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DEAD! – New Vine Withers After Amazon Bolts & Investors Pull Plug

New Vine Logistics slammed the doors and headed for the hills on May 30, after impatient investors pulled the plug following the direct-shipping company’s mounting losses.

New Vine touted itself as the solution to allowing wineries to sell and ship wine to consumers while complying with the crazy quilt of laws that varied from state to state.

New Vine shutdown notice posted on their shuttered office door.

New Vine shutdown notice posted on their shuttered office door.

SMALL WINERIES LIKELY TO SUFFER MOST

More than 200 winery customers were left in the lurch by the sudden closure including Beringer, Cline Cellars and even a Lufthansa wine club. But the smallest wineries — such as Araujo Estate Wines, Paul Hobbs Winery, and Fisher Vineyards which depend heavily on direct sales –  are likely to suffer the most.

WINERIES ANGERED AT LACK OF WARNING

“I am enormously angry,” said a  major Sonoma County vintner. “It is the height of arrogant irresponsibility to slap a sign on the door and run for the hills. Our brands can take a hit like this, but I feel sorry for so many smaller wineries who were depending on them. I wouldn’t be at all astonished if some of the smaller wineries sued because the sudden, secret closing didn’t give them any time to prepare.

“The company obviously knew it was in trouble and it had a responsibility to make sure that its closing did not hurt its customers,” he said.

Other winery customers interviewed by WII made similar statements, many copiously laced with profanities.

NEW VINE STONEWALLS INQUIRIES

The company sent out a mass email and posted a letter (above) on the door of its locked offices. It has, however, failed to return most phone calls or emails including those from its customers and the media.

Ted Schlein, the partner at New Vine’s lead investor, Silicon Valley venture capital firm Kleiner, Perkins, Caulfield and Byers, did not return Wine Industry Insight’s phone call by deadline.

AMAZON, ECONOMY, INVESTOR IMPATIENCE SANK EIGHT-YEAR-OLD PROFITLESS VENTURE

Despite New Vine’s stonewalling, Wine Industry Insight’s examination of government records and numerous interviews with investors, winery customers and others familiar with the company’s operations say that the company’s sudden demise resulted from multiple financial wounds including:

  • The inability to bring a long-promised Amazon deal to fruition,
  • Continued losses which had accelerated over the past six months, and
  • Substantially less shipping business from winery customers due to the economic down turn.

“OUT OF TIME, OUT OF MONEY” MAJOR VENTURE CAPITALISTS PULLED THE PLUG ON FRIDAY

Despite published accounts to the contrary, New Vine’s banker, Silicon Valley Bank did not pull the company’s plug. One member of New Vine’s consortium of venture capitalists told Wine Industry Insight that the direct wine fulfillment company, “ran out of time and out of money.”

The venture capitalist said that for approximately six months, New Vine had been trying to raise an additional round of equity financing and “we simply told them that we had had too many promises and not enough progress. In short, as a group, the equity stakeholders said we could not participate in another tranche.”

AMAZON = GODOT: NEW VINE RAMPED UP FOR A PARTNER WHO NEVER ARRIVED

“We got tired of hearing ‘Amazon, Amazon, Amazon,” from the company,” an investor told Wine Industry Insight. “I felt like I was back at a college production of Waiting For Godot. I didn’t like the play then and I certainly didn’t like having my money wait any longer.”

In anticipation of the Amazon deal, New Vine had, in the past year, ramped up shipping and fulfillment capabilities by expanding into a 380,000 square foot warehouse facility in American Canyon.

Amazon had become New Vine’s brass ring, but it never came close enough to make investors happy.

AMAZON: SLIM MARGINS, “TOO MANY UNKNOWNS” AND “BOOKS NEVER BREAK”

Amazon had no comment on the issue, but a Seattle insider told WII that, “the potential costs and hazards of wine and all the red tape outweighed the benefits. There was simply too many unknown factors — including the need to rely on a third party — for [Amazon] management to gain the required comfort level. That could change if the company decided to do it by itself and control the process. Still, the overhead with wine  squeezes margins too tight. And a book never breaks or goes sour.”

SILICON VALLEY BANK LEARNED OF SHUTDOWN ON MONDAY

Silicon Valley Bank Wine Division Founder Rob McMillan told Wine Industry Insight on Monday that, “We found out about the company’s decision today and we’ve been doing everything possible to find a soft landing solution.”

McMillan said that he has been working with New Vine’s equity investors and talking with parties that may be potential buyers.

“We were not involved in the decisions to close or lay off people,: McMillan said. “Nor have we filed any legal papers.”

NEW VINE CONTINUES THE WINE “TAR PIT” FOR VENTURE CAPITALISTS

Investing in wine has rarely been successful for venture capitalists who have managed great successes in other areas. The $180 million+ lost in wine.com and associated transactions in the millennial DotCom meltdown, however, have not completely deterred Menlo Park’s Sand Hill mafia who have dropped enough money on fine wine to make them want to own a piece of it.

While hard numbers are hard to come by, investors have told WII that New Vine has certainly burned through more than $50 million if one includes software and other goods exchanged for equity.

New Vine’s equity investors include:

  • Altos Ventures
  • Angels Forum/Halo Fund
  • Equity Group Investments
  • Kleiner Perkins Caufield & Byers
  • Monitor Venture Partners
  • Pacific Community Ventures (Part of Accel)
  • Thomvest
  • Staenberg Ventures (Rustic Canyon)

ASHES TO ASHES WITH NO PHOENIX IN BETWEEN

Ironically, New Vine had its beginnings in the ashes of the wine.com meltdown. Kleiner Perkins had suffered major losses in the wine.com debacle, but in 2001 still saw potential.

KPCB Partner Ted Schlein, looking to salvage something from the ruins, recruited Kathleen Schumacher (now Katie Hoertkorn), who had served as wine.com’s vice president and general manager in charge of fulfillment.

He introduced her to Netscape mogul and formed KPRC partner Jim Barksdale, and William Del Biaggio, CEO of the Sand Hill Capital which had retained the assets and intellectual capital of the defunct wine.com.

In short order, Schumacher/Hoertkorn’s new company had $3 million in venture capital and software worth $30 million from Del Biaggio in exchange for his equity.

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Comments

15 Responses to DEAD! – New Vine Withers After Amazon Bolts & Investors Pull Plug

  1. Great work Lewis… you really know how to dig! Stu

  2. Tremendous piece of journalism Lewis. You give bloggers a good name (perhaps because you used to be an editor!).

    Thanks for the great info. And by the way, does your source believe Amazon is delaying indefinitely, and is there any substance to the rumor they were waiting for New Vine to fail?

  3. lperdue

    Thanks! I used to couldn’t even spel editar, and now I are one!

    Anyway, I asked that last question and got what might be called a “pregnant silence.” I did get the impression that Amazon’s tempted, but reluctant. It could be that they are still running under the radar on state tax collections and the wine compliance process would put them in the bull’s eye.

  4. David

    Well said. Their competitors WTN Services, Copper Peak and Wineshipping have a huge task ahead of them to absorb this. This is bad for the wineries that don’t have a plan. WTN Services just accepted us and seems to us to have the best scale with an east coast facility. And owned by 1800Flowers we won’t run into the doors closing like NVL. New Vine has approached this like chickens.

  5. The web page is all about them — if you wanted to buy wine, why would you go to this site?

    Vinoshipper.com got it right…….

  6. A quick post to mention that Paul Hobbs Winery, unsatisfied with NVL services, started using Pack and Ship for direct mailing since last year. The melt down of NVL should not affect our business.
    By the way, our whole team really enjoys your newsletter, keep it going!

  7. In response to yesterday’s media reports about the suspension of New Vine Logistics’ business operations, Homer Dunn, chairman of the board, and I would like to issue the following statement:

    New Vine Logistics is currently working with customers to transfer all services to another means of legal direct shipping, and in the meantime, is finalizing all work, including compiling of reports, reconciling inventory and invoices, and performing all of the necessary business operations for the months of May and June.

    In response to comments that the company knew it was in financial trouble, we truly believed that we would have been funded and were not expecting to have to cease operations.

    “New Vine has always been committed to quality, legal service, and built the only service that integrated compliance and fulfillment. It does cost more to be compliant and follow all the laws established by the various states. The company also pioneered many solutions such as temperature controlled packaging. The whole objective was to allow wineries to concentrate on sales and marketing, versus the back end processes from inventory to fulfillment to special services to compliance.”

    New Vine was founded in May 2001 by wine industry, technology, and transportation veterans to solve the complex business problems associated with the interstate sale and distribution of wine. The company has developed proprietary fulfillment systems that enable fully compliant consumer-direct shipping in up to 44 states.

    We will keep winery customers, employees and shareholders advised of next steps. We deeply apologize for the situation, and we pledge to work with our customers to make as smooth and expedient shipping transition as possible.

    Kathleen Hoertkorn, founder
    Homer Dunn, chairman of the board

  8. ian

    Excellent reporting Lewis!

    Why didn’t NVL file for Chapter 11 or Chapter 7 bankruptcy to have an orderly wind-down of the business instead of closing so abruptly?

  9. SS

    New Vine had a great idea-I dont think anyone would argue with shipping wine legally in a temperature controlled container. Unfortunately this is a classic case of mis-managment (from the beginning in my view). Then a big company big shot was brought in from back east to ‘turn the company around’. This person didnt know anything about the California business climate, the wine industry or small business in general and look what you get. New Vine is no longer. Its unfortunate for the employees and customers but some of us saw this coming a long time ago.

  10. John

    Speaking for myself and the many employees of New Vine who found ourselves unemployed as of last Friday, with no notice, no paycheck, nothing…we have one statement. We are outraged.

    This closure came as an immense shock to us all. We were told not to come to work on Monday, and that payroll was “to be determined”. Is that even legal?

    SInce then, we have had no response from the company. Calls and e-mails are not answered or returned. It is like all of our hard work and dedication never really happened.

    We agree with the comment above that the company was literally run into the ground by the hiring of a COO with no industry competancy two years ago.

    While we do not expect to ever recoup our personal losses financially, on the principal of demanding at the very least some level of satisfaction by bringing the management team’s total lack of ethics to light, expect lawsuits. Plenty of them.

  11. Collier would like to extend our services to clients of New Vine Logistics with distress shipments and all other services. For expedited service please call Kimberly Dixon (925) 260-3558

    Collier Wine Logistics, Inc.
    800-840-4007

  12. Hello— My name is Annie Holman, I have a small company called Wine Country Naturals, I make body products with wine grapes in them (products such as Chardonnay-Pear Body Butter) anyway…I am new to The “Lewis Letter” as I like to call it! And I want to say “Love the Lewis Letter”—And my husband does too. (he is a winemaker for J. Rickards Winery (next to Silver Oak Cellers) and they almost went with New Vine on a deal and then decided not to…Excellent story!

  13. Hi Lew

    Thanks for the report. Cline Cellars left NVL back in October. We are currently shipping our products through Copper Peak. Cheers!

  14. There’s a bit of fine print here that I’m curious to know about that will impact whoever takes over mess. If, in fact, the State of CA was investigating practices regarding Amazon’s shipping of wine – and others with “marketing relationships” in this space – where does all of this lead?

    What does it mean for other companies with new biz models for selling wine on the web?

    Glad to have a bricks and mortar retail store in CA.

  15. My 2 Cents

    Hi Julie – Great to have a retailer willing to buy more wine. The 20,000 wine brands in need of additional selling channels will be calling you tomorrow for new orders.

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