Firstleaf and the First Rule of Wine Marketing—Tell The Truth

I’ve been tough on the Natural Wine category in the past. I think I may have called its champions “charlatans” and labeled them “frauds”. But I wasn’t talking about the wines. I don’t think they are any better or worse than other wines. I was primarily concerned with the way the champions of Natural Wine practiced Denigration Marketing: the act of denigrating your competitors for your own profit.

But Natural Wine champions aren’t the only folks who practice this particularly crude kind of marketing. Take Firstleaf wine club, for example.

Every time I log on to Facebook I see the advertisement I’ve placed here on the left. See what it says? “Your $20 bottle of wine is worth $3.” They have another very similar ad that claims “Our $5 wines are better than most $50 wines.” Whatever. You can’t argue with taste. But it says something else too. Something that is a lie and it’s something that absolutely seeks to denigrate others.

“When you buy wine in a store, you end up paying 3 times more than what the winery originally sold it for. Middlemen, such as distributors and retailers, mark up the price of the wine to cover their costs.”

This is bullshit on a number of levels. What’s worse is that Phillip James, the founder of Firstleaf and the person responsible for that little turd of a statement, knows it’s bullshit. And yet he still approved it for his ads and his marketing materials.

Let’s just walk through it real quick. A winery sets its retail price for a wine. Say, $50. That’s the price they sell the wine for at the winery or on their website. When they sell that wine to a wholesaler that wine goes out the door at $25—the “FOB” price. The wholesaler then marks it up to the retailer 50% to about $38. In order for that wine to sell for “3 times what the winery originally sold it for”, the retailer would then have to price it at $75—double the price they paid the wholesaler.

Retailers don’t do that. At most they might mark that wine up to $55. But more than likely it’s going to be priced in the $45 – $50 range.

Firstleaf is telling its prospective buyers that retailers are gouging customers in order to make a profit. In reality, it’s Firstleaf that is denigrating retailers in America by twisting the truth in order to pocket coin for themselves. And they are doing so in a way that is worse than the Natural Wine charlatans who imply that any other than their wines are unnatural. Firstleaf is not telling the truth.

But what exactly is Firstleaf selling anyway? What is this wine that at $5 is better than most $50 wines? Here’s what FirstLeaf says about the wines they sell to their customers and club members:

“At Firstleaf we are fortunate to get to work with all kinds of winemakers and vineyards. Winemaking is a collaborative experience, and our experts love seeking out passionate people making quality wine.”

Fair enough. Let’s look at their most popular winery: Hawthorne Grove. Here’s what Firstleaf has to say about this storied estate:

“Hawthorne Grove Winery has won numerous silver medals, five gold medals, one double gold medal, and was even voted 2016 Monterey County Winery of the Year on the strength of only their first four wines. Every release is a stunner, and we can’t wait to try anything they send our way.”

First of all, “Hawthorne Grove Winery” is a brand, not a winery, according to their federal certificate of label approval. It is owned by a company called Penrose Hill. Penrose Hill was created by the Firstleaf folks. So, I’m willing to bet it’s true that they really “can’t wait to try anything [Hawthorne Hill] sends our way.”

The address of Penrose Hill is 499 Moore Lane, Healdsburg, California. That’s the address of Rack and Riddle. It’s a custom crush facility that makes private label wine. Now, while I’ll grant you that Rack and Riddle IS a winemaking facility, there are no hawthorn trees in the vicinity. There is no grove of trees in the vicinity. There is no history of the spot being peopled by the “Hawthorne” clan. There is however a highway on one side as well as Jacks Auto Repair on the other. And don’t get me wrong. I’m not seeking to denigrate Jacks Auto Repair by association.

As for that “2016 Monterey Winery of the Year” claim….didn’t happen. Mystic Hills Winery won the 2016 Monterey Winery of the Year. (Since corrected. See comment section).

It’s not necessary to lie to sell wine. In fact, I bet all those wineries whose $50 wines are so much worse than Firstleaf’s $5 wines don’t lie in their marketing. What’s necessary…what’s the absolute very least that you have to do to sell wine is tell the truth. That’s the first rule.

In the end, it’s not Firstleaf’s stubborn relationship with the truth that should concern others in the wine industry. It’s not their willingness to claim awards they haven’t earned. It’s not their willingness to parlay a made-up label into a hard working winery. It’s their willingness to denigrate others in the industry in order to try to create cachet for themselves and their private label wines that is particularly despicable.

I’ve worked and still work with lots of retailers. I don’t know a single one that would base their consumer outreach on claims that other retailers are hurting consumers. I don’t know any retailers that would badmouth Firstleaf for their loose relationship with the truth. And it’s not that I run with a crowd of particularly upstanding retailers. It’s that I associate with a group of retailers that are committed to doing the very least that morals and ethics demand of them.


23 Responses

  1. ANDREW CHALK - April 11, 2019

    They are worse. Logically, they must be. They ignore 50 years of scientific progress in winemaking.

  2. Austin Beeman - April 11, 2019

    Thanks for saying publicly what we are all saying to each other. Every time a FirstLeaf ad jumps into my Facebook feed, they are going to get this link.

  3. Cynthia Cosco - April 11, 2019

    Thanks – Love this article!!

  4. Bruce Susel - April 11, 2019

    Thank you very much Tom for writing us are I hope that it spreas far and wide. I am so tired of seeing their fraudulent and slanderous articles all over the web that I’ve thought of poking my eyes out with chopsticks LOL. After confronting them on behalf of my organizations publicly I was banned from their Facebook postings.

    They are simply a crash pad selling private label wines buying bulk juice or grape more often than not juice. They slander the local retailer in the hopes that people will buy and subscribe to their wines if they do like these wines they are hooked and must re-order from them. It’s a devious game

  5. Dr. Seston - April 11, 2019

    I agree with you, but I don’t see many people following this rule. Maybe don’t lie, but not tell the truth. As if Josh Cellars or anyone else says on their label that they buy bulk, modifiy it, blend it, bottle it and sell it? Don’t think so. Industry peeps know what the difference in the small print is on the label, but telling the truth is not, unfortunately, part of marketing wine. Making up awards is just silly though.

  6. Tom Wark - April 11, 2019

    Bruce…Put down the chopsticks!!

  7. Don Meares - April 11, 2019

    YES, thank you for writing this article! Trying to be the next 2 (5) Buck Chuck, they are trying it thru the internet instead of Trader Joe’s, kind of deceptively I might add!

  8. Adrian Tamblin - April 11, 2019

    What’s your thoughts on other similar subscription type wine services, namely Winc, Lot 18 etc?

  9. Tom Wark - April 11, 2019

    Adrian,

    At the moment…none. I’ve just not looked closely enough to form an opinion.

  10. Mark Buckley - April 11, 2019

    Glad you piped in on this Tom. I’ve been seeing these BS ads on Facebook for a little while and know that it’s lies. How do we get them banned? If we all gang together and report them to Facebook with some factual reference links? Definitely a lot of charlatans out there. Personally, I’m a big fan of LastBottle, but Invino is also good.

  11. Blake Gray - April 11, 2019

    My Facebook feed is inundated with this crap every day, subscription bulk wine services overstating their own product’s veracity while ragging on more honest wines. And I never get posts from real wineries. It’s a problem.

  12. Firstleaf - April 11, 2019

    Hi everyone, we wanted to share a few details here.

    Wine is produced around the world and passes through many intermediaries before it reaches the consumer. Overall markups vary, but markups like this do exist.

    Hawthorne Grove won Monterey County Pinot Noir Winery of the Year award from the New York International Wine Competition in 2016, viewable at https://nyiwinecompetition.com/2016-winners/.

    We had omitted the Pinot Noir category and this has been corrected. We apologize for this mistake. We stand by the winemakers who created these wines, and the 20+ awards Hawthorne Grove has received to date is a testament to their hard work and ability.

  13. Clark Smith - April 11, 2019

    I’m almost completely with you. First, tell the truth. Yet you rarely find a winemaker who is authorized to talk about what really goes on in production. Instead you get statements like “I do the minimum (subtext: others don’t)” and “Wine is made in the vineyard” which has a ring of truth but sweeps under the rug the many tools and tricks we all employ such as reverse osmosis VA removal and alcohol adjustment and micro-oxygenation.

    Clarifying these tools is why I wrote Postmodern Winemaking. They aren’t good nor are they evil. They’re just tools. like a wire whisk or a stove for a chef. But the Natural Wine movement has made them into evil tools of manipulation, which is why winemakers prevaricate instead of bragging about their tools the way TV chefs do. Who can blame them? This is a far greater sin of the NW movement than their role in denigrative marketing. They have much to answer for, but their heart is in the right place. I just wish they hadn’t driven full disclosure underground.

    The reason I say “almost completely” is that your arithmetic isn’t quite perfect. While the distributor markup is, for big national brands, as low as 40%, for small brands like mine, it’s always at least 60% and sometimes higher. I figure to sell a wine that retails for $20 for an FOB between $6.50 and $7.00 – just about 1/3rd of the SRP. So FirstLeaf’s claim is justified.

    The tragedy is that distributors do essentially nothing to promote small brands. They really can’t. That sample bag has only 6-9 slots in it and the promoted offerings get changed out once a week, so if the distributor has 5,000 wines, only 5 to 10% ever get shown, and those will be the big wineries that move lots of product. Out of my $7, I need to pay for trips to the market to sell my wines myself, with or without distributor support. I really could sell the wines for $5 and still make a profit if I didn’t have to pay for the marketing costs on my end.

    In France, this is not the case. Wine is like Cheerios. No Sampling Hey, it’s DeBeouf Nouveau Beajolais or Mouton-Cadet What else do you need to know? As a result, the mar-up from winery to store is 6%, just like other groceries. As a result, the same name brand Muscadet-sur-lies that we buy here for $15 is 3 euros 50 cents in France.

    None of the small wineries even try to get on the grocery store shelf – they’re entirely supported by local DTC.

    My New York distributor bought 14 cases of my St. Laurent – a beautiful and intriguing wine. That was three years ago. Despite my multiple visits to the market, they never followed up the leads I generated, and are still sitting on 10.5 cases. Yesterday they dumped me and asked me to buy the wine back!.

    In the past, the absence of a distributor would bar me access to the many customers I’ve cultivated in Manhattan and Brooklyn over the past two decades. Fortunately there is now an alternative. I’m going with LibDib.com now. They charge only 15% to pass the wine through. I drop ship the wine so they don’t have to warehouse it and I do the selling as I have always anyway.

  14. Jacob Ner-David - April 11, 2019

    I am the owner of Jezreel Valley Winery in Israel, and we sell around 50% of our production in the US, and another 20% in UK/Europe. And I have many friends with wineries in Israel, Italy, Spain, and France. All of us exporting to the US market on average receive 1/3 of the suggested retail price as our ex-winery (at the door of the winery) price from our US importer. So yes, when a bottle of my Jezreel Adumim is sold in a store in Manhattan I am getting $10. So Firstleaf/Pemrose Hill on front is somewhat accurate.

    On the rest — completely agree with you, they are very deceptive. When I saw “Hawthorne” as a brand, I did the same as you — tried to find it — and it doesn’t exist. The companies that are trying to pass themselves off as getting you great wine without revealing who is making the wine, where, and from what vineyards, are doing a terrible disservice to all of us. On the other hand, Empathy Wines (Gary Vaynerchuk’s new brand) is at least telling us the vineyards, and they are the winery. Missing there is who is the winemaker.

    All of this inspired me to start Vinsent (www.vinsent.wine) which is a digital platform for wineries to tell their story and sell their wine. We are currently focused on wine futures, but eventually will expand for bottled wine as well.

    I know that wine lovers around the world want to know and engage directly with wineries — rather than faceless marketing machines. They want to see a video of the real winemaker telling them about the wine, and the ability to ask her a question.

    For those of us that are boutique winery owners/team members, we know that the story is everything (after the wine, which needs to be excellent).

    Thanks for starting to pull back the curtain on deceptive fake wineries.

    Oh, and my winery does make an excellent Pet Nat — but that’s a different conversation…

    Cheers!
    Jacob

  15. Hal Beck - April 11, 2019

    Rack & Riddle is a custom crush facility, but it offers a far wider range of services to the local wine industry than private label wine-making. Their clientele roster is impressive. While true there are few Hawthorn trees near-by, there are hundreds of acres of vines producing grapes that sell for $3 or 4K+ per ton. It’s also an easy walk to the Dry Creek Kitchen, and I’m confident there are wines made at Rack & Riddle on the wine list.

  16. Don Meares - April 11, 2019

    Nice writeup Jacob. Might I ask, how many cases does a boutique winery in Israel produce. I think a 2/3 discount by some small wineries here in Washington State USA would likely put them in the red!
    Don Meares

  17. Alder Yarrow - April 11, 2019

    99% of the wines sold in clubs like Firstleafs are in fact bulk juice or custom blends of bulk juice made by Terravant — a massive industrial winery that can make a wine that then gets bottled under a made-up brand label owned by the wine club. Why? Because these wine clubs need to be able to make a wine for $1-3 cost, so that when they sell you 3 bottles a month for $39 with free shipping (which costs them about $20) they can still make a profit. The quality of wine from these wine clubs is horrendously poor. Winning a gold medal in some wine competition, we all know, is not proof of anything other than you paid your entry fee to the competition.

  18. Brad Kitson - April 11, 2019

    Tom,

    I couldn’t agree more. The denigration marketing is offensive.

    Firstleaf are lying.

    Using the name “natural” bothers me quite a bit as it implies healthy. It’s false advertising.

  19. CHERYL DURZY - April 11, 2019

    Trying to reply under Clark’s comment, but my browser is not participating. Yep, distribution woes is what we are trying to help with/ Look forward to working with you now in NY Clark! Cheers!

  20. John Crystal - April 11, 2019

    From Linkedin – “Philip James”

    Passionate about technology and the wine industry. Deep technical background, inventor of several patents with strong business and product experience. Currently Founder and CEO of Penrose Hill.

    Previously Founding CEO of Lot18 and Snooth. Food and wine industry investor, with multiple successful exits. Raised over $50m in financing from investors including Accel, NEA and Softbank. Scaled companies to 100+ employees and tens of millions of dollars in revenue.

    World traveler: Motorcycled around the world solo, raising money for Wine to Water, a water charity with projects in 15 countries. Climbed Mt Everest. Featured in two mountaineering documentaries. Certified Yachtmaster with over 10,000 nautical miles, including 5th place in a Trans-Atlantic race.

    Perpetrator of the “Miracle Machine” campaign – an appliance that claimed to turn water into wine. Designed to raise awareness for Wine to Water. The Miracle Machine news went viral with over 500 million media impressions and over 500 media outlets around the world covering the story.

    Named a Finalist in Ernst and Young’s Entrepreneur of the Year, 2012. A “Top 100″​ person in New York Technology by Business Insider, a “Wine Influencer of Tomorrow” in Appellation America, and a “Person to Watch in Silicon Alley”​ by Crains. Recipient of honors for entrepreneurism including the Columbia Venture Community “30”​ and the NY Venture Fellows award. Awarded the O1 (Alien of Extraordinary Ability) Visa, for “Extraordinary Ability in Digital Media”. Member of the NYC Metro Chapter of the Young Presidents Organization. Awarded the InfoCommerce Model of Excellence Award.

    Profiled in several books: Growth in a Difficult Decade published by Regus; Rock and Vine by Chelsea Prince. Given hundreds of press interviews, featured in most major media outlets. Frequent public speaker at events worldwide. Guest speaker at both NYU and Columbia MBA classes: speaking on entrepreneurship, new product development, marketing and leadership.

  21. TomHill - April 12, 2019

    Nice piece of investigative journalism, Tom.
    Would like you to take a look at Saranty Imports when you get a chance.
    Tom

  22. Brian Seel - April 12, 2019

    Tom – great coverage about something that most consumers don’t dig into. They take wine marketing statements at face value. I was a blogger before I started my own wine club to bring legitimate small production wines to Florida. I discovered similar trick-by-omission and deceptive naming practices in the Martha Stewart Wine Club when it debuted. I think you might enjoy the post: https://www.vineration.com/blog/martha-stewarts-junk-wine-club

  23. Ali Story - April 13, 2019

    It’s maddening, more white noise in the market than I’ve ever experienced. Clubs like this and mega retail chains who create and/or support “fake wine” are making wineries like mine question if we will
    ever win. I am fiercely engrossed with wholesale channel and DTC, it’s been the hardest year of selling high-quality wine in my career. Yes, we are 100% family farm to bottle and right now with grower bills lingering it’s hard to sleep at night when hearing the millions of dollars these fake labels are generating for wine retailers. A company that declares “our wines won’t give you headaches”, achieved a revenue level in a short 5 years that we can only dream of. I’ve been a warrior for family owned wineries my entire career, given the bullshit factor we’re up against (and more) it only makes me hustle harder, I hope I don’t drop dead before I see things change for the better. My 2cents after loads of coffee this morning. ✌️ -Ali


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