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Vintage Wine Estates In “Business Realignment” 18 Months After IPO

February 9, 2023

After going public in mid-2021, 2-million-case California wine player Vintage Wine Estates has announced a “business realignment” and executive changes as it surfs choppy waters in the wine market. Company founder Pat Roney is transitioning from CEO to executive chairman, with industry veteran Jon Moramarco taking over as chief executive on an interim basis as the company begins a search for Roney’s permanent successor.

According to Paul Walsh, former Diageo CEO and Vintage Wine’s lead independent director, “Pat successfully grew VWE over the last 20-plus years and we have greatly appreciated his contributions as we advanced VWE as a public company. 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. It was critical that the Board make the necessary leadership changes to find the right talent to continue to execute our strategy.” Vintage’s move to go public in 2021 was made in partnership with blank check company Bespoke Capital Acquisition Corp, led by Walsh. Shortly after the $600 million IPO, Vintage’s share price was as high as $12.63, but it fell from there and closed yesterday at $2.79.

Now, Vintage has retained Arthur Bert, a corporate strategy and acquisition integration advisor, “to assist in the reorganization and simplification of VWE.” Looking forward the group plans to monetize some assets to reduce debt, raise prices in both its DTC and wholesale businesses, reduce marketing spend in DTC, and “optimize various sales, marketing, and operations overhead.” Besides Roney, other key Vintage executives will remain in place, including president Terry Wheatley, CFO Kris Johnston, and COO Zach Long.

In addition to those plans, Vintage announced that it will restate its previously issued financial statements for its fiscal first quarter 2023, ended in September, and delayed its second-quarter earnings release, which was slated for today after the close of financial markets. In a preview, the company said it expects quarterly sales for the three months through December to total $81 million, with revenue from recent acquisitions offsetting declines in the existing business, and adjusted EBITDA of $3.5 million.

Aggressive acquisition activity has long propelled Vintage, which at the time of its IPO had booked more than 20 acquisitions over the previous two decades, averaging 20% annual revenue and EBITDA growth from 2010-2020. Its brand portfolio grew to include more than 60 labels, including Girard Winery, Clos Pegase, Swanson Vineyards, B.R. Cohn, Viansa Sonoma, Cameron Hughes, Windsor Vineyards, Laetitia, and Layer Cake, among others, with most in the $10-$20 range.

The acquisition spree continued post-IPO with plays for Vinesse, Ace Cider, and Meier’s Wine Cellars, helping to boost Vintage’s revenue by 33% to $294 million in its fiscal year through June, with adjusted EBITDA rising 21% to $47 million. But with the moves announced last night, the newly public company is clearly headed for a period of retrenchment and streamlining as it looks to cull less profitable assets, cut costs, and reshape itself to compete in the tightening U.S. wine market, which has now declined in volume terms two years in a row.

“VWE has a strong foundation, key premium brands, great customer relationships and significant potential,” said Moramarco. “However, we have much work to do to improve our cash flow and earnings power while we measurably reduce debt. 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.”

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