Inertia Buys New Vine: Revelations

June 4th, 2009 → 11:28 pm @ Josh Hermsmeyer


In my previous post on New Vine (formerly New Vine Logistics), I listed 4 questions I had about the abrupt closure.

Thanks to the absolutely stellar reporting of Lewis Perdue at Wine Insights (be sure to subscribe if you don’t already), it looks like I’ve gotten some answers.

But first, the juicy stuff from Lewis’ latest post:

* Amazon has a stealth, password protected version of its amazonwine.com site up and running using New Vine technology.
* Employees claim they are searching for a class action attorney to file suit against NV

And, perhaps most scandalous of all, given the fiduciary duty management has to their investors, employees and clients:

* New Vine had “hidden” debt not accounted for on its books and had no CFO for the past 2 years. The debt was revealed only after an internal audit was performed by a crisis manager, and it is what caused investors to close New Vine’s doors.

So let’s see how the latest round of revelations and other recent events help answer my questions from the other day.

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?

My current opinion: It isn’t in Inertia’s or the investors’ interest to let what’s left of their client list easily defect to another fulfillment house. So, while I’m sure many will leave, other clients will probably find it harder to extricate themselves. They’ll likely be wooed and some attempt will be made to keep them on board.

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?

Fact: Silicon Valley Bank did not shut the doors (I relied on erroneous reporting in the Press Democrat), so this question is moot.

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.

My current opinion: Despite statements placed in the comments of my blog (and many others) by Charlotte Milan on behalf of Kathleen Hoertkorn and Chairman of the Board Homer Dunn, Lewis Perdue’s reporting appears to show clearly that both either knew, or should have known that things were going very, very badly. The discovery of “hidden” debt should have been a huge red flag that they had lost the trust of their investors. If reports are true, they should have alerted both their clients and employees about the companies’ financial distress. Huge black eye for the management.

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.

My current opinion: This debacle has very little to do with the future of direct shipping, and much more to do with poor management.

It’s been an interesting week in the wine business. Thanks to everyone who commented, shared insider chit-chat with me on Twitter, and to Lewis for his fine reporting.