Vintage Wine Estates changes CEO, rolls out plan to improve profitability
Vintage Wine Estates Inc., one of the largest U.S. vintners and producer of North Coast brands such as B.R. Cohn and Ace Cider, is looking for a new CEO and is planning a number of changes such as price increases over the next six months to improve cash flow and profitability.
Effective immediately, co-founding CEO Pat Roney is now executive chairman, the Santa Rosa-anchored company announced Wednesday. Independent board director Jon Moramarco, an alcohol industry analyst and longtime former top executive of major wine companies, has been appointed interim chief executive as Vintage searches for a replacement.
Running the company day to day will be President Terry Wheatley, still in charge of sales, marketing and distributor network relationships; Chief Financial Officer Kris Johnston; and Chief Operations Officer Zach Long.
“We have mutually determined that his role as CEO has changed significantly since our IPO, adding a complex dimension to his responsibilities, and taking him from what he has truly enjoyed,” said Paul Walsh, former chairman and now lead independent director, in the news release. “It was critical that the Board make the necessary leadership changes to find the right talent to continue to execute our strategy while maintaining the years of institutional knowledge and industry relationships that Pat has to offer.”
Roney has led Vintage since he and the late Leslie Rudd started it 20 years ago. The company has grown rapidly, with 20-plus acquisitions in the past 10 years, including over 10 in the past five years. Vintage now produces over 2.5 million cases of wine, spirits and cider annually and has more than 3,300 acres of vineyards, according to the annual report.
In 2021, Vintage became publicly traded via a merger with a special-purpose acquisition company, or SPAC.
“We believe that we have the business model which can deliver on growth and provide top-tier industry profitability, but we have much to accomplish to achieve these goals,” Roney said in the announcement. “Jon brings the skills to navigate through this plan and execute the changes needed to ensure our long-term health.”
Moramarco for over two decades had been CEO of Winebow, Allied Domecq Wines USA and various units of Constellation Brands, including its North Coast-anchored Icon Estates portfolio. In the past 13 years he’s operated Santa Rosa-based alcohol industry analysis firm BW166.
He said Vintage has “a strong foundation, key premium brands, great customer relationships and significant potential.”
“However, we have much work to do to improve our cash flow and earnings power while we measurably reduce debt,” Moramarco stated. “We have the plan and a powerful team of people with the drive to execute quickly to deliver improved results. We expect we can be on track as we enter fiscal 2024 to returning to EBITDA growth on a potentially smaller, but meaningfully more profitable enterprise.”
The company said it brought in corporate strategy and acquisition integration adviser Arthur Bert to help with “reorganization and simplification.” Based on Bert’s recommendations, Vintage plans these changes to boost revenue and operating profit in the second half of fiscal 2023, or January through June:
- Higher direct-to-consumer prices and shipping charges, together with less spending on related advertising and marketing.
- Price increases in certain higher-volume wholesale brands.
- Increased freight-recovery charges for its business-to-business segment.
- Trimmed sales, marketing and operations overhead.
- Renegotiation of certain contracts to improve price and margins while working to exit less-profitable contracts.
- Change supply-chain sources and costs, including a close look at how many different molds of bottle molds are used.
- Reduction in the number of different iterations of brands, or stock-keeping units (SKUs).
- Increasing operational efficiencies and improving working capital management.
- Continue to “monetize assets” to reduce debt.
These changes are forecast to cost $2 million to implement but save $10 million this fiscal year.
The company also postponed reporting of fiscal second-quarter financials, originally set for Thursday, so it can complete a restatement of the report for its first quarter, ended Sept. 30, 2022. It anticipates that the restatement, scheduled for release in mid-March, will reduce first-quarter earnings from $2.7 million down to $1.9 million. That follows a $700,000 net loss for fiscal 2022.
Meanwhile, Vintage estimates that revenue for the fiscal second quarter, ended Dec. 31, will be about $81 million, down roughly 2% from a year before. The company said that sales from acquired brands offset lower sales because of a customer’s television programming schedule and “slower consumer discretionary spending.
Jeff Quackenbush covers wine, construction and real estate. Before coming to the Business Journal in 1999, he wrote for Bay City News Service in San Francisco. Reach him at firstname.lastname@example.org or 707-521-4256.