You might have thought that an online wine club would be impervious to consumers’ belt-tightening.
News came last week that Winc filed for Chapter 11 bankruptcy. The company had gone public a bit more than a year ago.
Last November, the company’s initial public offering (IPO) raised $22 million with shares at $13 right out of the gate. At this writing, upon filing with the court for bankruptcy, shares were trading for about 20 cents.
The bankruptcy filing itself runs a few hundred pages and shows $50.3 million of assets and $36.4 million of liabilities, with Meta listed as a top creditor, with a trade line of more than $724,000.
Bloomberg reported that the company is seeking a buyer for its assets.
Now, it must be noted that Chapter 11 is no liquidation – rather, the firm can keep operating as it restructures or finds a buyer or pays its creditors. But the company’s latest quarterly report shows the pressures in place. Wholesale case volume was up over 7% in the third quarter of 2022 compared to the prior year period, “primarily due to a one-time sale of select inventory below cost,” as the company continued to expand its retail footprint. The company took note of a challenging macro environment, and we note that the fact that after Meta, one of the top creditors is FedEx, owed about $568,000 — which indicates the operating costs of a direct-to-consumer model that needs to get the goods to the consumers’ doorsteps.
Indeed, looking through the company’s 10-Q we see that loss from operations year to date (into the September quarter) stood at $12 million, widening from $10 million a year ago, while revenues declined to $51.9 million from $53.6 million last year.
We might call Winc one of the latest casualties of the connected economy, where the data-driven model offered (and yes, since it’s Chapter 11, still offers) personalized recommendations based on questionnaires, and home delivery.
But now the great reopening is fully in force, and there’s at least some return to the wine shops and the in-person tasting and the liquor stores in general. Back in September we found that alcoholic beverage subscriptions were relatively resilient. But now, there’s a wholesale pivot to cutting back on all manner of nonessential expenses, and the average retail subscription is down 40% from peaks seen last year. Thirty-four percent of consumers canceled subscriptions due to a desire to reduce expenses. And as we found, too, 43% percent of existing retail subscribers are uncertain about renewing their plans.
The fruit of the vine may lift one’s spirits — but it didn’t lift Winc investors’ fortunes.