Sonoma County’s Vintage Wine Estates cuts brands, staff, vineyards to reduce costs, debt
Vintage Wine Estates, one of the largest U.S. vintners and maker of North Coast brands B.R. Cohn and Kunde, has taken some bold steps in the past several months in “simplifying the business,” cutting costs and debt amid inflationary pressures and slowing sales.
The Santa Rosa-anchored public company (Nasdaq: VWE) on Wednesday detailed how it has sold two vineyards, trimmed the workforce by 4%, discontinued 2,000 less-profitable product items, increased prices, raised charges for consumer shipping and customer freight.
“I can attest that we have been very busy working to turn the business around,” said interim CEO Jon Moramarco on a webcast with investment analysts. He’s a board member and former wine business top executive who replaced co-founder Pat Roney earlier this year. “We are focused on rebuilding the more profitable operating structure, realigning the business to focus on our quality assets, and creating a solid structure to deliver future growth and opportunities.”
Vintage reported net revenues of $53.3 million and $41.4 million in its fiscal second and third quarters, ending Dec. 31 and March 31, respectively. Those were down 6.7% and 12% from a year before.
For its fiscal first three quarters, net revenue was $224.7 million, up 3%. But that includes $21 million in acquired revenues from Ace Cider and Meier’s Wine Cellars and a $2.6 million boost in bulk distilled spirits sales. Those offset $10.5 million less in sales of wine and spirits brands produced for a retailer then discontinued because of profitability.
That business-to-business element is the biggest part of Vintage’s sales, at $94.4 million for the first nine months of the fiscal year, and B2B sales were up 13.2%, driven by the Meier acquisition.
Wholesale is the second largest contributor to revenue, at $67.3 million for the three quarters, up 6.9%. The company said the brands it manages fared better than the rest of the U.S. market, but distributors are cutting the amount of inventory and brands they’re stocking.
As for Vintage’s cutting in half the number of stock-keeping units, or SKUs, in its portfolio, getting rid of 2,000 items. Moramarco said on the webcast that there was potential to cut the number of remaining items in half again.
On asset sales, Vintage sold 965 acres of its Laetitia Vineyard on the Central California Coast on Dec. 15, 2022, for $9.5 million. The buyer was Visalia-based Malli Enterprises, an affiliate of a grape, orange and nut grower, according to San Luis Obispo County public records.
On March 2 of this year, Vintage sold the 42-acre Tenma Vineyard in Napa Valley for $11 million. The buyers were TVP Acquisition Company and Estate Vineyards. TVP was an affiliate of Los Angeles-based The Wonderful Company, according to public records.
“We have too much debt. And faced with the impacts of rapid and significant inflation in the midst of slowing spending by consumers on discretionary items,” Moramarco told the analysts. ”We have to be vigilant with our cash management.”
As of March 31, the company had about $306.0 million of debt outstanding, down from $320.4 million at the end of September and $328.2 million at the end of June last year.
Jeff Quackenbush covers wine, construction and real estate. Reach him at firstname.lastname@example.org or 707-521-4256.