UPDATE: Lewis Perdue at Wine Industry Insight has the best article yet published on the closure. His reporting appears more accurate than mainstream newspapers. He’s a blogger by the way. Highly recommended.
Usually I use this blog to express my views and opinions, but today I just have questions regarding the NVL closure.
According to reports in the Press Democrat, quoting an unnamed employee, Silicon Valley Bank was responsible for the abrupt closure of NVL either last Friday or on Sunday. It isn’t clear which.
What is known is that the situation was first brought to light at noon on Sunday by Larry Chandler on Twitter.
Wine and Spirits Daily reports that the closure was brought on by Amazon’s delay in starting amazonwine.com. Megan writes that NVL built out anticipating having to handle the volume Amazon was sure to send its way, and was left hanging when they didn’t launch last Fall as expected.
My questions, given the above, are the following:
1. Some are saying that the inventory at NVL is locked down and somehow unrecoverable. They imply this might cause wineries and marketing agents to go under. How is this possible, and who legally owns the wine NVL had under its roof?
2. Silicon Valley Bank shut the doors on the operation, reportedly. In doing so, they likely imperiled some of their clients shipments. Did they tell their clients ahead of time? And if they did, didn’t they have the obligation to tell everyone in the industry?
3. Why wasn’t NVL more forthcoming to their clients? Clearly they saw this coming, and an orderly wind down stains your reputation much less than the mess many of their clients are currently experiencing.
4. What does this mean for the future of direct shipping? Is this just a blip caused by Amazon, or is it some kind of sign that the direct to consumer channel simply isn’t as healthy as we’ve all been led to believe? You would think that a company doing 60 million/yr in business, coming off years of double digit growth, would be able to weather an economic “storm” of low single digit growth if managed properly. You would think.
So many questions. Anyone have any answers?
Agent Red
1 year ago
Great questions, Josh!
To answer one question, many wineries and wine retailers DID see this coming! At least one day per week, I like to lessen the pressure on my own warehouse and delivery staff by driving the Top Secret Wine Van on wine pick up rounds. My visits have taken me to NVL several times in the past 2 years. Not a single pick up has ever gone smoothly there. I have experienced everything from missing pallets of wine to multi-hour delays. On one recent visit, the warehouse manager asked me if The Wine Spies were hiring. As impressive as NVL *looked* to the casual observer, these all added up to one conclusion for me: DOOM.
The next few days should be very interesting!
- Agent Red, Founding Agent
The Wine Spies, LLC
Mark parton
1 year ago
I can only speak to the last question (4) and that is the DtoC channel is healthy and profitable. We have doubled in size every year for the last 5 years and will do so AGAIN in this economy, ending the year at around $10m in wine sales. Dont blame low sales on the economy. I cant say it enough, excellent customer service and knowledgable sales people make this happen.
maren
1 year ago
I understand that wineries can collect their inventory if all bills are paid. To pay their last balances they will need to pay with a certified check. However, not all of the wineries have been billed yet…
Feel free to reach out to me at WTN Services if you are in trouble due to the NVL closure. Perhaps we can help. Maren at WTN Services
John Kelly
1 year ago
Josh – 1) I’m not an attorney but AFAIK NVL was a glorified tax-paid warehouse. Unless they were actually acting as a distributor for some of their clients, they cannot legally own the wine. SVB is going to try to recover what they can from the folded operation, including attempting to collect on all NVL’s outstanding invoices. But I don’t think the bank can own the wine either – they are not licensed to take posession. If the bank is attempting to collect on invoices for services never actually rendered by NVL, they will have problems. Some wineries may have to go to court to compel the bank to open the doors so the wineries can collect their inventory, but I don’t think the bank has a legal right to hold the inventory.
2) No, I don’t think the bank has any legal requirement to inform NVL clients that they are closing the doors. I don’t know which branch of SVB funded NVL, but if it was the tech branch this is how they fold companies all the time (SVB closed the tech company of a friend of mine 2 weeks ago with just a few hours notice). I would be surprised if SVB’s wine branch funded NVL, though if they did I would be even more surprised to find they closed it this way – either way this is going to be a PR nightmare for the wine division at SVB.
3) The guys at NVL pitched me a couple of times and I just thought they were heavy on talk and light on performance. Then I started hearing other stories along the lines of what Agent Red recounted above and was glad I never got in bed with them.
4) I don’t think the failure of NVL in any reflects some deeper problem with DtoC. If the success of their business model depended on Amazon launching their wine sales program by a date certain, that was just a sucker move. If I’m a middle manager at Amazon, I just delay the rollout for a bit so I can pick up any backend platform that NVL developed for a fraction of what the NVL guys were thinking they could sell it to Amazon for.
tom merle
1 year ago
1. The bank can most definitely hold the wine in lieu of delinquent loan payments. You don’t have to be licensed to take possession IMHO. It is just a “liquid” asset. Selling it off is another matter.
2. SVB has a wineries unit. They do have to be careful about negative PR affecting their other actual potential accounts. Banks very rarely give any notice, less assets go out the back door in the interim.
3. NV (formerly NVL) just couldn’t get their act together. Too much turnover, too many screw ups, etc.
4. The Amazon delay was the last nail, but they were bleeding. It makes no difference what the size is, as we know. And banks have a fiduciary responsibilty to pull the cord (or is it cork) for non performance.
El Jefe
1 year ago
1. and 2. It’s not actually clear that SVB had anything to do with the shutdown. Other sources suggest other investors chose to stop throwing good money after bad. The point really being – until you know, you don’t know. That said…
3. Nothing like driving your car right off the cliff. I can only imagine what those wineries are going thru right now. The next two weeks are the last window for wine club shipments before the summer heat. Those wineries ran the credit cards last week to set up for shipping, and now their inventory is in limbo.
4. DTC is strong as heck. There are still plenty of good options out there for wineries to put the puzzle together for themselves. And by the way, one very excellent option is to contact Maren at WTN services (see comment #3 above). She has taken excellent care of our DTC the past two years and I cannot recommend her and her staff more highly.
Lewis Perdue
1 year ago
It appears to me that the plug was pulled by the equity investors and not Silicon Valley Bank.
Rob McMillan, the head of the Wine section at SVB told me last night that they did not learn of the shutdown until after it had happened. His info and more stuff are in my story at: wineindustryinsight.com
Jared
1 year ago
So many people saw this coming, it should not have surprised anyone. As for Amazon picking over the scraps, quite possible, so we’ll see.
More interestingly, how does this impact 3rd party companies like Andrea Immer and Bottlenotes who have built their entire companies on NV’s supply.
Charlotte Milan
1 year ago
While this does not answer all of your questions, following is a statement from Kathleen Hoertkorn and Chairman of the Board Homer Dunn:
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, Hoertkorn affirmed that they “truly believed that they would have been funded and were not expecting to have to cease operations.â€
“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.â€
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.
Hoertkorn stated that she 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.â€
with held
1 year ago
1. wineries still own the wine and are being given their wine back. it is not locked down.
2. Investors pulled out after analysis completed by interim exec group.
3. katie tried securing more funding until the last possible minute but was unable to acquire it.
4. stay tuned, may be a new player coming into the fold.
With-held
1 year ago
Someone needs to help the employees get paid. Over 75 employees were let go on Friday without their final checks or accrued vacation. They are being told the bank has taken over, and refuses to let the company pay them but the bank has not taken over the company. The employees that are left there, are being told day by day if they will be paid, yet they haven’t seen a guarantee yet. When they ask about being paid for last week, they are told it is still being negociated. This has nothing to do with the employees, but bad management. It is not fair that the employees are being punished for lack of leadership.
John Kelly
1 year ago
Thanks to Charlotte Milan and “with-held” for weighing in here. Has anyone asked the question: “Has there been or will there be a bankruptcy filing?” Harsh for NV’s employees but don’t final paychecks rank behind other debts in bankruptcy?
With-held
1 year ago
No final checks to employees do not rank behind other debts in bankruptcy in the state of California! The state labor law clearly states that paying employees comes before any other debt. The employees have worked and earned their check, other debts come after that! Anyone who says otherwise, is sadly mistaken. How would you like it if your employer refused to pay you, but was paying for PR firms to release statements to the press or other debts? The employees are not to blame. Without them, you will not get the wine that seems to mean so much to you.
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