It’s Baaack: Wine.com Shopping for $10M to $15M — Exclusive


It’s been an astonishingly long and bumpy ride, but finally, Wine.com is making a claim for the first time in its 13-year history: It’s profitable.

That’s no small thing for CEO Rich Bergsund, who was installed at the head of the company in 2006 by the private equity firm Baker Capital. At the time, Baker had just recapitalized the company with $12 million, and hopes for Bergsund were not terribly high. (Baker put another $5.25 million into Wine.com the following year.)

It wasn’t personal. Rather, selling wine online looked like a fool’s errand. After all, the first iteration of Wine.com, founded in 1994 as Virtual Vineyards, reportedly blew through more than $200 million before being acquired for $10 million by eVineyard in 2001. The announcement was celebrated as David beating Goliath because eVineard had raised roughly 10 times less venture funding. But Wine.com’s problems extended beyond poor money management, and for years after its acquisition (eVineyard named the combined company Wine.com), profits remained elusive.

That just changed. For the San Francisco-based company’s fiscal year ended March 31, Wine.com saw revenue of $56 million -– up 25 percent over the previous year. And, Bergsund says, the company is profitable and on track to see as much growth again this year.

What happened to finally turn things around? Bergsund credits a number of initiatives, such as more than doubling Wine.com’s inventory, including wines highly rated by critics but that sell for $20 or less, and “collectible” wines that improve with age.

Successfully copying others’ business innovations has been working, too. For example, à la Amazon Prime, Wine.com customers can now pay $49 a year for unlimited shipping. (That change alone altered the way we shop for wine in my house.)

Wine.com has also been orchestrating daily flash sales since the middle of last year, using a previously abandoned internal brand, WineShopper.com. And people have been responding. Bergsund says flash sales accounted for nearly $4 million in revenue over the nine-month period ending in March, and that half of those who’ve joined the 60,000-person email list are new to Wine.com.

“It’s a different purchase occasion,” he says. “It’s not where you go when you want a big assortment or have something specific in mind. What you see is what you get. But there’s a segment of the population who wants to know what that deal is.” (As an added incentive, Wine.com puts $10 in a user’s account if they sign up a friend.)

Wine.com has been turning to more “social” coupon sites, too, including Groupon and LivingSocial, having learned after an experiment with Groupon last December that “enough [people] became real, repeat customers that it makes sense to do it.”

But the biggest advantage Wine.com now enjoys is simply that a lot of the heavy lifting is finally behind it. The company has relationships with more than 1,600 wineries and 140 wholesalers. It also has six warehouses around the country, including an 80,000-square-foot space in Berkeley, Calif., all of which allow the company to navigate around state-specific regulatory hurdles. Consider that a wine retailer can’t ship a bottle from California to New York, but Wine.com can ship a bottle of California wine to someone in New York from its giant warehouse in Long Island.


Whether its infrastructure and newfound momentum are enough to keep the company on an upswing remains an open question. But Bergsund says the company isn’t taking anything for granted. Pointing to just one small example, he tells me that though the company’s fairly basic apps for the iPad and iPhone now account for 7 percent of the company’s sales, its software engineers are working on many more sophisticated applications. One of them may allow users to buy a bottle of the wine they’ve just photographed.

One way or another, the market opportunity still looks to be huge — with just 1 percent of all wine sold online currently.

Bergsund will be playing up the opportunity soon when he meets with potential investors. He says he’s about to go looking for a fresh round of growth capital in the “$10 million to $15 million range.”

“The growth is still ahead of us,” he says.

We’ll see if investors agree.

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