Winc, a wine club membership company, and two affiliated companies – BWSC, LLC and Winc Lost Poet, LLC – filed for Chapter 11 bankruptcy on November 30, 2022 in the U.S. Bankruptcy Court for the District of Delaware. Winc listed $50.3 million in assets and $36.8 million in liabilities, reports Crunchbase. Their largest unsecured creditor is Meta whom Winc owes $724,000. Though the company reported $72.1 million in revenue in 2021, the company was never profitable.
In a December 8 news release, Winc said they will continue to operate the company normally, serving their members. A $5 million short-term loan and cash flow from operations will continue to support Winc’s operations during the bankruptcy process. Winc is in the process of selling its assets as allowed through section 363 of the U.S. Bankruptcy Code.
The company also announced they have a “stalking horse bidder,” who will buy the company’s assets if approved by the bankruptcy court. Higher or better offers secured during an open auction process could negate the stalking horse bidder’s offer.
As a result of the bankruptcy filing, Winc (NYSE: WBEV) was delisted from the New York Stock Exchange on December 5, 2022. The delisting does not impact the company’s operations, nor does it conflict with or cause a default of any of the company’s material debt or related agreements. Winc just went public in November 2021, raising about $22 million. Crunchbase reports that Winc shares have dropped 98% in value since their IPO.
Based in Los Angeles, Winc was founded under the name Club W in 2011 by Brian Smith, Geoff McFarlane, Mark Thomas Lynn and Xander Oxman, reports Decanter. Rebranding as Winc in 2016, the wine club membership company targeted millennials who would receive monthly wine deliveries based on their taste profile. The prospective member completes a simple questionnaire about flavors and preferences, and then Winc suggests wines to try for their next delivery.
Third quarter 2022 financials
On November 14, Winc reported third quarter 2022 financials. Here are highlights from their earnings report.
- Total net revenue for Q3 was $15.8 million, compared to $18.5 million year-over-year.
- Direct-to-consumer net revenues were $9.9 million, down $2.8 million.
- The net loss for the quarter was $4.2 million, compared to $5.7 million for the prior year period.
- The company had $2.8 million in cash on hand as of September 30, 2022.
Though the company did not announce the bankruptcy at that time, they did note their were focused on cutting expenses and improving cash flow.
“In this challenging macro environment, the Company is prioritizing cost control and cash flow management as we take steps to improve profitability while focusing on our core business,” the company said in a news release.
How the Winc wine club membership works
Wine club members are charged a monthly membership fee and given a credit for every $1 of the fee. Based on their taste profile, members receive recommendations from Winc about wines they might like. Members make their selections and must check out each month to spend their credits and receive their wine deliveries.
The price of Winc’s monthly membership fee is difficult to find on their website. It is not listed on the home page or in the FAQs, but a patient prospect can find them by looking at the gift card page. A one-month membership is $60, a two-month membership is $100, and a three-month membership is $150. Shoppers can also create a custom gift. Winc memberships are flexible. Members can choose from red, white or rosé, and they can skip a month or cancel at any time.
We always hate to see a subscription or membership company go down this path. It is disappointing to its founders, its investors and its members. It is also sad for the industry. From the member’s perspective, the company offered a great product at a reasonable price point if it was in their budget. Their sign-up process was simple, the customer experience was positive, and Winc seemed to be doing the right things. But, after more than a decade, Winc should have been earning a profit. It seems unlikely that the economic downturn was solely responsible for the bankruptcy. What else wasn’t working? Can a stalking horse bidder save Winc and its wine club membership, or will they buy the assets and gut the company? That will be up the bankruptcy court to decide.