Why IAG Loyalty Runs a Wine Shop

It's the No. 3 online wine shop in the United Kingdom, according to a senior executive, and it's very, very profitable.

Dear readers,

When I interviewed IAG Loyalty CEO Adam Daniels last month,¹ I did not expect him to share so much detail about his mistakes in the wine business, including the challenge of forecasting how much champagne its UK customers would buy. "We've now got it right, but certainly in the first few months, we kept running out of champagne," he told me.

But upon further reflection, it makes sense. I’m used to chatting with North America-based loyalty executives who talk about credit cards incessantly because they generate a ton of money. While the Europe-based loyalty program Daniels manages also offers credit cards with adequate margins, they are not similar cash cows because of caps on interchange fees.

So, Daniels’ team must look elsewhere. Sometimes, that's the United States, where consumers are awash in rewards points. Other times, it's the wine business, which IAG Loyalty entered in late 2022 when it launched The Wine Flyer, an online retailer that accepts IAG’s Avios currency as payment and awards points for cash sales.

This seems like a standard move: it’s common for customers to rack up points by shopping at a business, and for that business to pay the airline for points. That’s essentially what IAG did with wine until August 2022, through its now-defunct partnership with Laithwaites, an online wine seller. What makes this unique is that IAG Loyalty is actually running this business, and taking all of the profits.

"When we started this, some people thought we were crazy, to be honest," Daniels said. "But we believed that we had a customer set that really wanted to use the currency, both to collect it and redeem it, and we knew that customers wanted to buy wine. We had already had a relationship with a partner where we could see that business perform quite well. So we decided to go in there and run a wine business.”