We’ve been talking a lot, in this blog and elsewhere, about the nature of the Assignment process as it relates to Vinfolio, Inc.  The Assignee is working diligently to try to get a quick and speedy positive outcome for the Vinfolio business, while we continue to operate the business, buy wine, sell wine, and provide a Marketplace.  Like other assignment for the benefit of creditor processes, the Assignee is required to provide a mechanism for any party who may potentially have a claim against Vinfolio, Inc. to file their claim.  That mechanism is a “Proof of Claim”, and it’s being mailed to all parties who have interacted with Vinfolio going back over a year to ensure that if they believe they have a claim, it is accounted for.

Proof of Claims are exactly what they sound like.  If you believe Vinfolio owed you money prior to January 15, 2010 (Assignment date) and has not paid you, you’ll need to fill out the form and return it according to the instructions, before July 14, 2010.  The language on the Claim Form is a bit formal and legalistic, but it is just part of the process as we work to resolve the situation.  While we expect to achieve a resolution for the business much sooner (although there is no guarantee of that), claims can still be received and included in the process if properly filled and sent in before the deadline.

We realize the situation has its challenges, but we are focused on minimizing disruptions to day-to-day operations, while the Assignee identifies a buyer and a transaction completed.  We are working diligently to address issues that this situation has created and we ask for your patience as we work through the process.  And as always, if you have any questions, feel free to reach out via telephone to 1-800-969-1961 or via email to service@vinfolio.com.

Many customers have written me since my last post, Progress on payments, seeking clarification as to whether the payments for sellers from new (post Jan. 15) Marketplace and fixed price auction sales are “definitely off limits to creditors.”  The short answer is “yes.”

I understand the language we have used is a bit legalistic but let be call out a paragraph from that prior post again:

“Payment for transactions completed after January 15, 2010 is being managed by the Assignee and, the funds are being segregated for payments owed to sellers (although processing will take longer than usual during the Assignment which took place on January 15).”

The longer explanation can be better understood if I point you to an earlier post, Update from Vinfolio’s Assignee, in which the ABC process is described in more detail.  In particular:

Vinfolio (the “Company” or “Vinfolio”) entered into an Assignment for the Benefit of Creditors (“Assignment”) on Friday evening, January 15, 2010 to Vinfolio (assignment for the benefit of creditors), LLC (“Assignee”), an affiliated entity to Sherwood Partners, LLC (Sherwood”).

The bolded text above references a new company set up by Sherwood, and separately licensed via the CA Department of Alcoholic Beverage Control, through which all transactions are now processed.  On a go forward basis, all sales are being managed by the Assignee and the Assignee is holding the sale proceeds separately, so only sellers have a right to these funds.

Timing of sale-related payments

My last post covered payments (whether cash or credit) relating to January 15th and earlier.  Checks were mailed yesterday (or credits issued) for completed sale transactions during the January 1-15th period.  At this time, for pre-January 1 transactions, we are not able to provide a further update on fixed price auction transactions but our records indicate all completed Marketplace transactions are now caught up in terms of payment (the main reason is that these were on a shorter payment cycle than fixed priced auctions).  Any new owner of Vinfolio assets would determine whether to assume the remaining liabilities associated with fixed price auction sales (or others) for the period prior to January 1.  However, the sale process for Vinfolio, Inc.’s assets is not yet complete and there is no guarantee it will ultimately succeed.

The Assignee (or a successor company that acquires its assets) will ultimately make payments for all sale transactions completed after January 15.  During the Assignment, this process is elongated by a week to 10 days from the prior one as the Assignee has responsibility for this process and must run it through their protocols.  Because sale proceeds are being put in a separate account by the Assignee, Sherwood is able to fund payments to sellers for all transactions after January 15, 2010, and in a worst case scenario, there will be an orderly wind-up (including full payments for the amounts due after January 15, 2010).

I hope this provides further clarification to provide customers with the confidence to proceed with their sale transactions in the Marketplace and via fixed priced auctions.

P.S.    Payments for completed Marketplace and fixed price auction sales during the second half of January will be mailed (or credits issued) on Friday, February 12.

As mentioned in our previous post on January 17th, the secured creditor had indicated that they “will waive any right to these funds and has asked that these funds be paid to the sellers in those sales as soon as practical.”  The secured creditor was specifically referring to funds separately identified by Vinfolio for fixed price auction and Marketplace transactions completed from January 1, 2010 to January 15, 2010 (the payment period just prior to the Assignment for the Benefit of Creditors).

What’s a “completed” transaction?

• Marketplace – Completed transactions are based on the date the wine passed Vinfolio’s inspection after it was physically received (as evidenced by the date the seller was sent a “Sale Completed” email).
• Fixed price auctions - Completed fixed price auction sales measured are as of the date the sale was made and invoiced.

What’s authorized for payment?

Some good news! The secured creditor has just authorized checks from these transactions (as defined above) to be issued (although it may take until early next week for them to be processed and mailed).   The issuance of these checks will bring these Marketplace and fixed price auction transactions after December 31, 2009, current.  UPDATE ON JAN. 29: The Assignee has just informed us these checks will be mailed on Thursday or Friday of next week.

Payment for transactions completed after January 15, 2010 is being managed by the Assignee and, the funds are being segregated for payments owed to sellers (although processing will take longer than usual during the Assignment which took place on January 15).

Transactions on or before December 31, 2009

For those Marketplace and fixed price auction transactions completed on or before December 31, 2009 for which payments have not been made or for which checks did not clear, we are still reviewing the situation for how those transactions can be appropriately addressed.  We do not expect to be able to provide any further news on these transactions until next week at the earliest.

More information when available

As we’ve stated recently, we realize the situation has its challenges, but we are focused on minimizing disruptions to day-to-day operations.  We are working diligently to address issues that this situation has created and ask for your patience as we work through the process.  As more information becomes available, we will share it.  While this may mean that some questions won’t be answered immediately because they require more investigation or are not in our control, please understand that we are not ignoring these issues and continue to work toward resolutions.

Vinfolio (the “Company” or “Vinfolio”) entered into an Assignment for the Benefit of Creditors (“Assignment”) on Friday evening, January 15, 2010 to Vinfolio (assignment for the benefit of creditors), LLC (“Assignee”), an affiliated entity to Sherwood Partners, LLC (Sherwood”).  We wanted to provide some background on Sherwood and allow them to provide this communication to the Vinfolio customers and creditors.  Sherwood is an experienced and reputable firm that is capable of moving the Assignment process forward with great rapidity and for maximizing potential outcomes.  They’ve completed approximately 350 Assignments and are considered the premier Assignment company in the United States.

The following is information from the Assignee:

There has been some confusion on the Assignment process and there are many positive reasons why this process was chosen by the Company. Firstly, it allows the Company to select an Assignee who understands the business, industry and issues critical to the situation versus a court-appointed trustee who often does not.  The Assignee also has the ability to move with speed and flexibility to permit smart business choices.  An Assignment provides the capacity for controlled operations to be continued to maximize the value and allow for contractual obligations to be negotiated and resolved efficiently, and as important, the Assignment is cost effective.  Other forms of restructuring often involve significant professional fees that can cripple a business from moving forward and reduce recoveries for creditors.

We are currently operating the business and have retained more than 35 key Vinfolio employees to assist the Assignee, and the Assignee has received the approval of Vinfolio’s secured creditor to optimize potential outcomes.  These actions allow the business to continue to operate, for customer wines to be received into or shipped from the warehouse, and for customer’s wines to remain protected as they were prior to the Assignment.  The Assignee also expects to be able to ship and deliver wines sold.

We realize the situation has its challenges, but we are focused on minimizing disruptions to day-to-day operations, while the Assignee identifies a buyer and a transaction completed.  We are working diligently to address issues that this situation has created and we ask for your patience as we work through the process.

There has been a great deal of discussion regarding Vinfolio’s news in the past 48 hours.  We’re still mid-process on many of the issues relating to the Assignment.  We are getting a lot of inquiries and are trying to get answers to the most pressing questions everyone has posed.  But just as importantly, we need to be accurate in the information we release.  We will be releasing information, as we have it, rather than waiting for one large communication that answers all questions.  This may mean that some questions won’t be answered immediately because they require more investigation or are not in our control. 

1. We sincerely apologize to our customers, suppliers and users.  It’s been a very difficult process for us, and remains so.  We’re striving to maximize the odds for a positive outcome as quickly as possible.
2. It’s important for everyone to know that our operations continue as we undertake this process.   Our doors are open, and our lights are on.  Our warehouses continue to be safe and secure, climate control is active, wine is being received, shipped, and delivered, and staff are present.  We’re still here, and we’re doing our best to stay here.
3. We want to address the issue surrounding the returned checks.  After the checks were issued, the former secured creditor put a hold on our accounts without coordinating with us, which prevented issued checks from clearing.
4. The wine that you’ve stored with Vinfolio is your wine, not Vinfolio’s nor its creditors’.  Storage operations continue during the Assignment.  
5. As we go forward, if you buy wine, you own it whether you want us to ship it to you or you choose to leave it in Vinfolio storage for safekeeping.  
6. There were positive developments that happened on the day of the Assignment (Friday, Jan. 15th).  A group, including some of our significant customers, acquired the secured debt of the company.  This group is led by Jon Moramarco, The Managing Partner of BW 166 LLC. Jon was CEO of some major wine companies, including various divisions of Constellation Brands.  Many consider him to be one of the finest and most credible executives in the wine industry.  This new secured creditor has indicated a desire to see the business continue its mission and has acquired the secured debt to help align everyone’s (creditors’, customers’, employees’, users’) interest in this outcome.
7. From a financial perspective, the new secured creditor has indicated that for wine sold through the business’s Marketplace and fixed price auctions from January 1-15th, we should to be able to process payments, however, it could take a week or two before checks are issued.  For sales from January 16th onward, payments will resume on the normal payment schedule.  
8. Many have commented on the high quality of service that they’ve received from Vinfolio. That service has come from staff who have helped build what Vinfolio means to the user community.  It is their caring and attention to detail that has historically created the positive opinions that have generally existed about Vinfolio.  Like many businesses, there are fewer people working in the Vinfolio business today than there were a year ago.  All of these people had fully busy days prior to the news of last Friday and the items noted above have added to their workload.  We would appreciate when you talk to customer service at the Vinfolio business, that you please understand they are trying to do everything they can for you and are working to respond as quickly as possible.

So please bear with us, and we hope to be able to reach out again shortly to keep you informed and want to thank you for your support and patience.

After three years of very rapid growth -- placing it among the top 15 fastest growing private companies in the SF Bay area from 2006 to 2008, Vinfolio experienced a much more difficult sales environment during 2009.  A few weeks ago, we found ourselves in need of additional capital on a very near-term basis.  The company investigated several options but new capital could not be obtained on a necessarily compressed timetable.

Because of the situation, and to safeguard the interests of our customers and creditors (including for wine purchases, wine sales, and wine stored with Vinfolio), the board of directors and the shareholders of Vinfolio approved and undertook a form of restructuring known as an Assignment for the Benefit of Creditors (the “Assignment”) on Friday evening, January 15, to provide the business with the flexibility to develop the appropriate course of action going forward.

The Assignment is being managed by a leading third party firm of experts in such assignments (the “Assignee”).  It is important for you to know that key employees have been retained and our operations continue as we undertake this process.

Acquisition of Vinfolio Secured Debt

Also on Friday, January 15, a group including some of our significant customers acquired the secured debt of the company.  This group is led by Jon Moramarco, The Managing Partner of BW 166 LLC.  While the secured creditor cannot at this time officially speak for the business, they have given the following guidance to the Assignee for its operation of the Vinfolio business:

• According to Jon, “the Vinfolio business is a unique and valued asset to the community of wine collectors and wine enthusiasts. We want to see the business continue its mission and have acquired the secured debt to help align everyone’s (creditors’, customers’, employees’, users’) interest in this outcome.”
• The main value of the business is the goodwill of its customers and users.   The secured creditor wishes to take actions where feasible to preserve the goodwill.  Some of these include:
1. Commitments by the secured creditor group to fund the Vinfolio business in the near term while the Assignment process is ongoing.
2. Since January 1, 2010, the company has tracked funds from the sale of Marketplace and fixed priced auction items separate from other revenues.  The secured creditor will waive any right to these funds and has asked that these funds be paid to the sellers in those sales as soon as practical. 
3. During the Assignment process, this separation of funds and instructions from the secured creditor should continue.
4. The secured creditor has re-affirmed that they only have security in the assets owned by the company, and not in wines offered through the Marketplace or fixed price auctions, or wines stored by third parties with the business.

A personal word

Speaking as the founder of Vinfolio, I’d like to apologize to you for this unexpected development and ask our loyal customers and users to be patient during the Assignment.  Your continued support will aid the Vinfolio business as we go forward.

I’m sure there will be many questions and we’ll try to provide answers through our Customer Service department (service@vinfolio.com).

Thank you for your continued support.

WinePrices.com's wine price indexes continued to rise strongly in October based on 14 auctions worldwide, three of which were in Hong Kong. Of US$25.8 million in proceeds from these auctions, US$13.2 million or 51% was spent in Hong Kong.

The top three most actively traded fine wine indexes were up 8%-14% in October after increasing 9%-12% in September.  These indexes are up a stunning 44%-64% year to date.  Wine investors with the stomach to have invested when the economic outlook was bleak are now being amply rewarded.

See below for a table of key stats on all of the indexes and the full summary results page for trading metrics information (and archives from prior months).  Note: each index equaled 100 as of January 2005.

Observations

• Investment grade Bordeaux, which continues to experience high demand from Asia, is leading the pack in terms of returns.
• Positive year-on-year growth - The majority of indexes are now in positive territory when measured on a year-on-year basis.
• The California 100 index has shown little appreciation over the past five years (in last place based on its index value) and it's been the worst performing index year to date.  I suspect major contributing factors are the weak U.S. economy and relatively tepid international demand for the wines which comprise the California 100 index. Historically, virtually all of these wines were sold to oversubscribed mailing lists comprised largely of U.S. wine collectors and enthusiasts.  Now that wine auction demand is shifting towards Asia, the relative lack of exposure and access to California's top brands among Asian wine collectors is hurting these brands' secondary market price performance.  U.S. wines, in general, are relatively hard to find in Asia and most brands seem to be ignoring the opportunity (if the U.S.'s very minor presence at the recent Hong Kong International Wine Fair is an indication of interest).
• Vinfolio's Asian experience confirms these trends.  The first of five offers drawn from a US$3+ million cellar that we began offering yesterday through our U.S. and Hong Kong offices is already 75% sold out in 24 hours with the majority of the spending derived from Asia.

P.S. Stay tuned for November results from 17 worldwide auctions (results will be compiled by mid December although individual auction results appear on WinePrices.com as they are added).

A "flash sale" is a generic term applied to limited time (typically 24 to 48 hour) sales featuring a single item, or modest number of items from a single brand or small group of brands, typically at 50%-70% off suggested retail prices.  One of the most well known players in this category is Gilt Groupe, which focuses mainly on "premier fashion and luxury brands."  They have been so successful that numerous competitors have emerged and the selling methodology has spread to other product categories, including wine.  Recent entrants in the wine space include Cinderella Wine (from Gary Vee!), Wines 'Til Sold Out, and general merchandiser, Rue La La.

A new generic selling method

After assessing this new selling method, Vinfolio concluded that it's here to stay (with or without a recession). The combination of a limited time offer and a deep discount motivates consumers to buy before they miss the opportunity.  Flash sales also help fill a need for brand owners/representatives because not only are they a useful means of managing excess inventory levels, they can be an effective way to obtain new customers who buy again at full price after trying the wine (if executed properly).

Introducing Vinfolio's fine wine-focused flash sales

As Vinfolio's focus is on fine wine, we've decided to introduce a program (see today's press release) for high-end and boutique wineries, importers, and distributors which requires that the wine offered have a list price of $60 or more with a minimum professional score of 90.  We've also designed our flash sales to deliver long-term customer acquisition benefits and to leverage our full online marketing skillset (one of our key strengths).  So regardless of whether a wine's list price is $60 or $260, our program delivers value for the high-end or boutique winery, importer, or distributor.  If you are a member of the trade and would like to learn more, email flashsale@vinfolio.com.

Wine collectors should pay attention

For wine collectors willing to try new wines, the lower price points offered in flash sales reduce your risk of trial and stretch your wine budget farther.  However, don't expect to be able to buy large quantities at discount prices or see the same wine offered repeatedly.  For example, we permit flash sale partners to impose bottle limits of as little as one bottle for higher priced wine.  You should also expect the producer to be given your name and email address as a form of quid pro quo for being offered a great deal (this is the norm for all wine flash sale providers).  While you may opt out later, part of the reason these programs exist is to help wineries build their own direct-to-consumer channel.

Bottom line: Wine flash sales are here to stay.  If you interested in fine wines which appeal to more serious collectors and enthusiasts, then sign up on on our home page for Vinfolio's wine offers (which include flash sales).

The counterfeiting of any item is more likely when two conditions exist:

1. The item is substantially more valuable than the cost to fake it.
2. The identification of fakes is difficult or inherently subjective.

Unfortunately, fine wine easily satisfies both conditions. E.g. counterfeiters can refill empty authentic bottles or digitally print almost any label at low cost.  Identification of fake wine is more of an art form using various clues instead of based on an objective assessment.

Authenticating fine wine - What matters

What ultimately matters is the wine itself - not the label, bottle, or capsule. Anti-fraud technologies which successfully authenticate the contents of the bottle such as Prooftag (see my prior post from 2007) are all that's needed.  If the security seal isn't broken, then the bottle has to be authentic. Other methods like adding DNA markers or invisible ink to labels, or engraving bottles, only help authenticate the bottles not the contents.

Step 1: Producers must enable objective authentication

Deploying a security seal like Prooftag's solution is a fundamental requirement to eliminating fake wine as it introduces an objective test which may be relied upon with 100% certainty.  I'm not sure what the current cost of using a Prooftag solution is but I have seen a range of 30 cents to $1.50 per bottle in other articles (no doubt driven by the volume of tags).  As a consumer, I would rather see a security tag on the bottle than buy fancy packaging like overweight, over-sized bottles if producers need to find a means of paying for it.

Step 2: Permit anyone to validate authenticity of bottles

Just as with identifying counterfeit currency, the only way to spot wine fakes is to cast a wide net by educating and empowering members of the trade and consumers on how to validate bottles.  If the anti-counterfeiting technology is "non-forgeable" (as Prooftag claims), then disseminating information publicly is safe and does not "train" criminals in how to counterfeit the wine.

Without an objective test (as with older vintages pre-dating use of anti-counterfeiting measures), however, sharing information on how to identify authentic wines may be tantamount to publishing how to make a fake successfully.  This is exactly why Step 1 should be adopted ASAP by any producer interested in preserving their brand's integrity and resale value in secondary markets.

Overt vs. covert systems

A September 2009 feature story in Wines & Vines titled New Ways to Fight Counterfeiters opens with the question of "Overt or covert?"  Covert systems seem pointless - almost akin to creating laws without enforcing them.  The only reason a system is covert is because of the fear (or reality) that a dedicated criminal could copy it.

Open systems like Prooftag's can be even more effective by providing members of the wine trade with access to automated "readers" to verify authentic bottles in an efficient manner.  These readers should be provided at no charge to qualified fine wine retailers and auction houses willing to use them to help choke off any trading in fake wine.

Wine anti-counterfeiting standard needed

Various winery and producer trade organizations should endorse a common standard of anti-counterfeiting technology.  If the industry adopts a multiplicity of approaches, enforcement will become near impossible as trade members would not only need to support all technologies but know which one was used by which producer and starting with what vintage. It's unworkable.

Bottom line: Stamping out wine counterfeiting starts with producers taking preventive measures.  Assessing fakes without an objective capability to determine them is just educated guesswork at best.  Consumers are exposed to financial loss, fine wine retailers and auction houses may get unfairly blamed or accused of complicity, and producers' reputations are at risk when consumers drink poor quality fakes and think it's the real thing.

Other recommended reading:

1. Vinography post: Do we have Ebay to thank for all that counterfeit wine?
2. Dr. Vino post: High stakes and alleged fakes - Koch sues Kurniawan.  In particular, read Koch's legal complaint which goes into some interesting details (especially first 5-6 pages).
3. Jancis Robinson's robust series of articles in her fake wine category on her information-rich site
4. Billionaire's Vinegar.  Quite entertaining and superbly researched.

At the opening ceremony of the Hong Kong International Wine Fair today, John Tsang, Financial Secretary (on right in photo), announced an important step towards streamlining access to the Mainland Chinese wine market:

"I am pleased to tell you that we have just reached agreement with the Mainland Customs to provide customs facilitation measures for wine exported from Hong Kong to the Mainland. We are also discussing with their food safety department, the Administration of Supervision, Inspection and Qu

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12

Feb

2010

A necessary part of the Assignment process

Categories:

We’ve been talking a lot, in this blog and elsewhere, about the nature of the Assignment process as it relates to Vinfolio, Inc.  The Assignee is working diligently to try to get a quick and speedy positive outcome for the Vinfolio business, while we continue to operate the business, buy wine, sell wine, and provide a Marketplace.  Like other assignment for the benefit of creditor processes, the Assignee is required to provide a mechanism for any party who may potentially have a claim against Vinfolio, Inc. to file their claim.  That mechanism is a “Proof of Claim”, and it’s being mailed to all parties who have interacted with Vinfolio going back over a year to ensure that if they believe they have a claim, it is accounted for.

Proof of Claims are exactly what they sound like.  If you believe Vinfolio owed you money prior to January 15, 2010 (Assignment date) and has not paid you, you’ll need to fill out the form and return it according to the instructions, before July 14, 2010.  The language on the Claim Form is a bit formal and legalistic, but it is just part of the process as we work to resolve the situation.  While we expect to achieve a resolution for the business much sooner (although there is no guarantee of that), claims can still be received and included in the process if properly filled and sent in before the deadline.

We realize the situation has its challenges, but we are focused on minimizing disruptions to day-to-day operations, while the Assignee identifies a buyer and a transaction completed.  We are working diligently to address issues that this situation has created and we ask for your patience as we work through the process.  And as always, if you have any questions, feel free to reach out via telephone to 1-800-969-1961 or via email to service@vinfolio.com.

52 comments   permalink  

5

Feb

2010

Vinfolio's Marketplace and fixed price auctions are open for business

Categories:

Many customers have written me since my last post, Progress on payments, seeking clarification as to whether the payments for sellers from new (post Jan. 15) Marketplace and fixed price auction sales are “definitely off limits to creditors.”  The short answer is “yes.”

I understand the language we have used is a bit legalistic but let be call out a paragraph from that prior post again:

“Payment for transactions completed after January 15, 2010 is being managed by the Assignee and, the funds are being segregated for payments owed to sellers (although processing will take longer than usual during the Assignment which took place on January 15).”

The longer explanation can be better understood if I point you to an earlier post, Update from Vinfolio’s Assignee, in which the ABC process is described in more detail.  In particular:

Vinfolio (the “Company” or “Vinfolio”) entered into an Assignment for the Benefit of Creditors (“Assignment”) on Friday evening, January 15, 2010 to Vinfolio (assignment for the benefit of creditors), LLC (“Assignee”), an affiliated entity to Sherwood Partners, LLC (Sherwood”).

The bolded text above references a new company set up by Sherwood, and separately licensed via the CA Department of Alcoholic Beverage Control, through which all transactions are now processed.  On a go forward basis, all sales are being managed by the Assignee and the Assignee is holding the sale proceeds separately, so only sellers have a right to these funds.

Timing of sale-related payments

My last post covered payments (whether cash or credit) relating to January 15th and earlier.  Checks were mailed yesterday (or credits issued) for completed sale transactions during the January 1-15th period.  At this time, for pre-January 1 transactions, we are not able to provide a further update on fixed price auction transactions but our records indicate all completed Marketplace transactions are now caught up in terms of payment (the main reason is that these were on a shorter payment cycle than fixed priced auctions).  Any new owner of Vinfolio assets would determine whether to assume the remaining liabilities associated with fixed price auction sales (or others) for the period prior to January 1.  However, the sale process for Vinfolio, Inc.’s assets is not yet complete and there is no guarantee it will ultimately succeed.

The Assignee (or a successor company that acquires its assets) will ultimately make payments for all sale transactions completed after January 15.  During the Assignment, this process is elongated by a week to 10 days from the prior one as the Assignee has responsibility for this process and must run it through their protocols.  Because sale proceeds are being put in a separate account by the Assignee, Sherwood is able to fund payments to sellers for all transactions after January 15, 2010, and in a worst case scenario, there will be an orderly wind-up (including full payments for the amounts due after January 15, 2010).

I hope this provides further clarification to provide customers with the confidence to proceed with their sale transactions in the Marketplace and via fixed priced auctions.

P.S.    Payments for completed Marketplace and fixed price auction sales during the second half of January will be mailed (or credits issued) on Friday, February 12.

28 comments   permalink  

28

Jan

2010

Progress on payments

Categories:

As mentioned in our previous post on January 17th, the secured creditor had indicated that they “will waive any right to these funds and has asked that these funds be paid to the sellers in those sales as soon as practical.”  The secured creditor was specifically referring to funds separately identified by Vinfolio for fixed price auction and Marketplace transactions completed from January 1, 2010 to January 15, 2010 (the payment period just prior to the Assignment for the Benefit of Creditors).

What’s a “completed” transaction?

• Marketplace – Completed transactions are based on the date the wine passed Vinfolio’s inspection after it was physically received (as evidenced by the date the seller was sent a “Sale Completed” email).
• Fixed price auctions - Completed fixed price auction sales measured are as of the date the sale was made and invoiced.

What’s authorized for payment?

Some good news! The secured creditor has just authorized checks from these transactions (as defined above) to be issued (although it may take until early next week for them to be processed and mailed).   The issuance of these checks will bring these Marketplace and fixed price auction transactions after December 31, 2009, current.  UPDATE ON JAN. 29: The Assignee has just informed us these checks will be mailed on Thursday or Friday of next week.

Payment for transactions completed after January 15, 2010 is being managed by the Assignee and, the funds are being segregated for payments owed to sellers (although processing will take longer than usual during the Assignment which took place on January 15).

Transactions on or before December 31, 2009

For those Marketplace and fixed price auction transactions completed on or before December 31, 2009 for which payments have not been made or for which checks did not clear, we are still reviewing the situation for how those transactions can be appropriately addressed.  We do not expect to be able to provide any further news on these transactions until next week at the earliest.

More information when available

As we’ve stated recently, we realize the situation has its challenges, but we are focused on minimizing disruptions to day-to-day operations.  We are working diligently to address issues that this situation has created and ask for your patience as we work through the process.  As more information becomes available, we will share it.  While this may mean that some questions won’t be answered immediately because they require more investigation or are not in our control, please understand that we are not ignoring these issues and continue to work toward resolutions.

22 comments   permalink  

21

Jan

2010

Update from Vinfolio's Assignee

Categories:

Vinfolio (the “Company” or “Vinfolio”) entered into an Assignment for the Benefit of Creditors (“Assignment”) on Friday evening, January 15, 2010 to Vinfolio (assignment for the benefit of creditors), LLC (“Assignee”), an affiliated entity to Sherwood Partners, LLC (Sherwood”).  We wanted to provide some background on Sherwood and allow them to provide this communication to the Vinfolio customers and creditors.  Sherwood is an experienced and reputable firm that is capable of moving the Assignment process forward with great rapidity and for maximizing potential outcomes.  They’ve completed approximately 350 Assignments and are considered the premier Assignment company in the United States.

The following is information from the Assignee:

There has been some confusion on the Assignment process and there are many positive reasons why this process was chosen by the Company. Firstly, it allows the Company to select an Assignee who understands the business, industry and issues critical to the situation versus a court-appointed trustee who often does not.  The Assignee also has the ability to move with speed and flexibility to permit smart business choices.  An Assignment provides the capacity for controlled operations to be continued to maximize the value and allow for contractual obligations to be negotiated and resolved efficiently, and as important, the Assignment is cost effective.  Other forms of restructuring often involve significant professional fees that can cripple a business from moving forward and reduce recoveries for creditors.

We are currently operating the business and have retained more than 35 key Vinfolio employees to assist the Assignee, and the Assignee has received the approval of Vinfolio’s secured creditor to optimize potential outcomes.  These actions allow the business to continue to operate, for customer wines to be received into or shipped from the warehouse, and for customer’s wines to remain protected as they were prior to the Assignment.  The Assignee also expects to be able to ship and deliver wines sold.

We realize the situation has its challenges, but we are focused on minimizing disruptions to day-to-day operations, while the Assignee identifies a buyer and a transaction completed.  We are working diligently to address issues that this situation has created and we ask for your patience as we work through the process.

7 comments   permalink  

19

Jan

2010

Additional Vinfolio business update

Categories:

There has been a great deal of discussion regarding Vinfolio’s news in the past 48 hours.  We’re still mid-process on many of the issues relating to the Assignment.  We are getting a lot of inquiries and are trying to get answers to the most pressing questions everyone has posed.  But just as importantly, we need to be accurate in the information we release.  We will be releasing information, as we have it, rather than waiting for one large communication that answers all questions.  This may mean that some questions won’t be answered immediately because they require more investigation or are not in our control. 

1. We sincerely apologize to our customers, suppliers and users.  It’s been a very difficult process for us, and remains so.  We’re striving to maximize the odds for a positive outcome as quickly as possible.
2. It’s important for everyone to know that our operations continue as we undertake this process.   Our doors are open, and our lights are on.  Our warehouses continue to be safe and secure, climate control is active, wine is being received, shipped, and delivered, and staff are present.  We’re still here, and we’re doing our best to stay here.
3. We want to address the issue surrounding the returned checks.  After the checks were issued, the former secured creditor put a hold on our accounts without coordinating with us, which prevented issued checks from clearing.
4. The wine that you’ve stored with Vinfolio is your wine, not Vinfolio’s nor its creditors’.  Storage operations continue during the Assignment.  
5. As we go forward, if you buy wine, you own it whether you want us to ship it to you or you choose to leave it in Vinfolio storage for safekeeping.  
6. There were positive developments that happened on the day of the Assignment (Friday, Jan. 15th).  A group, including some of our significant customers, acquired the secured debt of the company.  This group is led by Jon Moramarco, The Managing Partner of BW 166 LLC. Jon was CEO of some major wine companies, including various divisions of Constellation Brands.  Many consider him to be one of the finest and most credible executives in the wine industry.  This new secured creditor has indicated a desire to see the business continue its mission and has acquired the secured debt to help align everyone’s (creditors’, customers’, employees’, users’) interest in this outcome.
7. From a financial perspective, the new secured creditor has indicated that for wine sold through the business’s Marketplace and fixed price auctions from January 1-15th, we should to be able to process payments, however, it could take a week or two before checks are issued.  For sales from January 16th onward, payments will resume on the normal payment schedule.  
8. Many have commented on the high quality of service that they’ve received from Vinfolio. That service has come from staff who have helped build what Vinfolio means to the user community.  It is their caring and attention to detail that has historically created the positive opinions that have generally existed about Vinfolio.  Like many businesses, there are fewer people working in the Vinfolio business today than there were a year ago.  All of these people had fully busy days prior to the news of last Friday and the items noted above have added to their workload.  We would appreciate when you talk to customer service at the Vinfolio business, that you please understand they are trying to do everything they can for you and are working to respond as quickly as possible.

So please bear with us, and we hope to be able to reach out again shortly to keep you informed and want to thank you for your support and patience.

6 comments   permalink  

17

Jan

2010

Vinfolio business update

Categories:

After three years of very rapid growth -- placing it among the top 15 fastest growing private companies in the SF Bay area from 2006 to 2008, Vinfolio experienced a much more difficult sales environment during 2009.  A few weeks ago, we found ourselves in need of additional capital on a very near-term basis.  The company investigated several options but new capital could not be obtained on a necessarily compressed timetable.

Because of the situation, and to safeguard the interests of our customers and creditors (including for wine purchases, wine sales, and wine stored with Vinfolio), the board of directors and the shareholders of Vinfolio approved and undertook a form of restructuring known as an Assignment for the Benefit of Creditors (the “Assignment”) on Friday evening, January 15, to provide the business with the flexibility to develop the appropriate course of action going forward.

The Assignment is being managed by a leading third party firm of experts in such assignments (the “Assignee”).  It is important for you to know that key employees have been retained and our operations continue as we undertake this process.

Acquisition of Vinfolio Secured Debt

Also on Friday, January 15, a group including some of our significant customers acquired the secured debt of the company.  This group is led by Jon Moramarco, The Managing Partner of BW 166 LLC.  While the secured creditor cannot at this time officially speak for the business, they have given the following guidance to the Assignee for its operation of the Vinfolio business:

• According to Jon, “the Vinfolio business is a unique and valued asset to the community of wine collectors and wine enthusiasts. We want to see the business continue its mission and have acquired the secured debt to help align everyone’s (creditors’, customers’, employees’, users’) interest in this outcome.”
• The main value of the business is the goodwill of its customers and users.   The secured creditor wishes to take actions where feasible to preserve the goodwill.  Some of these include:
1. Commitments by the secured creditor group to fund the Vinfolio business in the near term while the Assignment process is ongoing.
2. Since January 1, 2010, the company has tracked funds from the sale of Marketplace and fixed priced auction items separate from other revenues.  The secured creditor will waive any right to these funds and has asked that these funds be paid to the sellers in those sales as soon as practical. 
3. During the Assignment process, this separation of funds and instructions from the secured creditor should continue.
4. The secured creditor has re-affirmed that they only have security in the assets owned by the company, and not in wines offered through the Marketplace or fixed price auctions, or wines stored by third parties with the business.

A personal word

Speaking as the founder of Vinfolio, I’d like to apologize to you for this unexpected development and ask our loyal customers and users to be patient during the Assignment.  Your continued support will aid the Vinfolio business as we go forward.

I’m sure there will be many questions and we’ll try to provide answers through our Customer Service department (service@vinfolio.com).

Thank you for your continued support.

21 comments   permalink  

19

Nov

2009

Fine wine prices continue to rise; driven by Asian demand

Categories: Asia , Auctions , Wine price indexes

WinePrices.com's wine price indexes continued to rise strongly in October based on 14 auctions worldwide, three of which were in Hong Kong. Of US$25.8 million in proceeds from these auctions, US$13.2 million or 51% was spent in Hong Kong.

The top three most actively traded fine wine indexes were up 8%-14% in October after increasing 9%-12% in September.  These indexes are up a stunning 44%-64% year to date.  Wine investors with the stomach to have invested when the economic outlook was bleak are now being amply rewarded.

See below for a table of key stats on all of the indexes and the full summary results page for trading metrics information (and archives from prior months).  Note: each index equaled 100 as of January 2005.

Observations

• Investment grade Bordeaux, which continues to experience high demand from Asia, is leading the pack in terms of returns.
• Positive year-on-year growth - The majority of indexes are now in positive territory when measured on a year-on-year basis.
• The California 100 index has shown little appreciation over the past five years (in last place based on its index value) and it's been the worst performing index year to date.  I suspect major contributing factors are the weak U.S. economy and relatively tepid international demand for the wines which comprise the California 100 index. Historically, virtually all of these wines were sold to oversubscribed mailing lists comprised largely of U.S. wine collectors and enthusiasts.  Now that wine auction demand is shifting towards Asia, the relative lack of exposure and access to California's top brands among Asian wine collectors is hurting these brands' secondary market price performance.  U.S. wines, in general, are relatively hard to find in Asia and most brands seem to be ignoring the opportunity (if the U.S.'s very minor presence at the recent Hong Kong International Wine Fair is an indication of interest).
• Vinfolio's Asian experience confirms these trends.  The first of five offers drawn from a US$3+ million cellar that we began offering yesterday through our U.S. and Hong Kong offices is already 75% sold out in 24 hours with the majority of the spending derived from Asia.

P.S. Stay tuned for November results from 17 worldwide auctions (results will be compiled by mid December although individual auction results appear on WinePrices.com as they are added).

3 comments   permalink  

11

Nov

2009

Fine wine flash sales

Categories: Retailing

A "flash sale" is a generic term applied to limited time (typically 24 to 48 hour) sales featuring a single item, or modest number of items from a single brand or small group of brands, typically at 50%-70% off suggested retail prices.  One of the most well known players in this category is Gilt Groupe, which focuses mainly on "premier fashion and luxury brands."  They have been so successful that numerous competitors have emerged and the selling methodology has spread to other product categories, including wine.  Recent entrants in the wine space include Cinderella Wine (from Gary Vee!), Wines 'Til Sold Out, and general merchandiser, Rue La La.

A new generic selling method

After assessing this new selling method, Vinfolio concluded that it's here to stay (with or without a recession). The combination of a limited time offer and a deep discount motivates consumers to buy before they miss the opportunity.  Flash sales also help fill a need for brand owners/representatives because not only are they a useful means of managing excess inventory levels, they can be an effective way to obtain new customers who buy again at full price after trying the wine (if executed properly).

Introducing Vinfolio's fine wine-focused flash sales

As Vinfolio's focus is on fine wine, we've decided to introduce a program (see today's press release) for high-end and boutique wineries, importers, and distributors which requires that the wine offered have a list price of $60 or more with a minimum professional score of 90.  We've also designed our flash sales to deliver long-term customer acquisition benefits and to leverage our full online marketing skillset (one of our key strengths).  So regardless of whether a wine's list price is $60 or $260, our program delivers value for the high-end or boutique winery, importer, or distributor.  If you are a member of the trade and would like to learn more, email flashsale@vinfolio.com.

Wine collectors should pay attention

For wine collectors willing to try new wines, the lower price points offered in flash sales reduce your risk of trial and stretch your wine budget farther.  However, don't expect to be able to buy large quantities at discount prices or see the same wine offered repeatedly.  For example, we permit flash sale partners to impose bottle limits of as little as one bottle for higher priced wine.  You should also expect the producer to be given your name and email address as a form of quid pro quo for being offered a great deal (this is the norm for all wine flash sale providers).  While you may opt out later, part of the reason these programs exist is to help wineries build their own direct-to-consumer channel.

Bottom line: Wine flash sales are here to stay.  If you interested in fine wines which appeal to more serious collectors and enthusiasts, then sign up on on our home page for Vinfolio's wine offers (which include flash sales).

1 comments   permalink  

9

Nov

2009

Stamping out wine counterfeiting

Categories: Fake wine

The counterfeiting of any item is more likely when two conditions exist:

1. The item is substantially more valuable than the cost to fake it.
2. The identification of fakes is difficult or inherently subjective.

Unfortunately, fine wine easily satisfies both conditions. E.g. counterfeiters can refill empty authentic bottles or digitally print almost any label at low cost.  Identification of fake wine is more of an art form using various clues instead of based on an objective assessment.

Authenticating fine wine - What matters

What ultimately matters is the wine itself - not the label, bottle, or capsule. Anti-fraud technologies which successfully authenticate the contents of the bottle such as Prooftag (see my prior post from 2007) are all that's needed.  If the security seal isn't broken, then the bottle has to be authentic. Other methods like adding DNA markers or invisible ink to labels, or engraving bottles, only help authenticate the bottles not the contents.

Step 1: Producers must enable objective authentication

Deploying a security seal like Prooftag's solution is a fundamental requirement to eliminating fake wine as it introduces an objective test which may be relied upon with 100% certainty.  I'm not sure what the current cost of using a Prooftag solution is but I have seen a range of 30 cents to $1.50 per bottle in other articles (no doubt driven by the volume of tags).  As a consumer, I would rather see a security tag on the bottle than buy fancy packaging like overweight, over-sized bottles if producers need to find a means of paying for it.

Step 2: Permit anyone to validate authenticity of bottles

Just as with identifying counterfeit currency, the only way to spot wine fakes is to cast a wide net by educating and empowering members of the trade and consumers on how to validate bottles.  If the anti-counterfeiting technology is "non-forgeable" (as Prooftag claims), then disseminating information publicly is safe and does not "train" criminals in how to counterfeit the wine.

Without an objective test (as with older vintages pre-dating use of anti-counterfeiting measures), however, sharing information on how to identify authentic wines may be tantamount to publishing how to make a fake successfully.  This is exactly why Step 1 should be adopted ASAP by any producer interested in preserving their brand's integrity and resale value in secondary markets.

Overt vs. covert systems

A September 2009 feature story in Wines & Vines titled New Ways to Fight Counterfeiters opens with the question of "Overt or covert?"  Covert systems seem pointless - almost akin to creating laws without enforcing them.  The only reason a system is covert is because of the fear (or reality) that a dedicated criminal could copy it.

Open systems like Prooftag's can be even more effective by providing members of the wine trade with access to automated "readers" to verify authentic bottles in an efficient manner.  These readers should be provided at no charge to qualified fine wine retailers and auction houses willing to use them to help choke off any trading in fake wine.

Wine anti-counterfeiting standard needed

Various winery and producer trade organizations should endorse a common standard of anti-counterfeiting technology.  If the industry adopts a multiplicity of approaches, enforcement will become near impossible as trade members would not only need to support all technologies but know which one was used by which producer and starting with what vintage. It's unworkable.

Bottom line: Stamping out wine counterfeiting starts with producers taking preventive measures.  Assessing fakes without an objective capability to determine them is just educated guesswork at best.  Consumers are exposed to financial loss, fine wine retailers and auction houses may get unfairly blamed or accused of complicity, and producers' reputations are at risk when consumers drink poor quality fakes and think it's the real thing.

Other recommended reading:

1. Vinography post: Do we have Ebay to thank for all that counterfeit wine?
2. Dr. Vino post: High stakes and alleged fakes - Koch sues Kurniawan.  In particular, read Koch's legal complaint which goes into some interesting details (especially first 5-6 pages).
3. Jancis Robinson's robust series of articles in her fake wine category on her information-rich site
4. Billionaire's Vinegar.  Quite entertaining and superbly researched.

2 comments   permalink  

4

Nov

2009

New access to mainland Chinese wine market from Hong Kong

Categories: Asia

At the opening ceremony of the Hong Kong International Wine Fair today, John Tsang, Financial Secretary (on right in photo), announced an important step towards streamlining access to the Mainland Chinese wine market:

"I am pleased to tell you that we have just reached agreement with the Mainland Customs to provide customs facilitation measures for wine exported from Hong Kong to the Mainland. We are also discussing with their food safety department, the Administration of Supervi

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