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Portfolio Update: Winc Making Rapid Progress

Portfolio Update: Winc Making Rapid Progress
By Andy Gordon
Date October 19, 2020

We have good news on Winc, which we recommended last December.

Winc is thriving.

We recommended Winc because we loved its business model and traction. Winc collects data from its hundreds of thousands of customers and uses that data to make wines its customers love.

Of course, its business model could not anticipate COVID-19. But COVID-19 brought key aspects of Winc’s future into the present.

In May, when I talked to CEO Geoff McFarlane, he pointed out to me that Winc’s model leaned into the pre-COVID-19 “seismic shift of alcohol purchasing moving online.”

At the same time, Geoff was acutely aware of the economic devastation COVID-19 had brought to the U.S. economy and other markets. I characterized his thinking at the time as “cautiously optimistic.”

Geoff’s cause for optimism was based on a small sample size — two months of increasing business in March and April. He (and everybody else) had no idea at the time of how much worse the pandemic, right along with the economy, could get.

He has a much better idea now of what he’s dealing with. And he’s seen Winc’s sales continue its explosive growth through the summer months.

This year’s sales (through September) have nearly doubled, with growth taking off the second and third quarters. In the first half of the year, Winc’s customers grew by 382%. It now has 151,000 new customers.

In my last update to you in May, I mentioned that Winc had just launched a new organic and vegan wine brand called The Wonderful Wine Co. Geoff thought it could do really well. He knew that organic wine was one of the fastest growing sectors in today’s wine market.

I shared his optimism. But, of course, neither of us knew for sure. Now we do.

Winc’s Wonderful Wine is the company’s latest big hit. Wonderful Wine’s latest monthly sales indicate an annual revenue take of $2 million. And that’s based almost entirely on D2C sales. The next step is wholesale. Once they’re in stores such as Whole Foods and Vons, Geoff expects revenue to take another big jump (400%-to-500%) next year.

Winc is already working on its next blockbuster hit. The company is testing several hybrid products including spritzers, aromatized wines, sake and others. Winc doesn’t know which of these products will emerge as its next big winner. But it will find its next winner the same way Winc always does — by using its customer data to identify the wines with the most potential.

It’s a proven system. And, in a way, that’s the most encouraging thing about Winc. It doesn’t have to do anything special. It needs to keep being Winc — and continue to take advantage of a multitude of strong trends including…

A surge in online shopping during COVID. 76% of the consumers that increased their online purchases for home delivery agreed that they will continue to order wine online.

Rapid online wine sales growth. Wine sales are up over 300% since this time last year, and they command 70% of the e-commerce alcohol market (according to Silicon Valley Bank and Nielson)

An increase in online alcohol sales. Alcohol sales are expected to rise from $3 billion in 2019 to $13.4 billion by 2024, according to Cascadia.

Young wine drinkers emerging as a dominant force. Millennials will replace boomers as the dominant demographic in 2021.

Winc is close to being profitable. It will end the year aout 5% in the red. That’s nothing… especially when you consider it will have spent $10 million this year on strengthening and expanding its marketing operations. In 2021, Winc believes it can become EBITDA-positive for the year.

The goal is more than doable. Winc’s already experienced some EBITDA-positive months this year.

And last but not least, Winc is raising again. It’s worth checking out its issuance site. COVID-19 may have given its growth a shot in the arm, but Winc should continue to experience healthy expansion long after COVID has disappeared.

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