I felt excited reading the New Vine case. It painted a promising picture of New Vine as something nature that could potentially revolutionize the wine industry. However, the case stopped somewhere around 2005 and I did some more digging and realized that New Vine nearly shut down in 2009, its VC investors pulled their money out, and the business was acquired by Inertia Beverage Group in what seemed like a fire sale.
So what went wrong with New Vine Logistics? While I couldn't find clear evidence, here are some of my conjectures:
1. They never became profitable:
The latest data the case provides goes up to 2005, and by then NVL was still losing money (negative EBITDA of $1.8 million over $15 million of sales). It's possible that the optimistic forecasts were unrealistic and all that projected profit margin never came to fruition
2. Changes in the regulatory environment
The case mentioned that, despite the seemingly favorable ruling by the Supreme Court in cases like Granholm v. Heald, it still wasn't what the states were going to do about directly shipping wine to consumers. So perhaps the regulatory environment didn't end up becoming more lenient and NVL was adversely impacted by that.
On a somewhat related note, the case mentions that NVL didn't need a license to do business, as would traditionally seller of wine. I also wonder if that changed as well.
So what went wrong with New Vine Logistics? While I couldn't find clear evidence, here are some of my conjectures:
1. They never became profitable:
The latest data the case provides goes up to 2005, and by then NVL was still losing money (negative EBITDA of $1.8 million over $15 million of sales). It's possible that the optimistic forecasts were unrealistic and all that projected profit margin never came to fruition
2. Changes in the regulatory environment
The case mentioned that, despite the seemingly favorable ruling by the Supreme Court in cases like Granholm v. Heald, it still wasn't what the states were going to do about directly shipping wine to consumers. So perhaps the regulatory environment didn't end up becoming more lenient and NVL was adversely impacted by that.
On a somewhat related note, the case mentions that NVL didn't need a license to do business, as would traditionally seller of wine. I also wonder if that changed as well.
Wen, Both of your analyses are correct. And we'll pick up here in class on Thursday when we do NVL part 2 with WineDirect.
ReplyDeleteThank you! Now I'm still having a 100+ fever so not sure if I can make it to class today. But would love to understand better 1) why they ended up failing 2) what WineDirect then did that's different from what NVL did.
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