May 9, 2024 • 37 mins
Join Brandon Amoroso as he explores the dynamic world of online alcohol sales with Philip James, the visionary founder of Firstleaf, on The DRINKS.com Podcast. Delve into Philip's journey from the UK to pioneering the digital wine industry in the US, and uncover the innovative approach of Firstleaf in personalized wine recommendations. From discussing wine production intricacies to navigating the challenges of brand loyalty and the impact of the pandemic on the industry, Brandon and Philip offer invaluable insights. Discover the transformative role of technology, including Firstleaf's mobile app and the use of generative AI, in reshaping industries and adapting to evolving market dynamics. Gain a profound understanding of the intricate interplay between technology, consumer behavior, and industry evolution in this captivating episode.
Philip James
LinkedIn - https://www.linkedin.com/in/philipjames/
Sampl - https://drinksampl.com/
Region - https://drinkregion.com/
Brandon Amoroso:
LinkedIn - https://www.linkedin.com/in/brandonamoroso/
Web - https://brandonamoroso.com/
Instagram - https://www.instagram.com/bamoroso11/
X - https://twitter.com/AmorosoBrandon
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Hey everyone, thank you for listening to the
Drinkscom podcast the businessof online alcohol.
I'm your host, brandon Amoroso,and today I'm talking with the
founder and CEO of First Leaf,philip James, and First Leaf is
(00:20):
a personalized D2C wine club.
Thank you for coming on theshow, brandon.
Yeah, thank you for having me.
So, before we hop into some ofthe topics we want to cover
today, can you just giveeverybody a quick background on
yourself and Firstleaf?
Speaker 2 (00:35):
Yeah, of course.
So I grew up in the UK andmoved to the US for graduate
school and ever since graduatingwith my MBA, I've been in the
online wine industry.
Uh, so that's all the way backsince 2005.
Um and uh, you know what?
It's funny I thought kind ofthe internet was fully baked
(00:57):
back then.
You know, even Amazon was 10years old.
Ebay, amazon, like all thesebig ones, were more than a
roughly a decade old at thatpoint.
Uh, that point, but obviously,in terms of online wine, it was
like nascent.
Right back then, a winery couldonly ship to 10 states.
Um, you know, I think maybe abillion dollars of wine was sold
online.
Uh, and kind of fast forward totoday.
(01:18):
Uh, wineries can ship nearlynationwide, or effectively
nationwide 47 states now, andyou know, I think the industry
is four or five, six timesbigger than it was back then.
So I started my first companyin 2006, 2007, I think, and I've
(01:42):
started a few since then andthey've all been focused on the
same consumer problem, but withdifferent kind of back-end
solutions, if that makes sense.
And so, starting with SnuthLot18 in the middle and ending
now, obviously, where I am withFirst Leaf, and so in all cases,
it is me coming into theindustry not as a wine person at
(02:07):
first and never reallyunderstanding why it had to be
so complicated.
You know why the consumer Idon't know the consumer always
feels like misjudged.
Right, I still don't likepicking wine in a restaurant.
You know I find it hard tochoose wine in a grocery store.
There's so much choice on theshelf or on the list and so
(02:29):
little relevant information tohelp the consumer make a choice,
and so I've always tried tohelp a consumer find a wine that
matches their taste, and atfirst I tried to do that solely
through software, and thengradually that evolution up the
first leaf where we said look todo it properly, to do it
completely.
(02:50):
We think we have to make thewine handle the e-commerce and
do the sort of software basedrecommendations to help the
consumer.
Speaker 1 (03:00):
Yeah, I think one of the benefits to online is you
can curate it more specificallythan a shelf in a retail shop or
a wine list at a restaurant,and it is pretty overwhelming.
No-transcript.
(03:25):
Oh, you know, we've got a lotof this wine.
We really need to push it thisweek type of deal versus you
know, actually thinking aboutwhat sort of flavor profile
would go with you know your foodor you know what your
preferences might be.
Speaker 2 (03:38):
You know?
I mean, the question I hear aconsumer ask an expert most
commonly is do you like it Right?
What do you like, right?
So someone is in a store andand you know, unless you've, you
know, unless you're a sommelier, unless you've been trained W
set course or something likethat, you know why would you
know how a tannin is differentthan you know acids or mouthfeel
(04:02):
, or or fruitiness and sweetness?
I mean, these are words thatyou, you learn over time and we
know what the words are, right.
But you learn what that tasteis and how to discern it in the
wine, and most people don't havethat lexicon, right?
And so a consumer, uh, will sayto the sommelier you know, just
tell me one that you like,right?
But I mean, that's kind ofridiculous really, right?
(04:24):
What's the point of having allof this choice if you just, as a
consumer, have to give up,right?
And instead of knowing how toexplain what you might like and
someone giving you an actualrecommendation in person, you
just get something that somebodyelse likes.
I mean again, what's the point,right?
You might as well.
At that point, you might aswell just pick randomly Probably
(04:45):
everything on the list andprobably everything in the store
is good to somebody, right?
Somebody likes it, that's whyit's there, right?
And so you might as well justclose your eyes and pick it.
Like asking somebody else whatthey like, you might as well
just close your eyes and pick atrandom.
And so, yeah, obviously onlinemakes that easier because you
know who the person is, wherethey live, you have their
purchase history For us.
(05:05):
We ask consumers to tell us ifthey like a wine or not.
They can also get on the phoneand talk to one of our wine
concierge and actually dial intheir account and kind of have a
10, 20-minute conversation backand forth and like, oh, I
didn't realize you didn't likehighly tannic wines.
Let's make sure we remove thoseoff the top, or for whatever
(05:26):
reason.
You don't like French wine?
Hey, no problem, we'll justmake sure you never get a French
wine.
And so, you know, trying tohelp people find a wine they
like, while knowing that theydon't necessarily have the
language, you know the words todescribe their own taste, that's
hard right.
Like, try and describe afragrance to me.
Like, if you don't work in thatworld, good luck describing
(05:49):
that's musk, that's vanilla,that's something else.
That's hard right.
I mean I can't explain music.
I know what I like, but I don'tknow the words to explain it.
Speaker 1 (05:58):
Yeah, and I think you know one of the unique
advantages to online is that youcan actually dig into that,
create that one-to-onerelationship with a customer in
a way that you're not getting ina retail store or at a
restaurant.
But what are some of the waysthat you're tackling that
problem?
Specifically with FirstleafBecause you mentioned software
(06:22):
You're obviously selling throughan online sales channel.
What does that actually looklike in practice?
Speaker 2 (06:29):
So there's a few things that I think kind of sum
up to the service and the wholepersonalization that we offer.
The first one is, when aconsumer shows up and creates an
account, we ask them to takethis sort of basic onboarding
quiz, right, and that helps usunderstand how much they know
about wine, if there are certainthings they know they like or
(06:49):
don't like.
So certain styles of wine, youknow, region, grape combinations
, and then some sort of maybesimpler questions around the
kinds of foods they like, right.
So that gives us a pretty goodmatch, but it obviously's not
perfect, right.
That's just we haven't, theyhaven't tried a wine and they
haven't given us actual feedbackon the wine.
(07:10):
But but it helps, you knowtriangulate reasonably well.
Um, the second way is, overtime, as they receive wines from
us, they can rate those.
You know, simple thumbs up orthumbs down, and then that
narrows it in.
I talked about at some point.
I talked about if someone wantsto get on the phone and talk to
the wine concierge and likemanually, accelerate that and
(07:31):
dial in the account faster, theycan do that, and then that's
all the front end.
That's what the consumer sees,right.
And then behind the scenes, whatwe're doing.
We run our own lab and we usesomething called a FOSS machine,
that's an infrared spectroscopymachine.
So basically the big machinelooks like a fridge turned on
(07:53):
its side and it's what ouralgorithm and personalization
runs off of, right.
So this machine basicallyblasts an infrared light at a
test tube of the wine and tellsyou which frequencies reflect
back and which ones pass through.
Uh, so my master's thesis, uh,was in a very similar technology
(08:18):
, a chemistry master's, butactually our winemaker has our
head winemaker has a PhDactually in this infrared
spectroscopy science, in thatmachine, and so our algorithm
runs off it, our recommendationsrun off it.
That information is reallyimportant back to the winemakers
in terms of what we should buyand how a wine should be
(08:42):
finished to match a style that acertain group of consumers
would like, and so it's the coreof what goes on behind the
scenes.
And so I think what we're goodat is we ask pretty basic
questions.
So do you like sweet red wine,or do you like sweeter food, or
do you know you like oakychardonnay, yes or no?
(09:03):
And most people can answerthose questions.
But that kind of belies thecomplexity of what's going on
behind the scenes.
And so wine is complex, right,I mean wine is at least a
thousand different grapes fromat least a thousand different
regions, and often in a storethere could be a thousand or
five thousand different bottleson the shelf pretty hard to pick
(09:24):
from from that complexity.
We're doing a lot of mathbehind the scenes but trying to
present it to the consumer in areally, uh, simple and
approachable way yeah, it's.
Speaker 1 (09:35):
It's crazy to me how much choice there is, but also
how much science goes into youknow the creation of um.
You know a bottle of wine andthere's, you know definitely.
You know from, from the variouswin um, you know a bottle of
wine and there's, you knowdefinitely.
You know from.
From the various wineries thatI visited, there's some that are
super advanced when it comes touh, you know, you're basically
almost making the wine in a lab,it seems like at some
(09:58):
properties and then at othersit's very much so like you know
natural, uh, the way it.
It's very much so like you knownatural, the way it you know
used to be done for, you know,for centuries.
I don't know if there'snecessarily a you know a right
(10:23):
or wrong way, but it isfascinating to me that you can
basically engineer, you know awine to fit somebody's flavor
profile.
You know pretty specifically Um, and so I'm assuming that you
know for most of your wines,there's, you know you're, you're
going the private label routeand you're um.
You know crafting based off of.
You know the feedback thatyou're getting from, from your
customers.
Speaker 2 (10:36):
So everything we sell , we make, uh, and and so the,
the, the brands and the brandidentity, the label and the
packaging, all of that'sdesigned in-house.
And we both will buy oncontract from vineyards as well
as through brokers and kind ofthe spot market.
(10:59):
In some cases we have long-termcontracts that run multiple
years.
In some cases we have long-termcontracts that run multiple
years and we buy from wineriesyou would have heard of, but we
also buy from wineries that aresmaller, family-owned,
multi-generation, and in somecases we can say exactly who the
(11:24):
source is, and in some cases wedon't.
You know, and look, the terroir, the varietal, clone, the grape
, the farming, the harvesting,the fermenting, all of that's
really important, right.
But there's also, you know, forus, out of hundreds of
thousands of different choices,we have to pick which vineyard,
(11:44):
which grape, right, which, uh,which year.
We have to pick those things,um, and then then the, the blend
, right, sometimes a hundredpercent, but some, some of the
wines are red blend, or 50, 50,right that we'll make all these,
you know, different blends andand so, uh for sure, there's a
lot of science before we pick upthe wine, so the farming and
(12:07):
the harvesting, but then thereis also that science that occurs
after we pick it up, right, theblending, the aging, the
finishing and so on.
And so, yeah, the science isused.
The math and science and so onis useful for us at both.
Just think of how it's differentfor a traditional winery, right
, if you're a Napa winery, youbuy some Napa land, maybe, and
(12:31):
you put a building on it.
That's not how a lot of wine ismade, right?
A lot of the wine is made.
You'll visit a Napa winery andthen they might have a wine from
Monterey.
Maybe they own the wine, theland in Monterey, maybe they
don't, maybe they buy from othervineyards, and there's a lot of
vineyards out there, thegrowers out there, that don't
want to be involved in themarketing and the branding and
(12:54):
the selling of the wine.
And so the wine industry is alot more complicated behind.
I mean, you know this, ofcourse, but the industry is a
lot more complicated anddisaggregated behind the scenes
than the average consumer thinks.
Right, the consumer shows up ata winery on a weekend, tastes
the wine and sees a vineyard outback, and they assume that
everything comes from thatvineyard.
But not many wineries do that.
(13:16):
If they do that, they put theword estate on the bottle and
I'm not sure what the exactpercentage is, but I'm sure it's
less than 5%, maybe less than1% or 2% of wine is estate,
right, and you know, even big,famous brands are maybe growing
some but buying some and sort ofblending it, you know, as they
(13:38):
go to create that consistentstyle, style.
So there's a lot of uh, uh likescience that has to go in, even
before they take it to the lab,right, and, like you said, the
lab is the room next to thebarrel room, right, and some
labs have, you know, a couple ofmachines and some labs, you
(14:00):
know, actually look like a reallaboratory.
Uh, and every winery kind ofpicks where they go on that
spectrum.
But it is ultimately anincredibly complex product with
hundreds of different chemicalsin it, molecules in it.
Those are all natural, right,they're from the grape, they're
from the yeast and thefermentation and they're from
(14:21):
the barrel and kind of nothingelse, but it's still a product
with hundreds and hundreds ofdifferent molecules in it.
And so the science of taste issuper complicated, right, just
like, again, fragrance or musicor something like that.
Uh, but it's crazy howsomething with so few
ingredients I mean less thanfive right Um can create a
(14:42):
product with so much variabilityand and subtlety and nuance.
Speaker 1 (14:47):
Yeah, and it's crazy how much the label and the
packaging and you know all thatgoes into.
You know consumer choice whenit, you know when they're
deciding what they're going topurchase, but also their
perception or idea of you knowwhat it's going to taste like.
Like, if I'm in a store and Isee you know like an old school
(15:09):
Bordeaux style label and bottle,and if you pick it up and it's
like heavier, maybe it has likea larger punt as well, I think,
oh, you know this is going to be, you know, expensive.
You know more classic, tangible, dry.
You know more classic,traditional drive.
If I see you know one of thoselike nouveau.
You know crazy labels, maybeit's like AR, uh, you know, uh,
(15:31):
enabled as well.
Um, a cork, uh, not a cork, a atwist, a twist off versus a,
versus a cork.
You know my mind immediatelygoes to you know cheaper, maybe
more approachable, like fun andfruity or something like that.
And that initial perceptionfeed so much into what the taste
(15:55):
actually ends up being.
Because your mind is sopowerful and like creating, you
know what that flavor profilemight be like.
If you tell somebody, oh, it'sgoing to taste like this,
they're probably going to taste.
Speaker 2 (16:05):
You know, whatever you just told them, it's going
to taste like the and whatyou're describing is still 750
ml round glass bottles, right,and I know there's cans and
boxes and tetra pack and otherstuff.
But you know how long beforethe ttb allows wineries to make
(16:26):
wine outside of 750.
I don't mean 500 or 1.5 or 1liter, but you know, every now
and then they consider makingallowing any size.
So instead of 750 you couldhave 700 or 720 or 730.
And you know how long beforewine ends up like fragrance or
(16:47):
bottled water where, when youlook at the shelf, there's like
all kinds of stuff.
Right, you can get bottledwater in plastic but you can
also get it in glass and youknow slightly different sizes
and squeezable or fancy vos thatyou might put on a table like a
decanter.
Almost.
Fragrance right, everyfragrance basically has a
different glass mold and so youknow, I think there will be more
(17:10):
and more like.
But for retail particularlyright, this isn't as relevant
for us because we're sellingfirst leaf as a service first of
all, and then the bottles thatcome in the box of what we
provide as the service.
You sign up for Spotify becauseyou want music on demand, right
, you don't really look throughtheir catalog and decide who has
the richer catalog before youpick a music service.
(17:32):
So we have to sell first leafRight.
But for wineries that sell onthe shelf, I mean, you know,
when there's a thousand thingsand you all have similar
packaging, like you said, youhave to differentiate on the
label and the brand.
But I think over time there'sgoing to be more and more people
really pushing to differentiateon the bottle, the packaging,
you know, outside of the labelitself, uh, and fragrance and
(17:55):
water I think of of I mean waterparticularly right, where it's
all the same.
I know there's minerality, butother than that it's basically
all the exact same.
And people have a preferredwater brand, right, they have a
preferred vodka brand.
They certainly have a preferredfragrance.
And you know, I think winehistorically hasn't had great
(18:18):
brand identity.
Wine does, but not theindividual brands.
When you think how people shop,a lot of people say you know, I
like Cabernet Sauvignon andI'll pay $20.
Or I love New Zealand SauvignonBlanc.
Most people are not shopping bybrand.
They're saying they want aregion and a grape right or a
price range and a grape.
(18:38):
But you don't really say thatwith vodka right.
You go in and you say I wantSmirnoff or Absolute.
You don't say I'm looking for a$20 vodka.
So people have brand identity orbrand loyalty in many other
categories, and it exists inwine.
Maybe somebody walks in andthey're a yellowtail drinker or
(18:59):
barefoot wine drinker, butusually no, and most people are
absolutely open to, like, thepower of substitution suggestion
, right, oh, you love cloudy bay.
We don't have that, but here'sa different new zealand
sauvignon blanc and it's similarand you'll love it.
Uh, it's hard to do that invodka, right, you either want
(19:20):
absolute vodka or nothing.
I think, um, you know, here's adifferent vodka, but like no,
you're brand loyal.
And so I think one of wine'schallenges with its so many
products out there, uh, theaverage winery brand is small,
right, lower budget, it's hardto build loyalty at the brand
level, anyway.
(19:41):
But like I said, firstleaf hasa different challenge and
opportunity.
We're trying to get people tobelieve in Firstleaf.
You know the service, which iswe'll pick the wine, we'll also
get it to your door, and youknow all the other stuff that
goes into the service than justyou know just the bottles and
the wine itself.
Speaker 1 (20:00):
What are you know, what are some of the things that
you're excited about um forthis year?
Uh, that you know.
You think you're uniquelypositioned to capitalize on
because you are selling, youknow, online and direct to
consumer.
You know something that youknow a lot of producers aren't
necessarily privy to or able totake advantage of.
Speaker 2 (20:23):
You know I think this .
To me, this is the.
This marks the end of thepandemic and, and you know
there's a bit of an arbitraryline deciding when the end of
the pandemic really is.
But you know, 20, I started thecompany in 20, we launched in
2016.
(20:44):
And in hindsight, those firstfew years were were more
predictable.
Time didn't feel so at the time, but then 2020 came and I
realized I missed, you know,2016 to 2019.
And maybe the pandemic itselfwas over sooner, but the effects
(21:04):
from the pandemic were notright.
So the supply chain challengesin 2021 and 2022 were crazy,
right.
Interest rates are high.
You know, a lot of wineries, Ithink, ended up with sort of too
much stock.
Or you know, for us, we importa lot of wine and containers.
Or you know, for us, we importa lot of wine and and containers
.
Shipping a container of wineused to cost like three thousand
dollars, but briefly, it wasnearly twenty thousand dollars,
and so kind of working throughthat is pretty much done now,
(21:29):
and so for me, this is our firstlike clean and hopefully
predictable year since 2020.
And so it's nice to be able tofocus back on like the basics
basically right.
So focusing on the consumer andthe value proposition and the
actual business and not reactingto these external events that
(21:49):
you know I felt like you know,we're a small boat in a giant
ocean being whipped around bythings that were happening to us
, so we're spending a lot oftime this year focusing on the
breadth of the portfolio.
You know there's a lot ofreally good wine out there right
now.
We are putting a lot of energyinto our mobile app.
We launched that last year andthat's good both for Firstleaf
(22:14):
members.
So manage your account, yournext delivery, next delivery
rate, a wine, pull up theinformation, uh.
But we're also building outthis library of third-party
wines that you can, uh, you canscan somebody else's wine, right
, like a, like a liquor store orgrocery store, and you can pick
up a bottle and scan thebarcode and we'll tell you,
based on our personalization, ifwe think it's a good match for
(22:36):
you.
You know, and I really like thatbecause to believe and then try
first leaf today, you have tobelieve two things are true,
right, you have to believe ourrecommendations will work for
you and you have to believe thatthe wine we have is good.
And you have to believe thosethings at the same time.
(22:57):
Right, then you sign up andcreate an account.
But if you download the mobileapp, you can play with and try
the recommendations in someother setting.
You can try it on your wine athome, you can try it at a
friend's barbecue, you can tryit in a grocery store and I
think, if the recommendationsare good, we've helped you,
we've created something that canhelp you even without you
(23:21):
putting your credit card downand paying for the service.
So I love the idea that we cantake our technology and kind of
open it up and push it out topeople who I think over time
will want to try first-leafwines, but separating the two
pieces so you can play with therecommendations first and then
decide later if you want to tryour wine yeah, no, that's
(23:43):
exciting.
Speaker 1 (23:44):
um, I think the the the 2021 to 2023, like covid
period, was uh crazy forindustries.
You, you know, beyond just wine, I mean pretty much any
industry had crazy supply chainwoes.
There was a lot of overbuying,then underbuying.
(24:04):
Then, you know, on pretty muchno ability, at least from like
the marketing standpoint, to doyear over year comparables or
even month over month, becauseyou know it's just completely
different, like dynamic thatyou're operating within and so,
like you know, looking's justcompletely different, like
dynamic that you're operatingwithin and so, like you know,
looking at even performance forthis year of, like the marketing
(24:24):
agency.
For, you know, for some of ourclients, it's very challenging
to have a real baseline.
I feel like this is the yearthat you'll be able to set that
baseline again and then be ableto, you know, move forward and
improve, versus trying tocompare it to a year where, you
know, people were quiteliterally forced to shop online.
Speaker 2 (24:48):
And not just so.
You're right.
I mean, the comparisons arecrazy, but it's not just the
people were forced to shoponline, it's that they bought
different things.
I mean, I have a giant piece ofexercise equipment at home, but
now I can go back to the gym,right.
So in 2020, I bought a homerowing machine.
I don't know if I would havebought that today.
Certainly everybody boughtcooking equipment, and lots of
(25:11):
people bought you know-homedesks or office furniture, or
people purchase new couches.
Everybody was at home all thetime, right, and now the balance
of how people spend their moneyshifts, right, people are back
out traveling, doing other stuffand so, yeah, I mean, a lot of
wine companies had too muchinventory but, like you said, a
(25:32):
lot of other companies end upwith a bit of the wrong
inventory.
Right now is now is not thebest time to sell someone a
couch or a desk, and maybe it'sa better time to sell someone I
don't know luggage or somethingdifferent, right?
And so you know, there's been alot of um, uh, uh like
derivative effects from thepandemic, and I think most
(25:56):
consumers think the pandemicended, I don't know, two years
ago, right?
Vaccines, lockdowns, like thatstuff is all in the past.
Now COVID is still around,right, but its effects are less
than it used to be.
But I think for a lot ofcompanies the effects are still
present, right On the inventoryand supply chain and so on.
(26:16):
And so, yeah, I, I think so farit's only february, right, but
so far it's like a clean year,um, but you're, it's weird.
What's the comparison I mean forus?
I do try to compare topre-pandemic, although it's
ridiculous.
I have investors and they don'tlove it when I tell them let's
do a comparison to four yearsago.
But we are more than twice thesize that we were in 2019.
(26:39):
We've been profitable since2020, every year.
You know we're debt free and soin that arc of lockdowns and
(26:59):
supply chain, you know there'sebb and flow and up and down,
but, point to point, prepandemic to post pandemic you
know we're definitely a bigger,you know, um, more sound, you
know a better company, um, butthat's a longer comparison than
most investors love to hearabout, right?
They want to hear how thisquarter is versus last quarter,
not how we are today versus 2019.
Speaker 1 (27:17):
Yeah, yeah, I think you know it's more resilient.
Businesses, though, have comeout of COVID.
If you were able to survive,you know, that period, which a
lot of businesses were not ableto, you know you definitely have
some battle scars from it, butif you were able to handle, you
know, every day was a new sortof dynamic, with which you're
(27:39):
working within Now is like abreath of fresh air, even though
, like for e-com, at least for alot of our clients.
You know total sales are lowerthan what they were in like 2022
.
They might be coming indifferent channels, but your
Shopify sales aren't necessarilyas high as they were when
everybody was quite literallyforced to shop online, but it's
(28:01):
less like helter skelter andeverything is more streamlined
and you're able to focus on howto actually grow the business
versus how to just keep it alive, given all the changing
conditions.
Speaker 2 (28:14):
Yeah, and look, it's an unfair comparison to say how
are sales wherever not for usbut for anyone today versus when
lockdowns, like you said, werecompulsory basically.
So that's a bit of a weirdcomparison, right, but I like
that the metrics in generalstart to feel normal again.
(28:36):
The channels we're in, theprice, the CPA, the prices, the
consumer behavior it's allstarting to look a bit more
predictable.
And yeah, there were, you know,there were crazy effects during
the last few years, but themargin structure, the cost
structure, like things, start tolook normal.
(28:56):
They remind me of how they werein 2019.
You know, but I think theripples from the pandemic will
go on at least to the end ofthis decade.
Think of how many people workfrom home now versus before.
Think of how the default for abusiness meeting is like a Zoom
call, whereas the default usedto be I get on a plane and fly
(29:16):
to the vendor, and so I thinkit's something like 20 to 25
percent of people work from hometo some degree now, but
pre-pandemic that was threepercent, right, and so I'm sure
the impact on San Francisco isalways in the news.
Maybe New York City commercialreal estate, you know, I think a
(29:40):
lot of.
There's still a lot ofdisruption, right?
All the people that moved outof those kinds of cities and
moved into whether it's Texas orFlorida or other states.
I mean there's a big change.
I don't think everybody's fullyunderstood, right?
So more people at home meansmore people can get home
delivery, but that's alsoterrible for I don't know public
transport or what happened tolike the salad bar in Manhattan
(30:00):
or or the dry cleaning place inin Manhattan.
I don't dress up as often as Iused to.
You know, I used to have to puton a shirt and go to see
clients a lot, and I don't dothat very much anymore.
Speaker 1 (30:14):
Yeah, it was just like massive shifts.
I feel like that.
You know, maybe 50 years agothings would happen in you know,
longer periods of time, whereasif you look at just the last
four years alone, um, there'sbeen dramatic shifts in, you
know, weeks, not you know months, not even years.
And so, as a, as a business, youhave to be able to, you know,
(30:37):
adjust very rapidly and bepretty dynamic and, and you know
, the world is becoming moreinterconnected and global and
people aren't, as you know,stuck within wherever they
currently are, in the sense of,you know, a lot of businesses
had the opportunity during COVIDto ask you know, why is our
footprint in this particulararea?
(30:58):
Why couldn't it be, you know,elsewhere or why couldn't it be
in multiple different places?
And then, even looking at thedynamic between the employee and
the employer, that's shiftedlike four times in the past
three years, where, you know,the employees had a ton of power
, then it went back to theemployer, then it was the
employees and it's the employeragain, with, you know, layoffs
(31:18):
and not having layoffs.
It's, you know, it's definitelynot an industry for people who
don't like to be nimble or ontheir toes.
Speaker 2 (31:29):
You know, but I mean how many industries are going to
be left that aren't affected bytechnology?
I mean there's less and lessand less, and even farming Right
, which are, like that's goingto be the last to get affected
by technology.
I mean the stuff that existsout there, right, optical
sorters for grapes Unbelievable.
I mean there's so much fasterthan a human can do it and they
(31:50):
can spot the bad grape and, like, puff it out the way with a 3D
blast of air.
And people used to say that youknow they wouldn't use
mechanical harvesting.
So the machines like the talltractors, basically, that can
roll down the vines and you know, unless it's hillside, a lot of
people will use those now andlook, and some technology is
(32:13):
good.
A lot of people will use thosenow and look, and some
technology is good.
I think it was something like10% of wine was corked back in
the day, right, but now the waythat cork is, I don't know,
washed, right, the actual cork,the way it's cleaned, I guess
they don't really have that.
Whatever TCA is, I'm not sureif it's a bacteria, I think it
(32:35):
is, um, so that TCA bacteriadoesn't really really exist.
I mean it exists but it's notlike I don't know.
It's instead of one in 10 corks, it's one in a million corks or
something, I'm not sure theactual data.
But like, hey, some technologyis good, right, and and and
reaches into even you know thesort of slowest industries to
adopt it.
(32:56):
I'm really I mean, for a yearnow I've really been pushing my
team on generative AI, which isso useful.
You know, kind of up and downthe entire stack, right, we use
it on the actual website.
So when a consumer logs in,there's a thing we create called
wine print, which is sort oflike your personalized analytics
(33:17):
.
Generative AI writes the copyon that page and they do it in a
because we need it to bebasically unique, right, we
can't write all the versions byhand.
So generative AI takes the datainput and spits back out the
sentences that we show theconsumer.
So, hey, I like wines that aremedium acid, high tannin, you
(33:37):
know, lower alcohol and you canshow a sommelier and be like
show, you know, get me this.
Right, we talked about thechallenge people have in a
grocery store.
That's what we're trying tohelp solve, you know, with with
wine print.
But we use it behind the scenes.
We use it for image generation,copy generation.
We use it to analyze consumerfeedback, right, so we get too
(34:01):
many emails.
Or, if we send out a survey, weget too many responses to like,
we read them all but you can'treally get the sentiment of them
.
It's a bit like like a wordcloud or a tag cloud, right?
You need to understand, like,what the feedback is, and
generative AI can read it andspit you out a summary, right?
So people have issues aroundshipping or people have issues
(34:23):
around whatever else price orwhatever else.
The thing is you can get thesummary from that data so much
better and faster than the ideaof having someone read know,
someone read 5,000 responses andtry to count how many mentioned
the word shipping.
Speaker 1 (34:38):
That's kind of like what Google is doing with its
generative search and you know,if you Google something now, you
can get that blurb at the top.
That basically just takes youknow the hundreds of thousands
of results that Google has andthen gives you a nice little you
nice little description withoutyou having to click into 10
different articles, which is abig disruptor when it comes to
(34:59):
SEO.
But for the customer or for thesearcher it's a significantly
better experience.
Speaker 2 (35:05):
Yeah, look, and I know of course, people worry
that tech takes their job.
But I think, generally usinggenerative like, you need
someone to use the generative AIand make sure it makes sense,
right, because if you just letit spit it back out, you know
you get the images where someonehas five arms and seven fingers
, right, so you still get junkcome comes back out of it.
(35:26):
Uh, so you know, I'm reallypushing my team to be the user
of it rather than have itreplace their job, right, like,
if you don't embrace it, it willreplace your job.
But if you embrace it, there'salways going to need to be
people who train it or work withit or or edit it or oversee it.
(35:47):
And so, you know, I like thedescription that it's like.
Generative AI is like havinginfinite high school interns.
Those high school interns needa lot of oversight because you
can't just let them run thecompany, right, and so, yeah,
maybe one day it becomesinfinite college grads and you
know I should worry, but at themoment it still absolutely needs
(36:10):
a human layer on top tointerpret it or prompt it.
But you know it's out there andyou either have to use these
things or let them pass you by.
Speaker 1 (36:21):
And it makes me far more efficient and productive,
and you know, I look at it as aI'm able to do more now than
less, and I think you knowthat's the way that people need
to approach it.
But this is a super insightfulconversation.
I really appreciate you comingon, is there, you know?
Before we hop, though, wherecan people you know who are
(36:43):
listening find you, connect withyou online?
Speaker 2 (36:48):
Well, Firstleaf is easy to find.
That's just firstleafcom andI'm Philip James.
Easiest way is to find that'sjust firstleafcom and I'm Philip
James.
Easiest way is to find me onLinkedIn and connect.
But yeah, Brandon, thank youvery much for having me here.
Speaker 1 (37:01):
Yeah, of course.
Thank you.
Well, for everyone elselistening, as always, this is
Brandon Moroso.
You can find us at drinkscom.
Thanks for listening and we'llsee you next time.
Hey everyone, thank you for listening to the
Drinkscom podcast the businessof online alcohol.
I'm your host, brandon Amoroso,and today I'm talking with the
founder and CEO of First Leaf,philip James, and First Leaf is
(00:20):
a personalized D2C wine club.
Thank you for coming on theshow, brandon.
Yeah, thank you for having me.
So, before we hop into some ofthe topics we want to cover
today, can you just giveeverybody a quick background on
yourself and Firstleaf?
Speaker 2 (00:35):
Yeah, of course.
So I grew up in the UK andmoved to the US for graduate
school and ever since graduatingwith my MBA, I've been in the
online wine industry.
Uh, so that's all the way backsince 2005.
Um and uh, you know what?
It's funny I thought kind ofthe internet was fully baked
(00:57):
back then.
You know, even Amazon was 10years old.
Ebay, amazon, like all thesebig ones, were more than a
roughly a decade old at thatpoint.
Uh, that point, but obviously,in terms of online wine, it was
like nascent.
Right back then, a winery couldonly ship to 10 states.
Um, you know, I think maybe abillion dollars of wine was sold
online.
Uh, and kind of fast forward totoday.
(01:18):
Uh, wineries can ship nearlynationwide, or effectively
nationwide 47 states now, andyou know, I think the industry
is four or five, six timesbigger than it was back then.
So I started my first companyin 2006, 2007, I think, and I've
(01:42):
started a few since then andthey've all been focused on the
same consumer problem, but withdifferent kind of back-end
solutions, if that makes sense.
And so, starting with SnuthLot18 in the middle and ending
now, obviously, where I am withFirst Leaf, and so in all cases,
it is me coming into theindustry not as a wine person at
(02:07):
first and never reallyunderstanding why it had to be
so complicated.
You know why the consumer Idon't know the consumer always
feels like misjudged.
Right, I still don't likepicking wine in a restaurant.
You know I find it hard tochoose wine in a grocery store.
There's so much choice on theshelf or on the list and so
(02:29):
little relevant information tohelp the consumer make a choice,
and so I've always tried tohelp a consumer find a wine that
matches their taste, and atfirst I tried to do that solely
through software, and thengradually that evolution up the
first leaf where we said look todo it properly, to do it
completely.
(02:50):
We think we have to make thewine handle the e-commerce and
do the sort of software basedrecommendations to help the
consumer.
Speaker 1 (03:00):
Yeah, I think one of the benefits to online is you
can curate it more specificallythan a shelf in a retail shop or
a wine list at a restaurant,and it is pretty overwhelming.
No-transcript.
(03:25):
Oh, you know, we've got a lotof this wine.
We really need to push it thisweek type of deal versus you
know, actually thinking aboutwhat sort of flavor profile
would go with you know your foodor you know what your
preferences might be.
Speaker 2 (03:38):
You know?
I mean, the question I hear aconsumer ask an expert most
commonly is do you like it Right?
What do you like, right?
So someone is in a store andand you know, unless you've, you
know, unless you're a sommelier, unless you've been trained W
set course or something likethat, you know why would you
know how a tannin is differentthan you know acids or mouthfeel
(04:02):
, or or fruitiness and sweetness?
I mean, these are words thatyou, you learn over time and we
know what the words are, right.
But you learn what that tasteis and how to discern it in the
wine, and most people don't havethat lexicon, right?
And so a consumer, uh, will sayto the sommelier you know, just
tell me one that you like,right?
But I mean, that's kind ofridiculous really, right?
(04:24):
What's the point of having allof this choice if you just, as a
consumer, have to give up,right?
And instead of knowing how toexplain what you might like and
someone giving you an actualrecommendation in person, you
just get something that somebodyelse likes.
I mean again, what's the point,right?
You might as well.
At that point, you might aswell just pick randomly Probably
(04:45):
everything on the list andprobably everything in the store
is good to somebody, right?
Somebody likes it, that's whyit's there, right?
And so you might as well justclose your eyes and pick it.
Like asking somebody else whatthey like, you might as well
just close your eyes and pick atrandom.
And so, yeah, obviously onlinemakes that easier because you
know who the person is, wherethey live, you have their
purchase history For us.
(05:05):
We ask consumers to tell us ifthey like a wine or not.
They can also get on the phoneand talk to one of our wine
concierge and actually dial intheir account and kind of have a
10, 20-minute conversation backand forth and like, oh, I
didn't realize you didn't likehighly tannic wines.
Let's make sure we remove thoseoff the top, or for whatever
(05:26):
reason.
You don't like French wine?
Hey, no problem, we'll justmake sure you never get a French
wine.
And so, you know, trying tohelp people find a wine they
like, while knowing that theydon't necessarily have the
language, you know the words todescribe their own taste, that's
hard right.
Like, try and describe afragrance to me.
Like, if you don't work in thatworld, good luck describing
(05:49):
that's musk, that's vanilla,that's something else.
That's hard right.
I mean I can't explain music.
I know what I like, but I don'tknow the words to explain it.
Speaker 1 (05:58):
Yeah, and I think you know one of the unique
advantages to online is that youcan actually dig into that,
create that one-to-onerelationship with a customer in
a way that you're not getting ina retail store or at a
restaurant.
But what are some of the waysthat you're tackling that
problem?
Specifically with FirstleafBecause you mentioned software
(06:22):
You're obviously selling throughan online sales channel.
What does that actually looklike in practice?
Speaker 2 (06:29):
So there's a few things that I think kind of sum
up to the service and the wholepersonalization that we offer.
The first one is, when aconsumer shows up and creates an
account, we ask them to takethis sort of basic onboarding
quiz, right, and that helps usunderstand how much they know
about wine, if there are certainthings they know they like or
(06:49):
don't like.
So certain styles of wine, youknow, region, grape combinations
, and then some sort of maybesimpler questions around the
kinds of foods they like, right.
So that gives us a pretty goodmatch, but it obviously's not
perfect, right.
That's just we haven't, theyhaven't tried a wine and they
haven't given us actual feedbackon the wine.
(07:10):
But but it helps, you knowtriangulate reasonably well.
Um, the second way is, overtime, as they receive wines from
us, they can rate those.
You know, simple thumbs up orthumbs down, and then that
narrows it in.
I talked about at some point.
I talked about if someone wantsto get on the phone and talk to
the wine concierge and likemanually, accelerate that and
(07:31):
dial in the account faster, theycan do that, and then that's
all the front end.
That's what the consumer sees,right.
And then behind the scenes, whatwe're doing.
We run our own lab and we usesomething called a FOSS machine,
that's an infrared spectroscopymachine.
So basically the big machinelooks like a fridge turned on
(07:53):
its side and it's what ouralgorithm and personalization
runs off of, right.
So this machine basicallyblasts an infrared light at a
test tube of the wine and tellsyou which frequencies reflect
back and which ones pass through.
Uh, so my master's thesis, uh,was in a very similar technology
(08:18):
, a chemistry master's, butactually our winemaker has our
head winemaker has a PhDactually in this infrared
spectroscopy science, in thatmachine, and so our algorithm
runs off it, our recommendationsrun off it.
That information is reallyimportant back to the winemakers
in terms of what we should buyand how a wine should be
(08:42):
finished to match a style that acertain group of consumers
would like, and so it's the coreof what goes on behind the
scenes.
And so I think what we're goodat is we ask pretty basic
questions.
So do you like sweet red wine,or do you like sweeter food, or
do you know you like oakychardonnay, yes or no?
(09:03):
And most people can answerthose questions.
But that kind of belies thecomplexity of what's going on
behind the scenes.
And so wine is complex, right,I mean wine is at least a
thousand different grapes fromat least a thousand different
regions, and often in a storethere could be a thousand or
five thousand different bottleson the shelf pretty hard to pick
(09:24):
from from that complexity.
We're doing a lot of mathbehind the scenes but trying to
present it to the consumer in areally, uh, simple and
approachable way yeah, it's.
Speaker 1 (09:35):
It's crazy to me how much choice there is, but also
how much science goes into youknow the creation of um.
You know a bottle of wine andthere's, you know definitely.
You know from, from the variouswin um, you know a bottle of
wine and there's, you knowdefinitely.
You know from.
From the various wineries thatI visited, there's some that are
super advanced when it comes touh, you know, you're basically
almost making the wine in a lab,it seems like at some
(09:58):
properties and then at othersit's very much so like you know
natural, uh, the way it.
It's very much so like you knownatural, the way it you know
used to be done for, you know,for centuries.
I don't know if there'snecessarily a you know a right
(10:23):
or wrong way, but it isfascinating to me that you can
basically engineer, you know awine to fit somebody's flavor
profile.
You know pretty specifically Um, and so I'm assuming that you
know for most of your wines,there's, you know you're, you're
going the private label routeand you're um.
You know crafting based off of.
You know the feedback thatyou're getting from, from your
customers.
Speaker 2 (10:36):
So everything we sell , we make, uh, and and so the,
the, the brands and the brandidentity, the label and the
packaging, all of that'sdesigned in-house.
And we both will buy oncontract from vineyards as well
as through brokers and kind ofthe spot market.
(10:59):
In some cases we have long-termcontracts that run multiple
years.
In some cases we have long-termcontracts that run multiple
years and we buy from wineriesyou would have heard of, but we
also buy from wineries that aresmaller, family-owned,
multi-generation, and in somecases we can say exactly who the
(11:24):
source is, and in some cases wedon't.
You know, and look, the terroir, the varietal, clone, the grape
, the farming, the harvesting,the fermenting, all of that's
really important, right.
But there's also, you know, forus, out of hundreds of
thousands of different choices,we have to pick which vineyard,
(11:44):
which grape, right, which, uh,which year.
We have to pick those things,um, and then then the, the blend
, right, sometimes a hundredpercent, but some, some of the
wines are red blend, or 50, 50,right that we'll make all these,
you know, different blends andand so, uh for sure, there's a
lot of science before we pick upthe wine, so the farming and
(12:07):
the harvesting, but then thereis also that science that occurs
after we pick it up, right, theblending, the aging, the
finishing and so on.
And so, yeah, the science isused.
The math and science and so onis useful for us at both.
Just think of how it's differentfor a traditional winery, right
, if you're a Napa winery, youbuy some Napa land, maybe, and
(12:31):
you put a building on it.
That's not how a lot of wine ismade, right?
A lot of the wine is made.
You'll visit a Napa winery andthen they might have a wine from
Monterey.
Maybe they own the wine, theland in Monterey, maybe they
don't, maybe they buy from othervineyards, and there's a lot of
vineyards out there, thegrowers out there, that don't
want to be involved in themarketing and the branding and
(12:54):
the selling of the wine.
And so the wine industry is alot more complicated behind.
I mean, you know this, ofcourse, but the industry is a
lot more complicated anddisaggregated behind the scenes
than the average consumer thinks.
Right, the consumer shows up ata winery on a weekend, tastes
the wine and sees a vineyard outback, and they assume that
everything comes from thatvineyard.
But not many wineries do that.
(13:16):
If they do that, they put theword estate on the bottle and
I'm not sure what the exactpercentage is, but I'm sure it's
less than 5%, maybe less than1% or 2% of wine is estate,
right, and you know, even big,famous brands are maybe growing
some but buying some and sort ofblending it, you know, as they
(13:38):
go to create that consistentstyle, style.
So there's a lot of uh, uh likescience that has to go in, even
before they take it to the lab,right, and, like you said, the
lab is the room next to thebarrel room, right, and some
labs have, you know, a couple ofmachines and some labs, you
(14:00):
know, actually look like a reallaboratory.
Uh, and every winery kind ofpicks where they go on that
spectrum.
But it is ultimately anincredibly complex product with
hundreds of different chemicalsin it, molecules in it.
Those are all natural, right,they're from the grape, they're
from the yeast and thefermentation and they're from
(14:21):
the barrel and kind of nothingelse, but it's still a product
with hundreds and hundreds ofdifferent molecules in it.
And so the science of taste issuper complicated, right, just
like, again, fragrance or musicor something like that.
Uh, but it's crazy howsomething with so few
ingredients I mean less thanfive right Um can create a
(14:42):
product with so much variabilityand and subtlety and nuance.
Speaker 1 (14:47):
Yeah, and it's crazy how much the label and the
packaging and you know all thatgoes into.
You know consumer choice whenit, you know when they're
deciding what they're going topurchase, but also their
perception or idea of you knowwhat it's going to taste like.
Like, if I'm in a store and Isee you know like an old school
(15:09):
Bordeaux style label and bottle,and if you pick it up and it's
like heavier, maybe it has likea larger punt as well, I think,
oh, you know this is going to be, you know, expensive.
You know more classic, tangible, dry.
You know more classic,traditional drive.
If I see you know one of thoselike nouveau.
You know crazy labels, maybeit's like AR, uh, you know, uh,
(15:31):
enabled as well.
Um, a cork, uh, not a cork, a atwist, a twist off versus a,
versus a cork.
You know my mind immediatelygoes to you know cheaper, maybe
more approachable, like fun andfruity or something like that.
And that initial perceptionfeed so much into what the taste
(15:55):
actually ends up being.
Because your mind is sopowerful and like creating, you
know what that flavor profilemight be like.
If you tell somebody, oh, it'sgoing to taste like this,
they're probably going to taste.
Speaker 2 (16:05):
You know, whatever you just told them, it's going
to taste like the and whatyou're describing is still 750
ml round glass bottles, right,and I know there's cans and
boxes and tetra pack and otherstuff.
But you know how long beforethe ttb allows wineries to make
(16:26):
wine outside of 750.
I don't mean 500 or 1.5 or 1liter, but you know, every now
and then they consider makingallowing any size.
So instead of 750 you couldhave 700 or 720 or 730.
And you know how long beforewine ends up like fragrance or
(16:47):
bottled water where, when youlook at the shelf, there's like
all kinds of stuff.
Right, you can get bottledwater in plastic but you can
also get it in glass and youknow slightly different sizes
and squeezable or fancy vos thatyou might put on a table like a
decanter.
Almost.
Fragrance right, everyfragrance basically has a
different glass mold and so youknow, I think there will be more
(17:10):
and more like.
But for retail particularlyright, this isn't as relevant
for us because we're sellingfirst leaf as a service first of
all, and then the bottles thatcome in the box of what we
provide as the service.
You sign up for Spotify becauseyou want music on demand, right
, you don't really look throughtheir catalog and decide who has
the richer catalog before youpick a music service.
(17:32):
So we have to sell first leafRight.
But for wineries that sell onthe shelf, I mean, you know,
when there's a thousand thingsand you all have similar
packaging, like you said, youhave to differentiate on the
label and the brand.
But I think over time there'sgoing to be more and more people
really pushing to differentiateon the bottle, the packaging,
you know, outside of the labelitself, uh, and fragrance and
(17:55):
water I think of of I mean waterparticularly right, where it's
all the same.
I know there's minerality, butother than that it's basically
all the exact same.
And people have a preferredwater brand, right, they have a
preferred vodka brand.
They certainly have a preferredfragrance.
And you know, I think winehistorically hasn't had great
(18:18):
brand identity.
Wine does, but not theindividual brands.
When you think how people shop,a lot of people say you know, I
like Cabernet Sauvignon andI'll pay $20.
Or I love New Zealand SauvignonBlanc.
Most people are not shopping bybrand.
They're saying they want aregion and a grape right or a
price range and a grape.
(18:38):
But you don't really say thatwith vodka right.
You go in and you say I wantSmirnoff or Absolute.
You don't say I'm looking for a$20 vodka.
So people have brand identity orbrand loyalty in many other
categories, and it exists inwine.
Maybe somebody walks in andthey're a yellowtail drinker or
(18:59):
barefoot wine drinker, butusually no, and most people are
absolutely open to, like, thepower of substitution suggestion
, right, oh, you love cloudy bay.
We don't have that, but here'sa different new zealand
sauvignon blanc and it's similarand you'll love it.
Uh, it's hard to do that invodka, right, you either want
(19:20):
absolute vodka or nothing.
I think, um, you know, here's adifferent vodka, but like no,
you're brand loyal.
And so I think one of wine'schallenges with its so many
products out there, uh, theaverage winery brand is small,
right, lower budget, it's hardto build loyalty at the brand
level, anyway.
(19:41):
But like I said, firstleaf hasa different challenge and
opportunity.
We're trying to get people tobelieve in Firstleaf.
You know the service, which iswe'll pick the wine, we'll also
get it to your door, and youknow all the other stuff that
goes into the service than justyou know just the bottles and
the wine itself.
Speaker 1 (20:00):
What are you know, what are some of the things that
you're excited about um forthis year?
Uh, that you know.
You think you're uniquelypositioned to capitalize on
because you are selling, youknow, online and direct to
consumer.
You know something that youknow a lot of producers aren't
necessarily privy to or able totake advantage of.
Speaker 2 (20:23):
You know I think this .
To me, this is the.
This marks the end of thepandemic and, and you know
there's a bit of an arbitraryline deciding when the end of
the pandemic really is.
But you know, 20, I started thecompany in 20, we launched in
2016.
(20:44):
And in hindsight, those firstfew years were were more
predictable.
Time didn't feel so at the time, but then 2020 came and I
realized I missed, you know,2016 to 2019.
And maybe the pandemic itselfwas over sooner, but the effects
(21:04):
from the pandemic were notright.
So the supply chain challengesin 2021 and 2022 were crazy,
right.
Interest rates are high.
You know, a lot of wineries, Ithink, ended up with sort of too
much stock.
Or you know, for us, we importa lot of wine and containers.
Or you know, for us, we importa lot of wine and and containers
.
Shipping a container of wineused to cost like three thousand
dollars, but briefly, it wasnearly twenty thousand dollars,
and so kind of working throughthat is pretty much done now,
(21:29):
and so for me, this is our firstlike clean and hopefully
predictable year since 2020.
And so it's nice to be able tofocus back on like the basics
basically right.
So focusing on the consumer andthe value proposition and the
actual business and not reactingto these external events that
(21:49):
you know I felt like you know,we're a small boat in a giant
ocean being whipped around bythings that were happening to us
, so we're spending a lot oftime this year focusing on the
breadth of the portfolio.
You know there's a lot ofreally good wine out there right
now.
We are putting a lot of energyinto our mobile app.
We launched that last year andthat's good both for Firstleaf
(22:14):
members.
So manage your account, yournext delivery, next delivery
rate, a wine, pull up theinformation, uh.
But we're also building outthis library of third-party
wines that you can, uh, you canscan somebody else's wine, right
, like a, like a liquor store orgrocery store, and you can pick
up a bottle and scan thebarcode and we'll tell you,
based on our personalization, ifwe think it's a good match for
(22:36):
you.
You know, and I really like thatbecause to believe and then try
first leaf today, you have tobelieve two things are true,
right, you have to believe ourrecommendations will work for
you and you have to believe thatthe wine we have is good.
And you have to believe thosethings at the same time.
(22:57):
Right, then you sign up andcreate an account.
But if you download the mobileapp, you can play with and try
the recommendations in someother setting.
You can try it on your wine athome, you can try it at a
friend's barbecue, you can tryit in a grocery store and I
think, if the recommendationsare good, we've helped you,
we've created something that canhelp you even without you
(23:21):
putting your credit card downand paying for the service.
So I love the idea that we cantake our technology and kind of
open it up and push it out topeople who I think over time
will want to try first-leafwines, but separating the two
pieces so you can play with therecommendations first and then
decide later if you want to tryour wine yeah, no, that's
(23:43):
exciting.
Speaker 1 (23:44):
um, I think the the the 2021 to 2023, like covid
period, was uh crazy forindustries.
You, you know, beyond just wine, I mean pretty much any
industry had crazy supply chainwoes.
There was a lot of overbuying,then underbuying.
(24:04):
Then, you know, on pretty muchno ability, at least from like
the marketing standpoint, to doyear over year comparables or
even month over month, becauseyou know it's just completely
different, like dynamic thatyou're operating within and so,
like you know, looking's justcompletely different, like
dynamic that you're operatingwithin and so, like you know,
looking at even performance forthis year of, like the marketing
(24:24):
agency.
For, you know, for some of ourclients, it's very challenging
to have a real baseline.
I feel like this is the yearthat you'll be able to set that
baseline again and then be ableto, you know, move forward and
improve, versus trying tocompare it to a year where, you
know, people were quiteliterally forced to shop online.
Speaker 2 (24:48):
And not just so.
You're right.
I mean, the comparisons arecrazy, but it's not just the
people were forced to shoponline, it's that they bought
different things.
I mean, I have a giant piece ofexercise equipment at home, but
now I can go back to the gym,right.
So in 2020, I bought a homerowing machine.
I don't know if I would havebought that today.
Certainly everybody boughtcooking equipment, and lots of
(25:11):
people bought you know-homedesks or office furniture, or
people purchase new couches.
Everybody was at home all thetime, right, and now the balance
of how people spend their moneyshifts, right, people are back
out traveling, doing other stuffand so, yeah, I mean, a lot of
wine companies had too muchinventory but, like you said, a
(25:32):
lot of other companies end upwith a bit of the wrong
inventory.
Right now is now is not thebest time to sell someone a
couch or a desk, and maybe it'sa better time to sell someone I
don't know luggage or somethingdifferent, right?
And so you know, there's been alot of um, uh, uh like
derivative effects from thepandemic, and I think most
(25:56):
consumers think the pandemicended, I don't know, two years
ago, right?
Vaccines, lockdowns, like thatstuff is all in the past.
Now COVID is still around,right, but its effects are less
than it used to be.
But I think for a lot ofcompanies the effects are still
present, right On the inventoryand supply chain and so on.
(26:16):
And so, yeah, I, I think so farit's only february, right, but
so far it's like a clean year,um, but you're, it's weird.
What's the comparison I mean forus?
I do try to compare topre-pandemic, although it's
ridiculous.
I have investors and they don'tlove it when I tell them let's
do a comparison to four yearsago.
But we are more than twice thesize that we were in 2019.
(26:39):
We've been profitable since2020, every year.
You know we're debt free and soin that arc of lockdowns and
(26:59):
supply chain, you know there'sebb and flow and up and down,
but, point to point, prepandemic to post pandemic you
know we're definitely a bigger,you know, um, more sound, you
know a better company, um, butthat's a longer comparison than
most investors love to hearabout, right?
They want to hear how thisquarter is versus last quarter,
not how we are today versus 2019.
Speaker 1 (27:17):
Yeah, yeah, I think you know it's more resilient.
Businesses, though, have comeout of COVID.
If you were able to survive,you know, that period, which a
lot of businesses were not ableto, you know you definitely have
some battle scars from it, butif you were able to handle, you
know, every day was a new sortof dynamic, with which you're
(27:39):
working within Now is like abreath of fresh air, even though
, like for e-com, at least for alot of our clients.
You know total sales are lowerthan what they were in like 2022
.
They might be coming indifferent channels, but your
Shopify sales aren't necessarilyas high as they were when
everybody was quite literallyforced to shop online, but it's
(28:01):
less like helter skelter andeverything is more streamlined
and you're able to focus on howto actually grow the business
versus how to just keep it alive, given all the changing
conditions.
Speaker 2 (28:14):
Yeah, and look, it's an unfair comparison to say how
are sales wherever not for usbut for anyone today versus when
lockdowns, like you said, werecompulsory basically.
So that's a bit of a weirdcomparison, right, but I like
that the metrics in generalstart to feel normal again.
(28:36):
The channels we're in, theprice, the CPA, the prices, the
consumer behavior it's allstarting to look a bit more
predictable.
And yeah, there were, you know,there were crazy effects during
the last few years, but themargin structure, the cost
structure, like things, start tolook normal.
(28:56):
They remind me of how they werein 2019.
You know, but I think theripples from the pandemic will
go on at least to the end ofthis decade.
Think of how many people workfrom home now versus before.
Think of how the default for abusiness meeting is like a Zoom
call, whereas the default usedto be I get on a plane and fly
(29:16):
to the vendor, and so I thinkit's something like 20 to 25
percent of people work from hometo some degree now, but
pre-pandemic that was threepercent, right, and so I'm sure
the impact on San Francisco isalways in the news.
Maybe New York City commercialreal estate, you know, I think a
(29:40):
lot of.
There's still a lot ofdisruption, right?
All the people that moved outof those kinds of cities and
moved into whether it's Texas orFlorida or other states.
I mean there's a big change.
I don't think everybody's fullyunderstood, right?
So more people at home meansmore people can get home
delivery, but that's alsoterrible for I don't know public
transport or what happened tolike the salad bar in Manhattan
(30:00):
or or the dry cleaning place inin Manhattan.
I don't dress up as often as Iused to.
You know, I used to have to puton a shirt and go to see
clients a lot, and I don't dothat very much anymore.
Speaker 1 (30:14):
Yeah, it was just like massive shifts.
I feel like that.
You know, maybe 50 years agothings would happen in you know,
longer periods of time, whereasif you look at just the last
four years alone, um, there'sbeen dramatic shifts in, you
know, weeks, not you know months, not even years.
And so, as a, as a business, youhave to be able to, you know,
(30:37):
adjust very rapidly and bepretty dynamic and, and you know
, the world is becoming moreinterconnected and global and
people aren't, as you know,stuck within wherever they
currently are, in the sense of,you know, a lot of businesses
had the opportunity during COVIDto ask you know, why is our
footprint in this particulararea?
(30:58):
Why couldn't it be, you know,elsewhere or why couldn't it be
in multiple different places?
And then, even looking at thedynamic between the employee and
the employer, that's shiftedlike four times in the past
three years, where, you know,the employees had a ton of power
, then it went back to theemployer, then it was the
employees and it's the employeragain, with, you know, layoffs
(31:18):
and not having layoffs.
It's, you know, it's definitelynot an industry for people who
don't like to be nimble or ontheir toes.
Speaker 2 (31:29):
You know, but I mean how many industries are going to
be left that aren't affected bytechnology?
I mean there's less and lessand less, and even farming Right
, which are, like that's goingto be the last to get affected
by technology.
I mean the stuff that existsout there, right, optical
sorters for grapes Unbelievable.
I mean there's so much fasterthan a human can do it and they
(31:50):
can spot the bad grape and, like, puff it out the way with a 3D
blast of air.
And people used to say that youknow they wouldn't use
mechanical harvesting.
So the machines like the talltractors, basically, that can
roll down the vines and you know, unless it's hillside, a lot of
people will use those now andlook, and some technology is
(32:13):
good.
A lot of people will use thosenow and look, and some
technology is good.
I think it was something like10% of wine was corked back in
the day, right, but now the waythat cork is, I don't know,
washed, right, the actual cork,the way it's cleaned, I guess
they don't really have that.
Whatever TCA is, I'm not sureif it's a bacteria, I think it
(32:35):
is, um, so that TCA bacteriadoesn't really really exist.
I mean it exists but it's notlike I don't know.
It's instead of one in 10 corks, it's one in a million corks or
something, I'm not sure theactual data.
But like, hey, some technologyis good, right, and and and
reaches into even you know thesort of slowest industries to
adopt it.
(32:56):
I'm really I mean, for a yearnow I've really been pushing my
team on generative AI, which isso useful.
You know, kind of up and downthe entire stack, right, we use
it on the actual website.
So when a consumer logs in,there's a thing we create called
wine print, which is sort oflike your personalized analytics
(33:17):
.
Generative AI writes the copyon that page and they do it in a
because we need it to bebasically unique, right, we
can't write all the versions byhand.
So generative AI takes the datainput and spits back out the
sentences that we show theconsumer.
So, hey, I like wines that aremedium acid, high tannin, you
(33:37):
know, lower alcohol and you canshow a sommelier and be like
show, you know, get me this.
Right, we talked about thechallenge people have in a
grocery store.
That's what we're trying tohelp solve, you know, with with
wine print.
But we use it behind the scenes.
We use it for image generation,copy generation.
We use it to analyze consumerfeedback, right, so we get too
(34:01):
many emails.
Or, if we send out a survey, weget too many responses to like,
we read them all but you can'treally get the sentiment of them
.
It's a bit like like a wordcloud or a tag cloud, right?
You need to understand, like,what the feedback is, and
generative AI can read it andspit you out a summary, right?
So people have issues aroundshipping or people have issues
(34:23):
around whatever else price orwhatever else.
The thing is you can get thesummary from that data so much
better and faster than the ideaof having someone read know,
someone read 5,000 responses andtry to count how many mentioned
the word shipping.
Speaker 1 (34:38):
That's kind of like what Google is doing with its
generative search and you know,if you Google something now, you
can get that blurb at the top.
That basically just takes youknow the hundreds of thousands
of results that Google has andthen gives you a nice little you
nice little description withoutyou having to click into 10
different articles, which is abig disruptor when it comes to
(34:59):
SEO.
But for the customer or for thesearcher it's a significantly
better experience.
Speaker 2 (35:05):
Yeah, look, and I know of course, people worry
that tech takes their job.
But I think, generally usinggenerative like, you need
someone to use the generative AIand make sure it makes sense,
right, because if you just letit spit it back out, you know
you get the images where someonehas five arms and seven fingers
, right, so you still get junkcome comes back out of it.
(35:26):
Uh, so you know, I'm reallypushing my team to be the user
of it rather than have itreplace their job, right, like,
if you don't embrace it, it willreplace your job.
But if you embrace it, there'salways going to need to be
people who train it or work withit or or edit it or oversee it.
(35:47):
And so, you know, I like thedescription that it's like.
Generative AI is like havinginfinite high school interns.
Those high school interns needa lot of oversight because you
can't just let them run thecompany, right, and so, yeah,
maybe one day it becomesinfinite college grads and you
know I should worry, but at themoment it still absolutely needs
(36:10):
a human layer on top tointerpret it or prompt it.
But you know it's out there andyou either have to use these
things or let them pass you by.
Speaker 1 (36:21):
And it makes me far more efficient and productive,
and you know, I look at it as aI'm able to do more now than
less, and I think you knowthat's the way that people need
to approach it.
But this is a super insightfulconversation.
I really appreciate you comingon, is there, you know?
Before we hop, though, wherecan people you know who are
(36:43):
listening find you, connect withyou online?
Speaker 2 (36:48):
Well, Firstleaf is easy to find.
That's just firstleafcom andI'm Philip James.
Easiest way is to find that'sjust firstleafcom and I'm Philip
James.
Easiest way is to find me onLinkedIn and connect.
But yeah, Brandon, thank youvery much for having me here.
Speaker 1 (37:01):
Yeah, of course.
Thank you.
Well, for everyone elselistening, as always, this is
Brandon Moroso.
You can find us at drinkscom.
Thanks for listening and we'llsee you next time.
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