What a difference a week makes. This past Friday, it looked like wine lovers might face a big roadblock getting some of their favorite California wines via direct shipping. New Vine Logistics, considered among the largest and most-dominant players in California's direct wine shipping business, abruptly closed May 29, facing bankruptcy.
Today, it appears the company has been saved from insolvency, at least for now. Inertia Beverage Group, a leading rival in direct-to-consumer services, agreed in principle with Silicon Valley Bank (New Vine's senior secured creditor) to acquire its debt position in the company. "Operations are already gearing up and we are confident in the ability of New Vine's operational team and employees to quickly respond," said Inertia CEO Ted Jansen. He declined to reveal the dollar amount of Inertia's investment.
Founded in 2001 by veterans of the wine, technology and transportation industries, New Vine soon became one of the biggest players in helping wineries and retailers navigate the tangled web of state laws that regulate alcohol sales. It developed technology and systems that allowed wineries and online retailers to ship directly to 44 states.
New Vine's fortunes soared last fall when online retailer Amazon.com announced it was jumping into the wine business and New Vine would handle fulfillment. But working out the infrastructure and technical details of the partnership caused delays, and the faltering U.S. economy made matters worse. Several wineries and customers had begun to complain of mishandled orders in the past six months.
Still, New Vine's client list made it an attractive firm. "The company invested in technology and product development that were gold standard and innovative in the industry," said Charlotte Milan, a spokeswoman for New Vine. "It takes volume to pay for itself, and they were very close."
New Vine's troubles became public when key investors, venture capital firms Thomvest and Pacific Community Ventures, pulled out, concerned about the company's long-term viability and lack of cash. Founder Kathleen Hoertkorn ceased operations, laid off about 60 percent of the staff and tried to regroup.
When news broke that New Line was closing down, it set off a slight panic among its clients. Confused vintners soon gathered at the firm's shuttered Napa warehouse, trying to gain access to their wines, part of 1.6 million bottles of inventory stored there. New Vine handled storage for smaller wineries.
The company's more than 200 customers, including Peter Michael, Beringer, Chateau St. Jean, Dry Creek Vineyards and Chappellet, started scrambling to find a replacement. "We were lucky because we were between shipping cycles," said Peter Kay, director of sales and marketing at Peter Michael. Most California wineries avoid shipping during the summer, fearing temperature extremes might damage the wine.
By midweek, wineries were gaining access to their inventory and a skeleton crew was attempting to fulfill previous orders, according to Milan. And competitors were reportedly interested in acquiring the firm. Inertia began negotiations and soon came to a deal. Like New Vine, Inertia is based in Napa and offers multiple services aimed at building direct sales to consumers, from packing and shipping to software and management.
Whether New Vine's deal with Amazon remains in play is yet to be determined. Amazon refused to comment. But the online retailer's move into wine sales has been delayed for almost eight months now, provoking speculation on when it will happen.
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