Vintage Wine Estates Files Bankruptcy

[Marc_Hauser]

Looking at the bankruptcy docket, they’re working towards a sale of the business, in whole or in parts. So not likely a reorganization that maintains VWE as a single business. Then again, bankruptcy is a process and things can change.

They ran a process earlier and couldn’t find a buyer(s).

https://document.epiq11.com/document/getdocumentbycode?docId=4359590&projectCode=VWE&source=DM

[larry_schaffer]

And I have to assume the conditions are even less favorable for a sale of most of these assets as they were a few months ago. That is a major major issue moving forward.

[Ian_Dorin]

I thought it was $667 million in 2003?

Mondavi had racked up a lot of debt late in his life, which hurt the value of the company.

[Ian_Dorin]

That was just brands that they sold, wasn’t it?

I know that Prisoner Wine Company took over the Franciscan space (and painted the building a really crappy color too.)

[John_Morris]

@Marc_Hauser

What hurt them was a number of factors. Certainly, the downturn in the wine market generally. The de-SPAC going public (full disclosure: I was counsel to the underwriter on that transaction) and the financial transactions surrounding that. The founder retiring without having the right management team in place to continue the legacy. The challenge of being a public company in an industry that doesn’t really suit itself well to quarterly expectations. Going on a massive buying spree of brands, including a cider business, and the IP of two cannabis drinks businesses.

Sounds like the due diligence was – how shall we say? – interesting.

[John_Morris]

@D_Mowe

Not to repeat what has already been said, but want to give some further insight as i have been working with VWE for 15 yrs or more. VWE had a philosophy of buying distressed properties for far less value than they would have been in their heyday and running them as brands being produced from a centralized hub winery (buying a winery that might have a production facility, closing it and consolidating production). Anything they bought in Napa became just a front, all production was pulled and moved to Girard winery, anything bought on the Sonoma side they would close and send the production to their ray’s station winery in Hopland (old Fetzer). They bought Tamarack in Walla Walla, let everybody go and sent everything to Owen Roe… However, 7/10 wineries that VWE bought they did not resurrect as had hoped.

Operationally they have a HUGE brand that sucks all their resources called JOSH CELLARS. This was the biggest cash cow for the company (or cash flow provider). They were the producer and operational partner for Josh (owned by Deutsch) and started producing for them when it was 25,000 cases and last year they produced over 3 million cases!!! (all out of the VWE rays station winery in Hopland). Industry rumors are that the new CEO for VWE came in and saw that they were actually dedicating tons of $$ and resources to keep the josh machine going and after more careful review of the partnership with Deutsch realized it was not profitable business and he was keen to either raise prices dramatically to continue producing or cancel the agreement to focus on company owned brands. However, option 2 right now is an uphill battle due to current climate with larger volume brands taking the biggest hit in the current wine market and investment in these brands are needed and …looking at their current financial state, the $$$ needed to invest in these brands is not there.

Thanks. Very interesting insights.

[Marc_Hauser]

@John_Morris

Sounds like the due diligence was – how shall we say? – interesting.

SPAC deals were different. It was a time.

[Robert_Dentice]

Google says $1bn. Either way it was 20 years ago and VWE was valued at $245 million pre-money so the point is still valid that it seems like a big deal for them.

Constellation to buy Mondavi in $1 billion deal

[Kris_Patten]

That is vineyards, winery, everything. I believe this was going to be Woodbridge label, they don’t have a winery, and Mondavi brand which was likely the Private Selection, not Napa Valley and the winery and vineyards. Doubt anyone is looking to divest To-Kalon, the arch, or the Robert Mondavi Napa name and heritage.

Woodbridge and Mondavi PS are still nationally powerful brands.

[Ian_Dorin]

I went looking for the article I remembered, and found an even more updated number- $1.36 billion!

https://chiefmarketer.com/robert-mondavi-and-constellation-brands-in-1-36-billion-merger/#:~:text=The%20Robert%20Mondavi%20Corp.%20has,stock%2C%20according%20to%20news%20reports.

[Kris_Patten]

$325MM in debt assumption tho…

[Roy_Piper]

Cosentino was sold to Brion Wise, just for the facility, and I hear it will be the new home for Mark Herold Wines. What a location!

[JA_Miller]

Thanks all - these recent comments are the level of insight and perspective this thread needed!! I’m now learning more about the debacle as are others…much appreciated!

[Ian_Dorin]

Right? Like I said upstream, given the proximity to one of the busiest restaurants in Napa, you would think that overflow alone would have been enough to keep any winery going.

[Robert_Dentice]

Mark Herold, there is a name I have not heard for a long time!

[Robert_M_yers]

I know he sold it but is Merus still around?

[Robert_Dentice]

The website is still up. Does not look that active. It is part of Foley. The last Vinous review was from 18 and the last Wine Advocate review was a 21 Chardonnay.

[Ian_Dorin]

Looks like they are only selling library wines? Makes me wonder if they nixed the brand?

[Jason_T]

@Robert_M_yers

I know he sold it but is Merus still around?

I’m pretty sure it is. as my FIL is into the Foley wines, and I believe that’s still one of his regular purchases. Or, though what Ian says makes me reconsider.

[Robert_Dentice]

If I am remember correctly the sale of Merus was one of the first big sales where a winery with no vineyards and basically just a brand sold for a decent sum.

Google says it was sold in 2007.