The news of Vintage Wine Estates filing for bankruptcy sent shock waves throughout the industry.
"Execution of the IPO. I think it was rushed," said Rob McMillan, Silicon Valley Bank executive vice president.
The Santa Rosa-based company went public in 2020. Under it, over 30 wine and spirit brands.
Most of its products are in the $15 to $20 range. To understand what might have gone wrong, we spoke with McMillan, one of the top wine-business analysts in the country.
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"The industry is certainly flat on sales. The fine wine industry is doing a little better. It's the lower price wine that is certainly struggling," McMillan said.
McMillan believes a generation shift is also impacting sales.
"The younger generation is not drinking wine like the older generation, but they like wine," McMillan said.
In a statement, Vintage Wine Estates said it is pursuing the sale of all or substantially all of the company's assets and added in part: "VWE expects commercial operations to continue largely business-as-usual, and we look forward to serving our customers during this period of transition."
According to multiple experts, the wine industry is facing a global crisis.
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"The California wine industry is in the same situation that the wine industry is across the world. We have seen a deduction in consumption, and I think it's a scary time," said winemaker and owner of Monte Rio Cellars, Patrick Cappiello.
Cappiello is seeing the impact up close.
"Traditionally, this time of the year, I would do twice the amount that is producing here," said Cappiello. "In the last year, I have seen a 30%, personally a 30% reduction in business for my business for the last 12 months, which is huge."
Cappiello believes people drinking less after the pandemic, as well as other factors, could be playing a role.
"There is also a younger generation that is still figuring out life and maybe hasn't discovered wine and wine culture," he said. "Boomers are drinking less. I think that is probably the bigger effect, and we are seeing the people that have been the main driver behind wine consumption are starting to pull back, whether it's because they have enough wine in their cellar or because of health reasons."
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Sonoma County Supervisor Susan Gorin is concerned about what the bankruptcy of VWE will mean for many here.
"I know personally some of the wineries that are involved in the potential sales moving forward. B.R. Cohn and Kunde Winery especially are so important to the economy of Sonomay Valley and Sonoma County. So it's distressing," Gorin said.
Despite all the setbacks, many are staying hopeful.
"If you talk to the old school farmers. I talk a lot to the farmers from the area about what is going on, and they say 'Hey Patrick, it's just a phase. We are going to move through this.' This happens every 20 years, 30 years. Last time we saw it this bad was in the 80s, but we always come out of it," Cappiello said.
Full VWE statement:
"On July 24, 2024, Vintage Wine Estates (VWE) announced its voluntary filing for protection under Chapter 11 of the United States Bankruptcy Code in the District of Delaware. This process is intended to establish a fair, structured process for VWE to address outstanding debt obligations while the business pursues the sale of its assets.
This decision was made in light of recent financial challenges and the Company determined that this action is the best option to serve our customers and maximize value for a range of stakeholders.
Throughout Chapter 11, VWE expects commercial operations to continue largely business-as-usual and we look forward to serving our customers during this period of transition.
Since its founding, Vintage Wine Estates has had a singular focus on bringing industry-leading wines and ciders to a broad range of consumers and businesses. We remain committed to maximizing the value and potential of this business, fulfilling our commitments to partners, and delivering value for a range of stakeholders."
Regarding the future of brands owned by VWE. Its team said:
"The Company is committed to working closely with its stakeholders to minimize the impact of the bankruptcy process and to ensure that its creditors are treated fairly. The Company has engaged GLC Advisors & Co., LLC and GLC Securities, LLC to advise on its strategic options, including the pursuit of the sale of all or substantially all of the Company's assets as contemplated by the Bidding Procedures Motion. The Company has received and is currently evaluating multiple preliminary indications of interest with respect to the potential sale of various of its assets. Any of those sales would be subject to review and approval by the Bankruptcy Court and compliance with Bankruptcy Court-approved bidding procedures pursuant to the Bidding Procedures Motion or as otherwise approved by the Bankruptcy Court. In addition, the Company is consulting with Jones Day as legal advisors, Riveron Consulting as financial advisors and Richards, Layton & Finger as Delaware counsel."