New Vine Logistics FAIL

The wine industry is reeling from the news that New Vine Logistics has gone belly up. This is really a disaster for any winery that was using the company's fulfillment and compliance services. The best account of what happened comes from Lew Perdue, editor of the blog Wine Industry Insight. The bottom line is that NVL was caught in a fatal cash burn scenario. The company's investors couldn't stomach any more red ink and refused to inject any more equity into the venture. Now, winery owners are left trying to figure out how to get their wine back and how they are going to ship it to customers in the future.

The ramifications of this collapse are broad. This is not good for the Direct-to-Consumer movement and it's obviously not good for the smaller wineries that need to outsource their wine storage, fulfillment, and compliance needs. We will have to wait and see the extent of the damage, but clearly there will be some producers whereby this event becomes the straw that breaks the camels back.

While this is obviously crappy news, at least it didn't happen during the holiday season, a part of the year where many wineries capture significant and much needed cash flow. If there is any positive news here, that would be it.

And just when you thought their couldn't be anymore "risks" associated with this industry, we are all reminded that suppliers need to be vetted and chosen carefully in order to avoid situations like this and that it's not just agricultural or weather related issues that need to be thought about from an operational and financial risk perspective.

As more details start to come to the surface it's comforting to know that the failure of a third-party logistics company is not something we have to worry about here at Covered Bridge Cellars. Crushpad has taken a vertically integrated approach to wine storage and order fulfillment. In 2007 the company updated winery customers on it's in-house logistics efforts:

Logistics - 2007

• Launched a logistics operation to improve shipping accuracy

• 15,000 square foot warehouse with 2 full-time logistics staff members

• Added address and compliance validation to reduce return shipments

• Increased options for shipment to include 1 and 2-Day Air Service

• Added software and weight validation resulting in less than .05% errors during our busiest month ever

• Initiated 3-Tier direct shipping project to increase distribution (starts Feb. 2008)

• Subsidized shipping one bottle nationwide to increase trial purchases

• Added shipment tracking numbers to order confirmation emails and order records

• Re-aligned shipping charges to better reflect per bottle costs

Crushpad's logistics warehouse is a state-of-art, temperature controlled facility, that has around eight full time employees dedicated to getting the wine out the door to customers. As with the winemaking, we have access to all the critical shipping and inventory data via a secure web-based interface. The entire operation is top-notch without a doubt. And Crushpad as a business is well capitalized, operationally sound, and cash flow positive--traits that are a tremendous competitive advantage for any company in the wine industry--particularly in this economic environment.

*UPDATE*

It appears the comments above about NVL not having an impact on our business were incorrect! Crushpad actual does use the company's services for shipping wine to three-tier states such as MA and NJ--although no wine is stored at NVL. We just got an email from Crushpad letting us and others know that shipping to MA and NJ is no longer an option. Of course, once a new vendor is chosen this option will be available again. This is part of the email that was sent:

"We can confirm that none of your inventory is at NVL. That is the good news.

The bad news is we are left with no legal shipping options for New Jersey, or Massachusetts. We are actively researching alternative solutions for these markets, and will update you as details are available."  

Shipping via three-tier is super expensive, something like $15 per bottle and it takes forever because the wine has to physically go to a distributor, then a retailer, then on to the consumer's address. No consumer is going to pay that, but we still wanted to keep it as an option.

When we purchase wine online we simply have it shipped to addresses in NH or CT, where direct sales are permitted. But not everyone has that luxury. This entire mess only highlights the idiocy behind the restricitve, anti-competitive, direct shipping laws in states like ours and elsewhere. If we could ship direct to every state legally, there would be no need for a company like NVL to offer a "three-tier" shipping solution.

As we get more information we'll update you as to what's going on. For now, it seems like we temporarily lost the ability to ship wine to MA and NJ via three-tier. What a bunch of BS.

Jeremy

Comments

[Mike Duffy]

Does Crushpad do fulfillment for other than their wine-making clients?

[Jeremy]

Hi Mike,

Crushpad only provides the service to their existing customers. That would be clients purchasing a barrel along with any Commerce members--which is the category we fall under.

[maryann]

hello do you not do research wtnservices a 20 year old company owned by the 1 billion dollars 1800 flowers ships three tier to NJ MA is economical cares about clients and makes a profit. It has customers that it has serviced for 20 years! Visit them we have worked with them for 10 years never buying into the illusion of new vine. Also they hired matt wood former vp icon and have chris Edwards respected logistics guy leading the brands. Call then!

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