling prowess from my mom. She was a very personable person and charming. I try my best. You need to connect. It’s the common theme. You need to connect with everyone and find out what makes them happy. When you do that, they’ll make you happy. I guess that’s what one of the messages would be. If you can identify what makes people happy, I think somehow you’ll find happiness as well.
Andrew: All right. Let’s leave it there. Adam, thanks so much for doing this interview. I hope you’ll come back and do another interview with me at some point in the future.
Adam: It’s a great pleasure. You are a superb interviewer. You extracted things from me I’ve never said before. That is the quintessential interviewer, you really are great. Thank you for the opportunity to be on your wonderful show.
Andrew: Thanks for being on here. I have a lot of respect for what you’ve done over the years. I really appreciate the interview. And guys, thank you all for watching. I’m Andrew. See you on the website.
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