DIRECTOR OF DTC GROWTH & STRATEGY, CONSTELLATION BRANDS
Ryan Mason discusses navigating and transforming the direct-to-consumer wine & spirits industry. TL;DR Sip, Sip, Hooray!
In this episode you will learn from Ryan:
- How his past experience and a connection with Gary V led him to Constellation Brands
- Differentiating go-to-market strategies between Mass Market Vs High End Private Selection Wines
- How Constellation is leveraging new digital advertising strategies to see continued growth across their portfolio
- The ways Wholesale vs DTC unit economics affect decisioning at every stage of the business
- How growth modeling helps them score which brands will be a successful future investment in their portfolio
- Tackling barriers with shipping and logistics to remain compelling to the customer and profitable for the business
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Eric Best: [00:00] SoundCommerce is a real time and predictive data platform for retailers and consumer brands. Our thesis at Sound Commerce is simple. We believe that consumer brands have the power to make the world a better place and direct-to-consumer is the model to make it happen. This podcast is about the people behind the brands we love and the moves they made to turn those great brands into great customer centric businesses.
Jessica Juergens: [00:28] Thanks for tuning into the SoundCommerce podcast. I’m your host, Jessica Juergens. Today, I’m sitting down with Ryan Mason, Director of Growth for direct to consumer at Constellation Brands, a publicly traded beverage alcohol company that carries household brands in its portfolio, like Corona, Modelo Especial, Kim Crawford, and more that we’re going to hear about today.
Constellation Brands is embarking on a journey to go DTC and Ryan’s at the helm overseeing the six main functions in the DTC org, everything from BI and analytics to e-com web dev, acquisition, retention community, and of course, strategy. Thanks so much for being here, Ryan.
Ryan Mason: [01:10] Of course, thank you for having me.
Jessica Juergens: [01:11] Yeah. So maybe to kick us off, I would love to hear a little bit more about your professional background and namely how you have landed here at Constellation Brands.
Ryan Mason: [01:22] Absolutely. Absolutely. It’s been a bit of a winding journey.
So, way back. So, in general, my career has consisted of marketing analytics, digital media and some management consulting experience. My first job way back out of school was at a company called Social Code in the ad tech and digital media buying space. I was there for just a few years before going over to a larger agency under the VaynerX network of companies founded by Gary Vaynerchuk.
So, I worked there for about four years. I was a Director of Digital Media buying overseeing a lot of e-commerce clients. So, working a lot in the performance marketing space, generating top line sales and returning customers for large clients in the e-com space, apparel, fashion, direct to consumer, things like that.
I spent about a year at a subsidiary company of VaynerX by the name of the Sasha Group. And I was a founding member on the executive team there as Vice President overseeing our media advisory practice. And the difference between VaynerMedia, which is a larger agency and the Sasha group, which is a smaller growth consulting firm focused on SMBs and funding startups was that we worked a lot with founder led companies and smaller consumer brands to grow them through modern channels today. After that, I jumped over to Boston consulting group for a little bit where I spent time in their digital ventures practice, which is the corporate innovation and venture capital arm of BCG building startups and new business units together on behalf of large corporates. So not too dissimilar from what we’re doing here at Constellation building a smaller, nimble, direct to consumer team on the back of several fantastic brands. And the reason I ended up where I am today as Director of Growth for DTC at Constellation is a connection through Gary Vaynerchuk actually.
So, John Troutman, my current boss at Constellation was a founder along with Gary Vaynerchuk of Empathy Wines, which was acquired by Constellation Brands last summer. On the back of that acquisition, they were building out a robust direct to consumer and digital commerce team, so I was recruited over to join and working together again with some folks I used to work with back in the day. So, it’s exciting journey and excited to land here and really, excited about the growth that we’re looking at over the next couple of years.
Jessica Juergens: [03:36] It has been a winding journey, but it’s all definitely been leading you to this position. So, they’re lucky to have you, it sounds like. Yeah. What’s the elevator pitch on Constellation Brands or CBI?
Ryan Mason: [03:48] Sure. Yeah. CBI. So, I think you nailed it earlier. Large outback firm publicly traded fortune 500 itself has been a winding journey since its founding. I think back in like 1940 something has grown a lot organically and inorganically through a lot of acquisitions. And for the past 20 years or so has been on a big tear of acquiring businesses and growing them.
But I think everyone will recognize some of the names you mentioned earlier. So, there’s, two main divisions within CBI. There’s the beer side of the house and then the wine and spirits side of the house. So, my function sits within wine and spirits just for clarity, but there on the beer side, Corona, Modelo, Pacifico a few other bigger names in the Mexican lager space and just generally speaking some other startups that they’re working with, I think Funky Buddha was an acquisition. If you’re an IPA fan, I think that might be up your alley. So large in the beer side and then on the wine and spirits side I will say probably a bit more weighted towards luxury wines out in Napa and California, but we do have some presences in old world and in Italy for the Rafino group. And then in New Zealand, we have Kim Crawford as mentioned before, but some names to hit the list would be Robert Mondavi, Meomi Wines, Simi and a few others. And then on the spirits side, I think Svedka is probably the biggest names that in the listener’s ears today.
So, there’s quite a bit across the board. And then within wine and spirits is where my team sits building and optimizing our new digital commerce properties for all those brands that I mentioned.
Jessica Juergens: [05:16] Very cool. And you’ve talked quite a bit about just like really loving working with these growth stage brands and growth stage companies.
So, I want you to talk a little bit about what is required in order to have a successful, direct-to-consumer transformation strategy and organization in the middle of such a such a whale. And I don’t say that in a bad way. It’s just, it’s a huge company.
Ryan Mason: [05:39] Yeah, for sure. I think this is a really important point to call out and it was one of my earlier hesitations on even, you know, joining company to begin with. But what really struck a chord with me was when in the interview process speaking with John and then Robert Hanson, who’s our president was that they are at the core, an entrepreneurial group that does a lot of innovation, a lot of acquisitions and ventures with growth stage brands across the board. I mean the very fact that they acquired Empathy Wines spoke to me that they were kind of ready to make this kind of transition. Whereas before I think you could think of Constellation Brands as a large CPG company that moves a bit slower in this space is, a couple thousand employees across different offices, just in general, more of like a Procter and Gamble than a nimble DTC startup. So, of course you can draw a lot of comparisons between the two and draw a line between those, but the team that we’ve been working with, and a lot of the hires that we’ve been making come from, quote, unquote, the newer age of CPG that we’re in today.
So, a lot of direct-to-consumer backgrounds you know, people like me, who’ve been in the digital space for a while or consulting in ventures for a while. But I think the biggest thing for me is that they approached Empathy Wines more so for the talent and IP around building a brand in today’s digital world, rather than just the brand itself which is typically what Constellation does.
It was more of an acqua-hire approach. And I think moving into that has allowed us to be very nimble. And operates a lot more independently than some other groups in the business. And there’s sponsorship all the way from the top, right? So, sort of Robert and the rest of the leadership committee is very keen on building this arm within the organization and has allowed us to build our new technology, which is a little bit outside of what they typically would build.
So, there’s, there’s a lot of white space for us to, to have ourselves kind of chart our own path, which I think is interesting.
Jessica Juergens: [07:26] Yeah, definitely. And you’re managing a portfolio today of wine labels and really taking those all direct to consumer. How is the management of that portfolio? And that’s a very broad question, but you know, you have a playbook, is it just carbon copy or how are you guys approaching that?
Ryan Mason: [07:44] Yeah, it’s a good question. Yeah, a lot of the names I mentioned before kind of run the gamut of hyper luxury allocation models that you can only buy a certain amount, just given the scarcity of it all the way down into mass market brands. And even the price points vary quite a bit from, between 15 and $20 a bottle all the way up into the hundreds.
Right. So, it’s difficult to. just run one play repeatedly with these brands. So, what we’ve done, and this is even spending a couple of spirits brands that were there, we’re piloting as well. So, across wine and spirits, we’ve come up with a scoring model, so to speak on the best way to phrase it.
What I guess be what’s the best outcome product market fit that we can run these brands through. And we can score them on different attributes, like brand awareness current distribution and wholesale. How long the brand has been around, what type of product we’re selling, what is the price points?
How the economic shakeout for margins and Customer acquisition on, on a website, for example, of an expensive wine bottle versus the cheaper one bottle are very different. So, we’ve put a lot of thought behind that in our growth modeling. And what we landed on was the power brands strategy, which Those that scored the highest on that model were like the most out or the most appropriate for direct consumer selling from the get-go.
So, they, they do about 95% of our growth this year. And the rest, we will be transitioning to the tech stack and operating, keeping the lights on and, and growing the brands, but certainly not investing a lot of the capital into those. So, it’s more of a capital allocation exercise across the portfolio of businesses based on several different factors, mainly market fit.
And unit economics, but it’s been an interesting exercise. And the amount of data that we need to go through that and make those choices is a robust exercise in and of itself so a lot of the technology we brought in for is helping us do that. But yeah, we’ve, taken a rigorous approach to measuring that and scoring all our brands on a, scoring system before kind of just going to market with everything.
So, we’ve phased them out appropriately and we put different resources behind each brand.
Jessica Juergens: [09:44] Yeah. And how does the organization see direct to consumer e-commerce as an overall function of the traditional retail channel that you guys operate under as well as three-tiered e-commerce?
Ryan Mason: [09:56] Good question. It’s ruffling a lot of feathers.
I would say in a good way though. The friction has been healthy. We as an organization are now officially viewing like direct to consumer in this business unit as what we’re calling tip of the spear. So, it is really, truly leading our efforts in digital transformation across the board. A lot of the technology we’re bringing on board is, is much newer and fresher and different than some of the older partners that we’re using in the wholesale business.
So, we need different solutions. So, tip of the spear for digital transformation, tip of the spear for customer engagement and insights as you can imagine in a wholesale environment or a three-tier e-commerce environment through drizzly or another marketplace, you don’t get a ton of data on the end consumer.
And what we can do for example, now is sell directly through a website and we know. A lot about that consumer you know, location, age, gender we can proxy things like income. We can get their date of birth, we know the demographics what they like, what skews they’re buying on a consistent basis.
So, a lot of insights is being positioned at the tip of the spear as well. So, it’s, it’s more of a in the early stages direct to consumer will be capability, building, insights and pushing the organization forward. And then over time it will be a leading sales driver. We don’t anticipate it to eclipse our wholesale business.
I just don’t think that will ever happen. Of course, people like to buy on premise and of course in liquor stores and occasion moments can’t really be planned. So, we’re, looking to penetrate a pretty good number of digital sales, but certainly not surpassing wholesales, acting more as a. Insight’s tool in a progressive business unit for the organization.
Jessica Juergens: [11:31] Yeah. And you’ve, you’ve mentioned already data quite a bit. So, what role has data played for you guys throughout this transformation journey? And how do you sort of see data fundamentals as being a differentiator?
Ryan Mason: [11:44] Yeah. So, Dana is, is playing the leading role in a lot of our decision-making processes even, you know, as far as our capital allocation for growth insights generation, and decisions that we make. We are a very data-driven organization and very financially driven organization.
We have not too much appetite for running at a loss in the early stages of a venture. So, we’re, we’re pushing a lot of growth in ourselves and so far, so good. But to answer your question. I think data is, is the most important thing for us as a business. And it spans all our functions. Every, every interaction so to speak with the consumer is now digitized.
And we can collect that store it transforms and model it and use it to make decisions. So, it’s a really, important part of the business.
Yeah. And you know, something that we talk about a lot at Sound Commerce is just lifetime value as really being a direct result of every single interaction that a customer has with the brand, both from first click to doorstep delivery.
So how are you guys thinking about really creating experiences and that’s, you know, that encompasses online and offline while balancing those investments in the merchant-based approach and CAC.
Yeah. So, it’s, it’s a big question and it’s, it’s a lot to unpack. So, what we’re looking to do is, and we’ve, we’ve come a long way, but we’re looking to do is, is basically enable every single interaction with a customer to be digitized and recorded so that we can then.
Act on that data. And what I mean by that is every single purchase that’s made on the website, the reasonable purchases made in our tasting rooms. We’ve been to grade or we’ll be integrating new point of sale technology that, that goes into our database as well. To just have a unified customer record, that’s kind of step number one.
And then everything else we’re building is all the way up the value chain. Things can be recorded digitally and stored whether it’s the first impression on an ad on Facebook or the, the second or third time they visit the website. The number of products they look at the basket size, the complexity of the basket what’s in the basket. How, how often are they purchasing? Are they joining the club? Are they churning at a certain rate? There’s just so many metrics to look at and across, a handful of businesses will be close to a dozen soon. Those are things that we can’t really afford to do manually.
You know, if you’re a small startup focusing on one business, I think you can get away with doing a lot of that in programs like Excel, but for us, we need to aggregate and automate an immense amount of data in real time. So, using tools like sound commerce, what you guys are providing us is a no brainer and something we really need to do to aggregate all that data across 12 businesses from locations to websites, marketing channels, attribution, all sorts of stuff. So, it’s, it’s been a complex project.
Jessica Juergens: [14:28] Yeah. And I know that shipping is typically the most expensive part of e-commerce, especially in, alcohol. So how are you guys managing those expenses and the tracking of those expenses on a variable basis?
Ryan Mason: [14:40] yeah. It’s, it’s a question that, that we’re still answering.
And it changes brand by brand. So, we’re, we’ve integrated with a modern third-party logistics provider. That’s helping us fulfill and ship orders. And they are charging us with what the rates are to be charged. We are either passing that cost onto the customer or offering incentives by way of free shipping or complimentary shipping on orders to offer incentive to customers to join the club.
So, there’s a lot of different data points that we’re playing with right now. And a lot of decisions that will shake out over the next couple of weeks as we start to get a lot of these businesses off the ground. And we collect more data on how consumers are interacting with shipping, but to your point, it is kind of a big barrier.
I think. In your experience or any experience as a consumer shopping online, you see a lot of free shipping offers and a lot of comp shipping on your first order. So, there’s just like a lot of things from a consumer standpoint that we’re trying to tackle. for wine and spirits, typically it costs 25 bucks minimum to ship something to your door in like a three-to-six-day period. And if you want it overnight, it gets expensive. So, there are things that we’re looking into from our margin standpoint, to not cut too deep into our GP with shipping, but make it compelling to the consumer and make it palatable to us as business. So, something that we’re working on, but the good news is, is that all that data is integrated into our, data warehouse and we’re, working on coming up with answers on that and, and defining a strategy moving forward.
Jessica Juergens: [16:06] Cool. Yeah, I know I had just had my wine club membership for Empathy delivered, but I was out of town. So, I know that Signature Collection is also this whole different barrier, you know, like you’ve already made it all the way there you’ve paid for shipping and then for some reason, somebody is on vacation and can’t pick it up. So, is there any disruption happening in the Signature Collection space for alcohol?
Ryan Mason: [16:26] Yes. That’s a good question. Nothing I’m aware of. You know, unfortunately If you live in a house or an apartment without a doorman there’s not much we can do.
However, there are things that we’re trying to build in whether it’s custom formats or a reminder emails to consumers that your shipment is coming. Would you like to delay it? Would you like to ship it to another address? Would you like to sign for it in a different way? All sorts of things to kind of get around that in a manual sense.
Perhaps there is a solution on the horizon that hasn’t arrived yet, whether it’d be holding it for a few days in a safe location or what it might be, but we’re just kind of tips of the waves on that We haven’t really dove into that question, but it is quite a barrier, right?
Shipping costs, am I going to be home when it’s there? Do I have to sign for it? You know, I can’t, I just went down to the liquor store to get it right. There’s a lot of value props we must lean into that are convenience oriented and exclusivity of product oriented to kind of overcome some of those things for the consumer.
Jessica Juergens: [17:23] That makes sense. How has your omni-channel approach been as well? Obviously, we’re coming out of COVID I’m being optimistic here. So how are you guys thinking about that this year?
Ryan Mason: [17:36] Yep. So, I think it was a quote from Robert earlier on, but any direct-to-consumer native brand ultimately becomes a great Omni channel brand.
Right? So, it’s about the brand itself and not really about the channel. We are operating a channel and growing a channel for Constellation that just never has existed really. So, it’s exciting for us to get that growth and then we’re seeing a lot of it. Over time now we’re certainly not going to shrug off wholesale. We’re certainly not going to shrug off three tier e-commerce marketplaces like drizzly. So, we want to make sure that the consumer is met where they are and we’re providing them a service wherever they want to get the service from. When it comes to allocating inventory and planning and forecasting, that’s something that we’re getting sharper on because it was a custom production schedule for every brand. And then if you change that from wine to whiskey or vodka, it also changes the production schedules and allocations of it. If it’s a limited release, is it mass produced? How do you allocate across channels?
Is it wholesale on premise or is it direct to consumer only? So, there’s a lot of tools that we’re looking to build off our data warehouse. And then integrate into our other kind of operation systems that help us get better at planning and forecasting the needs and the demand for omni channel.
And so, I don’t really have a magic eight ball answer quite yet, but we’re working on it. And there’s going to be some ebbs and flows of I think over the last eight months or so, we’ve seen a lot of people still kind of stuck at home, ordering online, maybe becoming more comfortable with this process.
And then as we get into the summer months and hopefully everyone’s vaccinated and knock-on wood, we’ll start to see more people out at bars, restaurants, and liquor stores. So, it’s going to be a bit of a difference in consumer patterns. So, it’s certainly something we’re thinking about. Right. And we’re going to put some thought behind it, but it’s ever changing. I think.
Jessica Juergens: [19:17] Yeah, very cool. What about your investment in the upper funnel brand awareness? So, you mentioned before you guys have quite a few labels that are predominantly west coast, you’re bringing a lot of those nationwide and especially to the East coast. So, are there any tips and tricks for that side of the business as well?
Ryan Mason: [19:35] So we’re conducting a lot of what you would call traditional awareness marketing. But in the more digital sense of the word so we are working with some agencies and we’re doing a lot of this in house. Our team we’ve recruited from a lot of different areas. And one of those areas is digital agencies and people who are fluent in ad buying tools on Facebook and Google in particular, for example or even planning a communications marketing program that goes through online video or connected TV providers to go on Hulu, or whether it be Amazon prime, whatever it might be.
So, there’s, there’s just a lot of new digital channels out there that are a lot more effective at awareness driving than some of the more traditional publication or print focused or billboard focused avenues that have been taken in the past. So, we’re, we’re a predominantly digital organization.
And it benefits us in a few ways for this, we can really measure lift and awareness through custom studies with partners like Nielsen or Facebook or Google to measure if those ads are effective in generating what we want to generate. But also given that all the touch points are digital. We can integrate those into our data plan and make sure that we’re measuring impact effectively.
And then to your point about kind of shifting out from one market to another, there’s a lot of people in California who are probably very familiar with a lot of the Napa brands that we own and operate, but at the same time, people in New York might not be and so how do we translate that message?
How do we make sure that the brand identity is, is understood and has it come to life on the website? How does it come to life on our social channels? Basically, anywhere consumer interacts with us today, we want to make sure that the identity is stitched together appropriately. And that we’re investing in the right marketing channels that are measurable attributable and relevant.
Jessica Juergens: [21:14] Yeah, that brings up a question that I was going to ask you as well around just how you’re thinking about a customer. Are you thinking about a customer in the context of a single brand or are you really thinking about them across your entire portfolio?
Ryan Mason: [21:27] Great question. So right now, and the way it’s being done is we’re thinking, we think about our customers brand by brand because there are a lot of insights, value, props, and taste profiles that are very different.
But at the same time, you know, when you look inward and you kind of zoom out a bit, I drink a ton of different wine brands and I like a lot of whiskey brands and rock brands. So, there’s, there’s overlap. And how do we identify that overlap? How do we act on the overlap? I think is a question that’s going to start to come up for us a lot.
As we launched kind of the balance of the portfolio right now, we’ve got about half of the website’s up that were planned to get up for launching meomi.com next week. So. Those are listening, check it out. But we’re also launching a couple more at the balance of the end of the year. And what we’re going to do with that is started to collect everything into a single customer database file.
And analyze overlap, analyze taste, preferences, profiles and things like that. We’re not quite there yet. Crawl, walk, run. We’re in the walk phase, I think with that analogy, but it’s a good question. Something on our mind.
Jessica Juergens: [22:27] Yeah, no, I’m excited for that. As a consumer. I remember the first time I had Meomi, I was in a steak house and I was like, what is this? I bring it over. It’s like, I need to take a picture of this and then go home. So good stuff. Okay. There’s obviously been a ton of disruption in the wine and alcohol industry in general and the whole shift to direct to consumer. So, what is one thing or two things that you guys do that’s against the grain or something that you hear all the time and the direct-to-consumer buzz world. And you’re just like, oh my gosh, not that again.
Ryan Mason: [22:58] I’ll take the first one first and then, in the alcohol sector, there’s a lot of focus on I guess two things that are on top of my mind, there’s a lot of focus on alternative formats and lower ABV products. So, whether it be smaller formats, like a 375-milliliter bottle, which is half the size of regular or even something as unique as a completely different bottle shape itself to easier to ship, easier to drink. So that that’s number one. You see brands like House out there, which are like aperitif brands, which are doing low alcohol content, or even like CBD infused plus less alcohol, more of like a social drink than anything else. So that’s interesting trend that we’re following.
We haven’t acted on that yet, but we do anticipate that we will have quite a bit of innovation in our DTC practice coming up with new brands or new identities or new product line extensions, of an existing brand that, that may kind of map to one of those trends. So that, one’s interesting.
I’m not sure if that’s going to be a fad or if that’s going to last. The other one is Natural and organic sourcing especially for wine, right? So organic is one thing. And I think a lot of our vineyards are already doing this. I think Robert Mondavi as well under way with our transition to fully organic and sustainable farming. With the resources today, that doesn’t mean much of a change in the way things are done or the taste profiles of the wine or anything like that.
So, it’s a little bit of a no-brainer for us. The other one being natural wines or, or unadulterated biodynamic farming especially on the West coast has become a big consumer trend where people like some of the funkier wines, which are, you know, bright purple or bright orange, really. Even some of them that have a little bit of carbonation or it’s just like an interesting bubble that we’re looking at.
And so, we’re, we’re thinking about it. But as like a classic wine house of brands, Constellation Brands, typically it has a little bit more of the high-end mass-market commercialization brands and less of these upstart natural wine brands and market, but Hey, never say never. Right? So those are two things that I think are interesting. I, myself am interested with natural wine. I think it tastes interesting I’m not sure about you on the West coast having that experience, but it’s becoming popular.
Jessica Juergens: [25:07] Yeah, no, I’ve seen everything that you just described, and you know, it was the whole like sober, curious movement. Right. natural, no sulfites, all that good stuff. So, I love it. What about direct to consumer? Are there any sort of like buzzy things that you hear that you totally reject and have never followed?
Ryan Mason: [25:23] That’s a good question. I think as far as like truisms or things I’m hearing nothing comes to mind, rings a bell, but what I am seeing is an outrageous amount of direct consumer brands in my Instagram feed. And I think that’s been growing over the past couple of years. There’s been a lot of attention on that recently. And some things have shaken out authored an article about this when I was at BCG or was about some, some of the unprecedented venture investment in these types of companies. Without really looking at the underlying economics businesses running at exorbitant negative profit margins. Really never becoming cashflow positive without ever really looking at how much they’re acquiring a customer for. Is that customer staying? Are they generating lifetime value? Are they generating gross profit? are your fixed costs even being covered? So, things like that, I read and kind of chuckle, but it’s, it’s unfortunate that a lot of brands out there just getting a lot of funding and, and really kind of having to take a couple steps back or even shutting down.
So, there’s, been a little bit of a boom and bust, I think. But now. You know, we’re living it right now. And an example is a large company like Constellation Brands going to market with a direct-to-consumer business plan. So, they’re taking a swing at it. Two, we’ll see where we land. I think it’s different the way we operate than some of these other ventures backed startups where, they might have a little bit of runway to be unprofitable.
We certainly don’t. We, we, we must meet certain targets and We’re just in a different mindset. So, it’s interesting that the balance struck between corporate venture innovation and, and founder led. I think there’s been a lot of frothy founder led investment happening. And some of those work right.
Casper, I think is a good story. They’re huge now. I’m not sure how they’re doing the bottom line, but brands like Glossier or other ones. So, they’re, they’re out there, the success stories, but I think there’s for, for every one of those success stories, there’s a dozen that may have fallen by the wayside. And I see it. A ton that was in my Instagram feed. So, I’m not sure the fate of all those brands.
Jessica Juergens: [27:16] Yeah, it sounds like you’re focused on contribution margin net of all those variable costs has proved useful because you guys aren’t just optimizing lifetime value in spending whatever it takes, but you’re focusing on cost of goods sold and a lot of the sort of foundational principles there. Along those lines, something that we do talk a lot about at Sound Commerce as well as just this notion of customer based corporate valuations, as opposed to just looking at future discounted cash runway and things like that. Peter fader, I think, is a gentleman out here that has sort of spearheaded a lot of that. How do you guys think about optimizing for lifetime value? And how do you take lifetime value from being a buzzword in the industry and something that you talk about quarterly, you know, in a business review to being something that your teams are instrumenting across all the different functions that you’re managing.
Ryan Mason: [28:07] Yeah, that’s a good question. And I’ve read a couple of articles on that topic as well. In fact, there’s a company out there that specializes just in, lifetime value measurement. it’s new and they’re called the retina.ai and worked with them in the past just briefly. and they’re piloting a lot of interesting work and I’m sure there’s a lot more out there and you guys of course are doing the same with a lot of great data behind it.
I think one of the, and it’s funny to go back to your things that in DTC that I scoffed at, I think the CAC/LTV ratio I love, but the way that they define it is important. Right. How do you define LTV? Is it revenue? Is it GP? Is it contribution? Is it at the customer level? Is it on an average or is it a cohort level?
So, it’s, it’s not as simple as having a good ratio upfront for CAC/LTV. You really must dig in and look at the customer level or the order level at a certain point, you can go down and look at, is this program effective? How do we define effective? We define it as what are the costs of running a program, including cost of goods sold, right.
Sometimes. What is the outcome of the purchase? What is the gross profit on that initial purchase? What is the ratio between CAC and gross profit? And over time what is the ratio between CAC and contribution margin and LTV, which is like a Diluted form of LTV on revenue at the customer level. And so we look at all those metrics, we’re still gathering what our benchmarks are.
We’d like to be able to measure on every, first purchase and every customer what the CAC to gross profit is on that first order, ideally, It’s above one. Ideally, it’s higher than that, but then over time, right. GP to CAC should be at least five to six times ratio. And then beyond that contribution.
Right? So, you can go all the way down to the bottom line of a balance sheet or an income statement rather, going down to the bottom line and seeing what you’re doing at an order level. Customer level, I think is very important.
Jessica Juergens: [29:52] Yeah. Yeah. But part of it, what you’re mentioning as well is moving out of averages and moving to the highest fidelity, bottom-up awareness of all these different events too.
It’s pretty, it’s remarkable.
Ryan Mason: [30:03] Definitely.
Jessica Juergens: [30:04] Do you treat high lifetime value customers differently than other customers? Here’s a loaded question for you.
Ryan Mason: [30:10] Loaded question. The answer is yes though, right? And it depends on the brand for a mass market brand. Like Meomi or Kim Crawford and maybe a little bit differently than a high-end private selection, Robert Mondavi customer, or even someone from our really, upscale business-like Schrader or Double Diamond.
Some vineyards out there that you may have not heard of but produce consistently rated very expensive wines. And there is a level of white glove service you must apply to those businesses. A lot of it is done hand to hand rather than on a website or through a phone, like you have a customer base and if they’re placing a large order, or if they’re unhappy with the shipments our customer service teams are armed with that information of what does this customer mean to us? Are they worth a lot in lifetime value or is this a first-time purchase? Do we want to surprise and delight them? Do we want to retain them over time? So, I think it’s important to have all the information about a customer before making decisions on how to service a problem or how to treat them or send them offers so the answer is, yes, we don’t really have quite a playbook yet, but we’re still during defining what lifetime value means to us. But certainly, the goal is to be able to have the customers level of platinum gold club member, I’m just making it up be treated a bit differently or more appropriately than someone who may have just purchased a first bottle.
So, so yes, but at the same time we want all the customers to be happy. So
Jessica Juergens: [31:36] Of course, any big bets or initiatives for this year or next as you guys scale.
Ryan Mason: [31:43] Yeah, I think there’s a couple. Couple of big bets would be moving into spirits direct to consumer proof of concept.
The market size is substantially smaller just given the regulatory environment. with wine, you can ship between 47 and 48 States. I think it might be 48 with spirits. It’s like 7. So, it’s a lot smaller, but there’s like a couple on the horizon, California and New York are going through legislation now.
So those would really swing the pendulum, just given the population size of those States alone. But right now, the market size is smaller for what we’re able to ship directly from a distillery. For example. But we’re excited about launching proof of concept later this year, where the whiskey brand bars, and hopefully that’ll go as well and can signal and serve as a litmus test for us in that area.
And if, and when the regulatory dominoes start to fall, we can then take advantage of that.
Jessica Juergens: [32:32] Amazing. And along those lines as well. Are there also plans to get into taking some of your beer labels direct to consumer as well?
Ryan Mason: [32:42] At the current moment, no. That is. A good question. Something we’ve put some thought behind. But I think some of the things we were discussing about before the consumer barriers with shipping and with signing for a package it’s hard to imagine that someone would go through that to get a 12 pack of Corona delivered to their door. I love Corona. I buy it at the store. I just don’t know if I would be able to sign up for a regular shipment of that.
Beer is just a different beast. And just given the, and it’s funny on the scale of, you know, beer, wine or spirits, the alcohol per volume of course, is much lower on beers. So, to be able to shift someone a meaningful amount, it had to be a big package, right? So, it’s at least 24 bottles kind of thing.
And then it’s very expensive. So, the economics are not very favorable at the current moment. But on the flip side, if we were to make an investment or develop a brand, that is direct to consumer very IPA forward, high alcohol content, that’s a bit more custom or occasional occasion-based drinking that could work as well, like very craft and very high end.
But with our current portfolio, I don’t think it would make sense.
Jessica Juergens: [33:50] Yeah. Makes sense. All right, so maybe to close it out, a fun question for you.
Throughout COVID any new hobbies that you’ve taken up or new brands that you’ve discovered that, you know, you’ve only seen due to the COVID pandemic?
Ryan Mason: [34:05] So, yeah, a couple of things I think early on I started, I picked up meditating. Meditation for me was something that I did. I never really thought about it before. And then I figured, Hey, why not? I’m going to give it a shot. And now I love it. I also picked up running. I always been active, and I work out, but now I run several miles per day, usually who knows might have a half marathon in my future.
Don’t want to put too much on my shoulders.
Jessica Juergens: [34:29] Ryan let’s do it.
Ryan Mason: [34:31] Let’s see, what else have I done? All the basic stuff. Right. You know, baking the breads and all that stuff. That was just very trendy at the time. Grew my hair out a bit. It’s a bit longer than it usually is. Let’s see. I’ve been hitting up our employee store online and getting our highly discounted wine and spirits delivered to me personally.
So, I’ve been trying a lot of our Constellation Brands, which I think haven’t really. Then a consumer has in the past, other than Corona, I do love Corona. But like some of the wines, right, Meomi, Kim Crawford. I haven’t really tried those, but discovering all of those, I would say is, has been a good COVID activity.
Jessica Juergens: [35:04] Yeah. Not all the tie-dye matching sweatsuits for you quite yet?
In your New York life. Well, cool. Thank you so much for joining me. Is there anything else that you want to make sure that we hit on that we didn’t touch on today?
Ryan Mason: [35:20] No, I don’t think so. Other than that Sound Commerce been a great partner and you guys have been awesome and we’re excited to continue growing our data practices with you guys.
And just give you guys a little plug here at the end of the podcast. But no, I think we covered it.
Jessica Juergens: [35:33] Thank you. It’s been super fun working with all of you guys as well. I can’t wait until we can all travel again and do a little offsite visit in Napa. So, it’s just around the corner.
Awesome. Well, thank you so much, Ryan
Ryan Mason: [35:43] thank you. I really appreciate it.
Marisa Harvey: [35:45] Thanks for listening to Sound Commerce with Eric Best. If you like our show and want to know more, check out www.soundcommerce.com or call 1-888-41-SOUND