July 10, 2013, 12:29 PM

CEO addresses a rumor that Wine.com is on the block

Rich Bergsund addresses a claim that the wine merchant isn’t turning a profit.

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Wine.com Inc. CEO Rich Bergsund took to his own blog last week to counter a claim that the web-only retailer is up for sale by its majority owner, Baker Capital.

An article on GrowthCapitalist.com, an online news source covering private and public company finance, states that Baker Capital is attempting to sell off Wine.com because the company isn’t profitable despite $70 million in annual sales. The article says initial attempts to sell the wine merchant haven’t drawn interest and that its main asset is the domain name.

Bergsund’s blog post noted that Wine.com, No. 239 in Internet Retailer’s 2013 Top 500 Guide is “majority owned by a private equity fund that makes money by buying and selling companies. So we’re basically always for sale and that has always been the case.” While declining to discuss merger and acquisition activity any further, he did provide some perspective on Wine.com’s recent past and the challenges the online wine business faces including regulatory constraints, the logistics of shipping heavy wine bottles, extreme weather conditions and adult signatures required for delivery.

The company was founded in 1998 as eVineyard.com by Mike Osborn, who continues as head of merchandising. In 2001 eVineyard bought the Wine.com name. By fall 2005 Wine.com was losing $15 million of earnings before interest, taxes, depreciation and amortization, on $35 million in sales, Bergsund writes.

He joined Wine.com in 2006 and one of the first goals was to reduce the company’s break-even point from more than $200 million to $45 million. Next came adding to its wine assortment, improving pricing and delivery, and adding tools and content to help shoppers with buying decisions, Bergsund notes.

Wine.com turned “EBITDA positive” in 2010 and closed fiscal 2011 “with $1.9 million in cash flow on revenue of $56 million,” Bergsund writes.

The company decided to reinvest all cash generated from internal operations for future growth. Spending included offering more high-scoring wines priced under $20, revamping gift sets and baskets, beginning same-day shipping and “weather-safe” shipping, launching an iPad app and mobile commerce site, adding a WineShopper daily deal site, and rolling out a loyalty program offering a year of unlimited free shipping for $49. WineShopper.com is the company’s flash-sale site.

Results of those changes included Wine.com traffic grew 2.4 times to top 15.6 million visits in the past four years; bottles sold and shipped doubled to 2.7 million; revenue grew 70% to $75 million; inventory turns increased to 12 times; and net fulfillment cost per order declined by 75%, Bergsund writes.

Bergsund answered his own question “If Wine.com is doing fine, what’s up with this blog post?” by saying “You’ve got me.” He says the writer didn’t contact him for comment. He ends his blog saying “we’re excited to continue to innovate, wow our customers and partner with our suppliers for many years to come.”

Bergsund didn’t respond to a request for further comment and Baker Capital did not respond to a request for comment on whether Wine.com is for sale.

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