Cracks in the walls of mainstream consumer food retail: Naked Wines meets Kagio market.

Some time ago, I wrote about the concept of the value chain, and that I couldn’t match it with what I observed in informal emerging markets like in rural Kagio, Kenya. What I observed of the market there was not a neat box in the formal structure of a value chain, but a flexible, multipurpose node in the rural economy’s complex web of human interaction and exchange of goods, services, and knowledge; a value web.

Recently, I revisited this notion when I was reading an article on a company called Naked Wines. This company is by no means serving an emerging economy audience, but it is trailblazing the wine market and working it in the same way as I saw at the farmer’s market in Kenya.

Intoxicating innovation
Founded by an ex-banker and wine aficionado, Naked Wines provides a compelling value proposition to a considerable group of people who are looking for exclusive wines of origin. Naked Wines provides an online market place, where independent wine producers can sell their wines, and connect with the current 200.000 subscribers, as well as with occasional customers, through an online forum and rating system. The company shifts around 10.000 bottles a day.

The value proposition lies in solving a big chunk of search costs that wine lovers usually place into finding their exclusive wine, and offers it to them at a very compelling price point (though still more than what the average consumer pays for). No longer do you need to organise a wine tour to Lombardia each time you want to purchase batches of exclusive wines.

The crux
Many wine-grape growers would dream of being able to sell their own wines. Yet, most are deterred from doing so because of the financial risk. The whole system of the mainstream wine market is based on selling your grapes as fast as you can at moment of harvest to the bidder who will buy as much as possible, or preferably all, of your product. Going at it alone could come with the repercussion of big wine houses boycotting your grapes for good. No banker minding his pinstripes would fund such a move.

Naked Wines has solved this financial risk. By asking an upfront monthly membership subscription to its customers of about 20 euro, the company has a monthly reserve of 6 million euro to pre-finance a winegrower’s full harvest in return for exclusive purchase. Through this pre-finance, growers commit themselves to the platform, and in return customers can buy wines that are not available elsewhere at a discount rate.

For many growers the pre-finance is what convinced them to take the plunge, and is thus the x-factor that makes this business model work. Have a look at this awesome business model in the slides below, compiled with the business model canvas.


The bigger picture
Back to the case of Kenya, I see comparison. The integrated functions of the value web I saw there, are utilised in the same manner by Naked Wines through combining finance and a marketing proposition to growers, into a unique value proposition that can be carried by a specific market niche (“these melons are destined for Mombasa”). Also, in both circumstances the ubiquity of ICT has enabled this distributed, networked type of market, or value web to come into existence.

The big insight here is that in order to create a market, we are not dependent on figuring out what the average person wants on average anymore. Our connecting technologies support endless market re-segmentation possibilities at a global level, and serving them effectively and at low cost. Mainstream targeting is turning into a vulnerable strategy, and is likely be substituted by an endless variety of globally dispersed, yet easily connectable niches. 

There are those that say that the advancement of the modern supermarket, indicates advancement in developing nations. But with the new layout of the competitive landscape, I think that the legacy of the supermarket system in developed economies inhibits newer, and higher forms of value creation. In countries like Kenya, I predict you will not likely see the same pattern of development in consumer retail as in the current developed nations. Instead I expect a surge in food retail innovation that will leapfrog western markets (just like with mobile payments).

There is tremendous market power by coalescing value chain functions. By turning these functions from separate islands of myopic economic optimisation into purposeful networks that are hosted by a common business model, a new market power is unleashed. Cases like Naked Wines, show what can be achieved.

I think that businesses that are able to achieve these type of connections are serious contenders for overturning the status quo in the agriculture and food system. This is a huge opportunity to stab at mainstream retail culture, which has become complacent in providing value to farmers and consumers alike. Risk capital investing in the future of agriculture and food should be on the look-out for this business model pattern.


  • Difference is not so much made by the product or product technology, but more so by the business model
  • Integrating value chain functions into a network setup, hosted by a common business model, creates a disruptive innovation juggernaut in our food and agriculture economy
  • Yes, you can create tons of value by connecting consumers and farmers. But only if it’s purposeful
  • I think I need to change the title of my blog. Suggestions anyone?

Market size estimation in uncharted rural economies

Agriculture is the main driver of the rural economy in developing countries. Realizing product and service innovations targeted at these agriculture-based markets holds tremendous potential for creating new growth engines for business, as well as achieving social and economic development.

While this is a market with huge opportunity, it is also very difficult to navigate. Much of the rules and patterns of behavior are based on informal solutions to irregular and low incomes, semi-literacy, and social and environmental uncertainty.

Estimating your market in such an economy is not a likely task. Insights are yet to emerge on the radars of formal market intelligence approaches, like the chamber of commerce, or Google analytics, etc. And, if there’s little else to target specific customers by, than referring to them as a number of 2 billion or so people who grow crops on small pieces of land and rear animals, your business is likely to fail.

Needless to say, emerging rural economies require different market estimation approaches. We need to be more creative and develop proxies, which are more sensitive to picking up signals of upward market dynamics.

The water tank indicator
I recently had an idea for such a signal, based on some photo’s I took of water tanks during fieldwork. I still need to validate this thought, but I’ll write it out here, for sake of argument (I’m open to your comments!).

A water tank located near your home provides a lot of convenience. You can collect rainwater in substantial volumes that can be accessed from your own premises. Also it could help you eek out your water supply during the dry season.

The very common alternative to the water tank, is to walk to the water pump or the lake with a jerry can, for which you often need to cover substantial distances. Water tanks thus create a considerable saving on time and effort dedicated to fetch water. Time that can be freed up for other activities on your farm or on someone else’s farm.

Water tank in North Buganda Region, Uganda
Water tank in North Buganda Region, Uganda

Occasionally you will find a household that has invested in a tank, and my experience is that these are relatively well-off people, because water tanks are a big investment (or an NGO has dropped by with a program…). Could water tanks be a soft signal for upward mobility?

Now correlate this line of thought with a photo I made in Kagio in Kenya below. What would such an inventory of water tanks signal about the overall wealth dynamics of the area around this town? 

Water tank inventory in Kagio, Kenya
Water tank inventory in Kagio, Kenya

What we could do with such insights
I don’t know whether the water tank story will hold up if I try to validate it. But if it does prove to be relevant, it could be a very interesting indicator. It could help determine great locations for piloting or launching a new product or service for an emerging market segment with purchasing power. I think you could also use remote sensing data to locate such water tank inventory points, as they’re pretty conspicuous. This market sizing indicator might even be brought to scale!

The big question is whether it would be worthwhile to invest in digging up more of these insights. If we can create a validated set of such context-rich indicators that can be brought to scale, then we can inform the emergence of new growth pockets in a very resource extensive way. I think it might be worth a shot! Do you?


  • It’s hard to estimate the size of your market in an economy that is yet to emerge
  • If you want to take a new group of 2 billion non-customers online, then you need to become smart about your targeting methods.
  • It might be easier to infer purchasing potential from a water tank, than through formal survey methods that filter out the demographic that has that extra dollar per day to spend.