Is Scout & Cellar an MLM?

If you’re reading this, you probably Googled, “Is Scout & Cellar an MLM” because someone cold messaged you on social media asking you if you were interested in joining the wine business or trying to sell you on “clean-crafted” wine or you’re just curious. The answer is plain and simple— yes.

In this blog post, I talked about how MLMs were essentially legal pyramid schemes. While they sell products, the primary focus is on recruiting people into your downline. Most money is made from recruiting people whether you’re given a commission based on the amount of people you recruit, your downline’s sales, or both.

So what exactly is Scout & Cellar? Scout & Cellar is a multi-level marketing company that sells clean-crafted wine. According to Scout & Cellar’s website, their wine is free of pesticides, synthetic additives, added sugar, and most sulfites. Their CEO Sarah Shadonix has coined the term “yucky stuff” to describe these extra additives. Personally, I don’t trust people who use the words “yucky” and “yummy” unironically. I don’t know if the CEO knows this, but sulfites are NOT the cause of headaches (otherwise raisins would be giving everyone migraines), but that’s another post for another day. As a consultant, you’re not allowed to claim that the wine is headache or hangover free or even saying that the wine is good for you. And wine naturally has sugar… What else would the yeast eat in order to produce alcohol?

When you visit their website, you can find link that says, “become a consultant.” This page explains what it means to be a consultant, but the real kicker is the is the Business Basics Kit complete with shareable materials, four bottles of wine, and what Scout & Cellar calls “must-have” products. If you’re wondering, the Business Basics Kit costs $249, and the annual renewal fee is $99.95. Apparently if you’re in North Dakota, there is a state law that protects you from being required to purchase a kit. You can also find testimonials from people boasting about how this multi-level marketing company has allowed them freedom and professional skills such as building a team (aka building a downline).

Like the investigative person that I am sometimes, I decided to click on the get started button to see what joining was all about. The first step is reading all of the terms and conditions before you can order your business kit, but who really reads all of those? In this particular case, I did and what I found was fascinating. Here are the red flags I found quoted word-for-word below:

“Consultants shall not be treated as employees of Scout & Cellar for any purpose including, without limitation, federal, state or local tax purposes or retirement benefits.” I think this is straightforward. If you’re not considered an employee, you don’t get health and retirement benefits.

“Consultants are solely responsible for paying all expenses incurred during the course of business, including any license requirements or fees associated with operating as an independent business or Independent Consultant, and assume the business risk in connection with their independent Scout & Cellar businesses.” They’re talking about reimbursement here. A normal company would pay for you to get a certification/license if you really needed it or reimburse your mileage if you had to drive somewhere for company purposes. MLMs are not normal companies, so these costs come out of YOUR pocket.

“I acknowledge and agree that Company’s usual course of business is selling wine. I represent and warrant that I am not in the business of selling wine. I represent and warrant that I am in the business of marketing, promotions and education.” This point in particular cracks me up because the “become a consultant” page literally asks if you want to be in the wine business. According to the terms and conditions, you’re not even in the wine business, you’re just a salesperson!

“I agree to purchase a non-commissionable Business Kit from Scout & Cellar. I understand that a Business Kit is the only purchase required to conduct business as a Scout & Cellar Independent Consultant. I also agree to pay any renewal fees required to extend the term of this Agreement.” Normal companies don’t make you pay to work for them or charge you renewal fees to keep working for them, but MLMs do. Remember it’s $249 to join and $99.95 annually to stay active.

“A Consultant’s ‘Downline’ includes the group of Consultants directly mentored by that Consultant, along with any Consultants beneath the aforementioned group.” Here’s the first mention of the word “downline.” Your downline is you and anyone you’ve recruited along with anyone that your recruits have recruited. Almost like… a pyramid scheme.

This is all in the terms and conditions and doesn’t include policies and procedures which is basically an entire section of red flags. Here are some things I picked straight out of the policies and procedures:

“The Program is defined as: 1. Marketing, promoting, and educating consumers about Scout & Cellar products as described herein; 2. Participating in the Compensation Plan (receiving Commissions and Bonuses, when and if eligible); 3. Mentoring other Consultants into the Program; 4. Building a downline; 5. Advancing through the levels in the Compensation Plan; 6. Receiving information and communications from Scout & Cellar; and 7. Participating in Scout & Cellar’s support, service, education, recognition and incentive programs for Consultants, upon payment of any applicable charges.” I’m going to need a few glasses of wine to get through all of these policies if we’re being honest. I’m not sure how many times I can read the word, “downline” without wanting to scoop my eyes out with a melon baller.

“Consultants may mentor other persons to become Consultants. However, Consultants earn Commissions and Performance Bonuses in the Program only based on the marketing and promotion of products, and not based on the recruitment or enrollment (mentoring) of other Consultants.” Based on this information, we can conclude that Scout & Cellar consultants don’t make money from recruiting people, they make commission from their downline’s sales.

“When presenting or discussing the Scout & Cellar opportunity or Compensation Plan to a prospective Consultant, Consultants may not make income projections, income claims, income testimonials, or disclose their Scout & Cellar income (including, but not limited to, the showing of checks, copies of checks, bank statements, or tax records), or the income of any other Scout & Cellar Consultant. Nor may Consultants make ‘lifestyle’ income claims.” This is something I see a lot with the It Works! huns. It Works! distributors love to brag about all of the things they’ve been able to do since joining the company (i.e. paying off loans, going to conferences, etc.). I think Scout & Cellar wrote this to cover their own ass, but I’ll have to admit that this is a good rule.

Now let’s talk about income. How much do Scout & Cellar consultants actually make? Well, you can earn 12% commission when your sales total $0-$499, 15% commission when your sales total $500-$1,499, 20% for $1,500-$2,999, and 25% when your sales total $3,000+. And, every month you start right back at the bottom 12% commission. If you made $3,000 every month for an entire year, you’d only make $9,000 in one year. Who the hell is buying $3,000 worth of Scout & Cellar wine from one consultant? But this is just personal sales.

However, you can make money from your downline on top of your personal sales depending on your “career title.” Let’s say you’re at the Associate Manager career title. If one person from your level one downline makes $700, Scout & Cellar takes 30% for operating costs, and you earn 6% of $490 which is a little under $30. If one person from your level two downline also makes $700, you will earn 3% of $490 which is a little under $15. This is only $45 for two people, so what do you do? Recruit more people who will recruit more people. Eventually your downline will end up looking like a pyramid.

Remember the $249 business kit you paid for? You’ll need at least $1,670 in personal sales to cover that cost and that’s unlikely because the research done by the FTC says that 99% of people will lose money by joining an MLM.

If you want to take a look at the compensation plan in full detail, watch the video below:

And before I finally finish this blog post, I’ll put this quote from the Scout & Cellar policies and procedures just in case I accidentally offended some independent consultants out there reading this.

“Consultants may not use blog spam, spamdexing or any other mass-replicated methods to leave blog comments relating to Scout & Cellar or its products. Comments Consultants create or leave must be useful, unique, relevant, and specific to the blog’s article.”

If you want to read more about MLMs, I suggest taking a look at Jackie Brown’s book, Ask ME About Mary Kay. It’s all about her experience with the Mary Kay MLM.

Mary Kay is the same as any of the wine MLMs except for the fact that they sell makeup. I really liked this book because it gave a behind-the-scenes look at what it’s like to be in an MLM. If you’ve never joined one and never plan to like me, it’s extremely insightful and thought-provoking.