Top Deal: Wine To Your Doorstep? Yes please.

Key Stats:

Summary

At time of publication, November 26th, Splash Wines had raised $95.5K

The Splash Wines team has been selected as a “Top Deal” by KingsCrowd. This distinction is reserved for deals selected into the top 10% of our deal diligence funnel. If you have questions regarding our deal diligence and selection methodology please reach out to hello@kingscrowd.com.

Problem

The US wine market is the largest in the world reflecting a 15.5% annual growth rate. In 2017, consumers spent $2.69 billion on direct-to-consumer wine shipments up 18.5% from 2016. Like in any other industry, sales of wine are moving online. In addition, millennials are becoming the largest wine consuming generation.

Although the industry is shifting to match the needs of the digital age and to cater to millennial preferences, the online wine market is currently fragmented without a clear market leader.

Unlike spirits or beers, there are only a few wine brands recognizable to most millennials. When buying wine, individuals consider a variety of factors, but these considerations oftentimes confuse those who are not wine connoisseurs.

Online customers can easily be confused by a multitude of labels that resemble a foreign concept when buying other types of alcohol, the wide range of prices, questionable business practices, and lack of customer service.

Solution

Splash Wines is a national family company and wine marketer founded in late 2014. The family has been in the wine industry for three generations and for the past 15 years has been at the forefront of the Internet wine industry. Splash Wines is trying to disrupt the online wine business with its unique business model and customer-first approach.

Now that nearly all millennials are 21, Splash Wines is making an effort to make this generation their target market. Due to the lack of maturity from this group in regards to purchasing wine driven by a lack of knowledge and experience, millennials are far more undecided before they go shopping.

Likewise, millennials are way more open to trying new and trendy drinks. These factors are letting different brands redefine the experience of buying wine for millennials.

 Splash Wines’ product market fit encompasses a subscription model that millennials are used to. On their website, customers can choose to curate their own bundle of quality wines from around the world or choose from a selection of seasonally or flavor curated bundles of 15 bottles.

 For $6 monthly or $60 yearly, customers are given member pricing on their site and free shipping with a 1% cash back on all purchases. For a one time payment of $150, members can enjoy membership for life with 5% cash back, a free select bottle annually, and access to limited availability special offers.

Why We Like it

Revenue Growth & Market Traction

Splash WInes has been profitable since October 2015 with over $23 million in revenue to date. They are on target for $12 million in revenue in 2018. Likewise, the company has grown from $4.1 million in sales in their inaugural year to $8.1 million in 2018.

There are currently over 60,000 subscribers to Splash Wines. The company has approximately 100,000 customers total and has sold over 2.5 million bottles to date. 

Highly Experienced Founders

Robert Imeson is the founder and CEO of Splash Wines. Imeson has been in the wine industry ever since he finished college. He worked for Clan Importers, the family wine and spirits business after graduating from Oregon State University in 1976.

Robert launched Simpatico Wines in the early 1980s, managed the purchase of Dubuque Brewing Company in the early 1990s, formed MicroStar Keg Management in 1996, formed The Michael Jackson Rare Beer Club in 1998, which became one of the largest Beer portals on the internet.  

In 2009, Imeson launched Barclay’s Wine, focusing exclusively on direct-to-consumer wine sales, and in 2014, Imeson and other family members left Barclay’s to form Splash Wines. Needless to say, he is extremely experienced in the spirits business.

Product Differentiator

 Although there are a handful of brands such as Winc and wines.com also moving to gain market share, we think Splash Wines is positioned as the well-seasoned online wine aficionado team.  

Winc, a California based direct-to-consumer winery founded in 2011 (who also raised on SeedInvest) is one of the better-known brands playing in this space. Winc has raised a total of $30.6M.  

Unlike other brands, Splash Wines differentiates itself with their superior customer service fueled by their wine expertise.

The company doesn’t outsource their customer service and makes sure their team is easily accessible to their customers via phone, email, or live chat. 

Splash Wines also invests in customer service education, tastings, and regular visits to wine regions. The team is also given the freedom to think outside of the box and is involved in strategy and planning to exceed expectations for the company.  

To supplement their customer service, the company is pioneering a subscription model that is the first of its kind in the industry. They do not automatically ship customers and/or charge them for wine on a regular basis but instead are a membership-based company. The company charges just a maximum of 15% above our own cost, the best everyday value in the industry.

Other

As alluded to, the company’s business model is very attractive with an average order equating to $95 in revenue while having 97% margin on membership sales. Shipments to existing customers average $100.4 per shipment at a 13.8% margin.  

Splash Wines offers a 6 to 12 month complimentary membership with initial purchase. As seen by this initiative and their offer of a one-time purchase for a lifetime membership, the company is laser-focused on acquiring loyal and lifelong customers with a focus on making their product sticky.

Business Model Validity

We think Splash Wines growth strategy has proven effective. Because the company already acquires members at a profit, they are able to focus on customer retention.

This year, management estimates to drive revenues of $11.8M with $360K in pre-tax profits. The fact that they have been profitable since its founding year in 2015, we think shows tremendous product-market fit and high level management execution. Our confidence in management is further bolstered by the fact that they have only raised $1M in funding to date.

While its competitor Winc has raised over $30M in capital, both their margins and sales in relation to capital raised are not as impressive.

Part of this has been due to the fact that the company has been able to establish strategic relationships and open various distribution channels including NextHome, Vingo, Groupon, and Staples.

The company has a 91% customer satisfaction on Groupon with over 9,000 ratings. The company is also in agreement with Staples to sell their wine on the Staples website. The company’s analytics-driven marketing plan includes targeted social media strategies.  

With superior distribution to many smaller competitors we and profitable customer acquisition, we are confident in the long term viability of the business.

Rating

Splash Wines is effectively growing revenues in a fast growing market in a capital efficient manner. Being led by a founder with over 30 years of experience in this industry while having people on the team that understand millennials, social media, and current trends, the company is positioning itself to be a market leader.

 At a $15M pre-money valuation on almost $11M in 2018 sales, we think this is an attractive investment entry point. As long as the company stays true to their values of customer services and remembers the problems they are solving for millennials, we think this is a Top Deal to invest in!