Category Archives: Industry News

Ready to rock out with wine?

grapesofrockWine.com is gearing up for an awesome event, Grapes of Rock, to be held here in San Francisco at the Fort Mason center. Forget the old pairing of rock and beer (or maybe its whiskey), and starting thinking rock & wine. Poison fans out there will rejoice when they hear Bret Michaels is headlining the event, though some of my millennial friends tell me he had a reality show. Or two. Or more. But hey, that makes him stretch the generations, right? Me? I’d look forward to hearing “Every Rose Has Its Thorn” again, just so I can wax nostalgic about cheesy middle school slow dances.

Get your tickets – all happening Sunday, November 3.  Wines of Rock will be there, as well as Parducci, Kunde, Middle Sister and more.

Hope to see you there!

A letter from the Wine.com CEO to our customers & suppliers

Hi folks,

I’ve received several calls and emails today about a blog post full of false information about Wine.com.  I’d normally ignore something like this and get on with my day, but my team has worked too hard building Wine.com to not respond.

Is Wine.com for sale?
We’re majority owned by a private equity fund that makes money by buying and selling companies.  So we’re basically always for sale and that has always been the case.  Beyond that, we never comment on specific M&A or funding activity because that’s private business.

Is Wine.com struggling?
There’s no question wine is a challenging category online, due to regulatory constraints, shipping heavy glass bottles, extreme weather concerns and adult signatures required for delivery.  So the answer to this question has three parts:

Part 1 – pre turnaround
This company was founded as eVineyard.com in 1998 by Mike Osborn, who runs our Merchandising to this day, and has developed deep, trusting relationships with our hundreds of suppliers and wholesalers.

There was a lot of failed investment activity in online wine in the late 1990’s (see timeline below), but eVineyard was on the sidelines in Portland, going slower, trying to figure out the right business model.  When the original Wine.com combined with Virtual Vineyards and WineShopper, then all went out of business in 2001, eVineyard bought the Wine.com and WineShopper names.

Yesterday’s blog post provided quotes from people running the company from 2002 to fall of 2005 (the blogger from Growth Capitalist didn’t call me, by the way).  As of fall 2005, the company was losing $15M of EBITDA on $35 million in revenue, and had a break-even point of over $200 million in revenue.

So yes, you bet Wine.com was struggling.

Part 2 – turnaround
I joined Mike and his team in 2006 because I saw a category that consumers wanted to buy online, healthy customer and supplier relations and a great team that had been mismanaged.  We got to work on our cost structure, reducing our break-even point from over $200 million in revenue to $45 million.  Then we went to work on our customer experience – adding to our wine assortment, improving our pricing & value, making delivery more convenient and reliable, and adding tools and content to give customers confidence in their wine buying decisions.  In fall of 2007 we took in our last round of external financing, $5 million, and have been self-sufficient ever since.

Despite the recession, we turned cash flow positive in 2009 and EBITDA positive in 2010 on $45 million in revenue.  We closed our fiscal year in March 2011 with $1.9 million in cash flow on revenue of $56 million.

Turnaround complete – Wine.com no longer struggling.

Part 3 – growth
Now the fun part.  We decided (with our board) to re-invest all cash generated from internal operations into laying the foundation for future growth.  Wine is underpenetrated online, and it’s a $35 billion category in the US.  What investments could we make in our customer experience that would create greater loyalty and growth?

We doubled our selection of 90 point scoring wines under $20, grew our fine wine & collectibles, added Bordeaux futures and our Collector Concierge service, revamped our gift sets & baskets, introduced same-day shipment, weather-safe shipping and date-certain delivery, launched our ipad app, mobile site and WineShopper daily deal site, and created our Steward-Ship loyalty program ($49 for a year of unlimited shipping).

Customers responded.  Over the last four years, website traffic grew 2.4 times to over 15.6 million visits.  Bottles sold and shipped nearly doubled to 2.7 million.  Lifetime customer value grew 50%.  And revenue grew 70% to $75 million.  All while inventory turns increased to 12 times and net fulfillment cost per order dropped by 75%.

Double-digit growth continues today, and we’re more bullish than ever about our innovation pipeline.

If Wine.com is doing fine, what’s up with this blog post?
You’ve got me.  The blogger didn’t contact me to check her facts, and only seems to have spoken with a couple unhappy people who I don’t even know who worked here nearly a decade ago.  All I can say is the Wine.com team has moved on from whatever drama occurred under their watch.  And we’re excited to continue to innovate, wow our customers and partner with our suppliers for many years to come.

Cheers,
Rich

Rich Bergsund
CEO, Wine.com
July 2, 2013

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Online wine industry timeline:
January 1995: Virtual Vineyards launches

June 1998: Today’s Wine.com originally founded as eVineyard

September 1999: Virtual Vineyards acquires Wine.com domain name
http://news.cnet.com/Growing-wine-rivals-pour-it-on/2100-1001_3-261224.html

April 2000: Amazon launches WineShopper
http://news.cnet.com/2100-1017-239383.html

August 2000: WineShopper & Wine.com merge
http://www.winebusiness.com/news/?go=getArticle&dataId=1684

April 2001: eVineyard acquired the assets of Virtual Vineyards/Wine.com/WineShopper:
http://www.winespectator.com/webfeature/show/id/Internet-Wine-Retailer-Winecom-Sold-to-eVineyardcom_20020

Wine.com leadership timeline:

Chairman of the Board
Larry Gerhard (May 1999 – May 2002)
Chris Kitze (May 2002- August 2005)
Rob Manning, Baker Capital (August 2005 to present)

CEO
Larry Gerhard (May 1999 – February 2002)
Peter Ekman (February 2002 to April 2004)
George Garrick (May 2004 to September 2005)
Rich Bergsund (June 2006 to present)

Celebrities & Wine

They say to make a small fortune in wine, you must start with a large one. So it makes sense that celebrities buy and own wineries.  We’ve been getting news across the board about celebrity wines, and we’ve been stocking up on a few as they become available. Most recently, Angelina Jolie and Brad Pitt released their Miraval rose, produced on their own property in France and crafted by the Perrin family of Beaucastel fame. Given the serious and artisan nature of their acting, one can hope that they have put the same passion behind their wine. We encourage you to try some, as well as others from your favorite celebrities!

Miraval Rose: On pre-sale for now, this beautiful bottle hails from the Provence estate recently purchased by the Jolie-Pitt clan. They’re not messing around. With help from the Rhone-based Perrin family, proprietors of Chateau Beaucastel, the Jolie-Pitts are using the best of the region to release this rose, showcasing a beautiful package and what we hope to be a delicious wine.

Barrymore Pinot Grigio: This is a wine produced by Drew Barrymore. Seems that Drew was inspired by the journey wine takes – from grape to bottle – and wanted to create a wine that reflected her taste and style – fresh, dynamic, fun. Well, we agree, wine IS all about the journey and we think Drew is definitely all those things. The wine is from the northeast corner of Italy, and the label is done by Shepard Fairey, the same artist behind the Obama “Hope” poster.

Dreaming Tree: Dave Matthews is not only a talented crooner, but also a lover of wine. His Dreaming Tree label makes three wines from the North Coast – a Chardonnay, a Cabernet and a red blend. Give them a try while listening to some mellow music…

Top Chef Quickfire: A line of wines created by the Top Chef enterprise. They produce Zinfandel,  Chardonnay, Cabernet Sauvignon and Pinot Grigio.

Inaugural “California Champagne” Controversy

korbelnaturalYesterday, at President Obama’s Inaugural Luncheon, three wines were served, including a Korbel Natural Special Inaugural Cuvée California Champagne. Korbel, as you may know, is a California winery, and the wine it produces, as you’d imagine, comes from California. However, the label for this wine (and most of its sparkling wines) says “Champange.” If you are a sparkling wine connoisseur, or even a regular imbiber of bubbles, you probably know that very few sparkling wines outside of Champagne actually put the name, “Champagne” on the label. You may even remember a law that was passed specifically banning the use of Champagne on a label if the wine did not come from the region of Champagne. So why does Korbel have the privilege to use such a term on their label?

The French organization known as the Comite Interprofessionel du Vin de Champagne (CIVC) has worked very hard to regulate the use of Champagne on labels outside of Champagne. The European Union protects the Champagne designation and limits its use on wine labels to wines from Champagne. Many other countries around the world have signed agreements with the EU and France to ban the use of Champagne on their own wine labels. The United States entered such an agreement as well, but with a grandfather clause. Wineries who were operating and producing sparkling wine before the agreement was signed in 2005 are legally (according to US law) able to use the term “champagne” on their label. But most don’t. One that does, however, is Korbel, the subject of much controversy regarding President Obama’s inaugural luncheon.

Korbel Wine Cellars began producing “California Champagne” in the late 1800s, when using the term “champagne” on wine labels outside of champagne caused no worldwide ire. They have continued to do so, even with the sale of the company, a sale that mandated continuation of the term “champagne” on the label. They are old school. They’ve been using the term for years and have no reason – or requirement by law – to change. But other wineries who produce sparkling wine in California who are “grandfathered” in do not use the term, mostly out of respect for the Champagne region. Interestingly, the  majority of California sparkling wines who continue to use “California Champagne” on their labels are priced below $15. Those pricing their wines in the $30+ brand themselves as California sparkling wine. It reflects the fact that the majority of wine consumers on the market most likely do not understand the difference of Champagne and sparkling wine.

So most everyday wine drinkers thought nothing of the fact that President Obama chose Korbel to serve at his inaugural luncheon, despite the fact that it called itself “California Champagne). But Champagne producers and representatives were quite in uproar, and I’m sure those wine drinkers who have a strong tie to place accuracy were also a bit peeved.

It’s funny that the US allows this, but has also banned wineries from using US place names on their label. When Calistoga received AVA status, Calistoga Cellars had to change its name. Wines that put “Napa” on the label but did not hail from Napa changed their labels, but California Champagne remains, and we doubt that Korbel or Cook or anyone else will stand up to voluntarily change this until the law makes them.

The Wine.com 100 once again says… everyone loves a good Cabernet value!

Today we release our 6th annual Wine.com 100. It’s our list of the Top 100 wines sold on Wine.com for the first 11 months of 2011.  It’s the only 100 list compiled based on customer activity rather than critics ratings. Since we go through over 13,000 unique wines in a year, the top 100 list really showcases what people are saying with their wallets.

One resounding theme that has run through all of our Wine.com 100 lists – everyone loves a great value. In particular, a great value Cabernet. In four out of six Wine.com 100 lists, a value Cabernet under $15 came in at #1. This year, it’s the Columbia Crest Two Vines 2009 Cabernet Sauvignon from Washington. The 2009 is now sold out, but the 2010 is in stock and is fantastic! The rest of the list mimics the same kind of buying behavior we see each year – lots of wine from California (40) and lots of Cabernet Sauvignon (29), plus imports and domestic wines shared equal presence (50/50). But a few things stood out this year.

- Italy doubled in popularity, growing from 6 bottles last year to 12 this year.
– White wine grew as well, going from 14 bottles to 24  bottles, with Chardonnay (9) and Sauvignon Blanc (5) leading the charge.
–  Six of the top 10 were Cabernet Sauvignon. While Cabernet usually leads as the top grape in our list, six in the top 10 definitely showed the grape’s popularity.
– A dry rose finally made the list! Though we have featured sparkling rose on our Wine.com 100, a dry rose finally made an appearance in 2012 at #67. The wine? Of course the Chateau d’Esclans Whispering Angel Rose, which, sadly, is sold out in most markets. Expect it to come back in stock next Feburary so you can stock up for spring and summer!

Enjoy shopping the Wine.com 100 and stock up on your favorites next year so that you can help influence next year’s list! Cheers!