Winc and Sherry Lehmann: Two Very Different US Retailers in Trouble

Winc, the much lauded 11-year old online business that went public last year, has collapsed, despite $54.2m from venture capital investors including Bessemer Venture Partners, Shining Capital and Crosscut Ventures. Sherry-Lehmann, the 88-year-old Manhattan store faces a $3m unpaid tax bill and rumours of possible closure.

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Bankruptcies in the US (Photo: Pitamaha/
Bankruptcies in the US (Photo: Pitamaha/
  • Winc is a startup, offering personalised and ‘clean’ wines whose quality failed to impress critics
  • Despite this, it attracted over $50m of investment and had a successful IPO in 2021
  • Falling margins and increasing losses led to its bankruptcy in December
  • Sherry-Lehmann is a top New York retailer that had plans to expand to California and elsewhere
  • It was heavily hit during the pandemic lockdown and is now suffering from reduced expenditure by Manhattan office workers who are spending less time in their offices
  • Unless it can resolve its $3m New York tax bill, Sherry-Lehmann could face closure


Two very different US wine companies have hit hard times. First, there’s Winc, the ‘$112m wine subscription box business’ which was briefly the poster child for a range of 21st century concepts including wines ‘tailored’ for individual palates, ‘clean’ ones to suit those on paleo and other diets, direct selling by subscription and huge amounts of venture capital.

Launched in 2011 as Club W by four entrepreneurs, Mark T. Lynn, Xander Oxman, Geoff McFarlane, Brian Smith, the business was set up as the first ‘personalised wine club’. Customers were invited to complete a form detailing their preferences covering a range of foods and drinks, including coffee, salt and lemon. Algorithms then provided recommendations of wines they would be almost certain to enjoy. With each bottle they bought came a QR code link to a 90-second video about the particular wine and a set of recipe cards.

Subsequently, there was a move into ‘clean’ wines for people who were concerned about their daily intake of gluten, salt and carbohydrates, under the Wonderful Wine Co brand and ‘wellness without deprivation’ slogan.

When questioned by former Meininger’s editor, Felicity Carter, for an August 2020 piece in the Guardian, Brian Smith, one of Winc’s founders and its ‘winemaker’, explained that this formula was achieved by using organic grapes “wherever possible” and not manipulating the wines.

Obscure Origins

However hands-off the winemaking - quite possibly by wineries supplying the bulk market - Winc was surprisingly reticent about the origins of some of its wines. A white, for example, was simply described as coming from ‘France’.

Despite Carter’s and others’ skepticism about the ‘clean’ wine and the accuracy or usefulness or the value for money of the supposedly personalised recommendations, Winc attracted good coverage from general, lifestyle and business media that often accepted its description of itself as the ‘Netflix of wine’ 

Not Netflix

Some industry observers were as unconvinced by this claim and the business model as the critics were by the wines. Lewis Perdue of Wine Industry Insight watched the company closely and noted in 2020 that, unlike Netflix which famously had an annual customer-retention rate of 93%, Winc’s, it was thought, was as low as 30%. The business, he pointed out was “chronically unprofitable” and “in order to stay afloat” it had “gone to investors almost every year of its nine years of operation.” 

He went on to say that “While its investment website claims a compound annual growth rate of 195%, Winc does not offer nine years of income statements to back that up. In addition, the 2017-2018 revenue numbers that are provided show inconsistent income and no trend of decreasing losses. The company offers no prospects or projections for profitability.”

Postponed IPO

The November 2021 IPO which was widely celebrated as a success was, in fact, a postponed, scaled-down version of what had been planned for the previous month: 1,538,462 shares of common stock at $12 and $14 per share, down from 5m shares at $14 and $16 per share.

This background is important in the context of commentary about Winc’s poor 2022 performance - including a fall in DTC revenue of 22% during the third quarter - that paints a picture of a healthy business that had turned sour after a successful boom during the pandemic. 

US analyst, Jake Schmidt, offered his own view via a Twitter thread. In 2020 - supposedly the boom year when locked-down wine drinkers turned to online buying - Winc had revenues of $65m, a healthy gross margin of 41%, gross profit of $27m and operating expenses of $33m. This left it with a loss of $6m, a cash position of minus $7m and debt of $22.6m.

The following year, revenues rose - to $74.5. The gross margin went up slightly - to 42% - but operating expenses shot up by $14m. Earnings fell to minus $14.5m and debt had risen to $26.9m.

Falling Margins

Up to September 2022, gross margin had gone down to 36% and total liabilities were up at $36.8m. The direction of travel was clear: Perdue was correct in his 2020 verdict that Winc was fundamentally unprofitable

Schmidt attributes Winc’s failure to the challenge in shifting consumers from buying wine as an impulse purchase to getting it regularly from an online retailer. In 2021, Rabobank estimated the online share of off-premise retail alcohol to be just 4%. Included in that figure is the giant which offers over 50,000 different wines, many of which are familiar brands with critical recognition, unlike Winc’s private label examples. 


Another factor Schmidt mentions is the rise in logistics and delivery costs, and it is revealing that Fedex and Hillebrand are among Winc’s biggest creditors. 

A third business to which it owes nearly three quarters of a million dollars is Meta, reflecting another increasingly expensive area for DTC businesses: advertising. Costlier digital ads are particularly relevant to a young company looking to acquire new customers to replace the ones it is losing at far too fast a rate.

Perhaps the clearest verdict on  the Winc saga came from another Twitter commentator called Greg Banbury: “Unfortunately they were trying to solve a problem that didn’t exist. Millennials don’t spend enough on wine delivery and aren’t anywhere near as loyal. Also, you can’t slap a pretty label on cheap wine and expect high Loan To Value.”

Old School

Right at the other end of the wine distribution scale, Sherry-Lehmann, the wine store described as the most “justly celebrated wine store in the nation” by Vanity Fair magazine, is as different to Winc as a US wine retail business could be. An 88 year-old traditional fine wine retailer in the heart of New York, its role has always been to offer a great range, backed up by personal service. Sufficient stockholding also allowed anyone who wanted a case of a particular Bordeaux or Brunello to have it on the same day, thanks to delivery vans which make the journey from the 65,000 ft warehouse three times a day.

A longstanding Manhattan landmark for US wine enthusiasts and wine producers looking to gain prestigious exposure in the North American market, the store is very proud of the fact that it was chosen for the launch of the first vintage of Dom Perignon in 1936 - before the Champagne was first released in France. 

Unpaid Tax

Sadly, for its loyal customers, however, according to the New York Post, the shop “may close” because it is reported to owe the New York authorities, $3.1m in unpaid sales taxes, placing it in the top ten of the state’s ‘delinquent’ business taxpayers.  

Sherry Lehmann was founded in 1934 by Jack and Sam Aaron, sons of a Russian immigrant. Initially it was called Sherry Wine and Spirits - taking its name from the Madison Avenue building in which it was located - and sold the same kinds of basic range as its neighbours. Then the writer and importer Frank Schoonmaker introduced Sam to European wine, taking him on a buying trip in 1937.

Thanks to Sam Aaron’s enthusiasm for the regions and wines he discovered with Schoonmaker and on his own travels, and to his skills at describing the wines in catalogues that have become collectors items, the business flourished. 

Name Change

In 1965, the Aarons bought a business called M.Lehmann from one of their former employees, and changed the company name to Sherry-Lehmann. After Jack’s death in 1967, management of the business passed to his son, Michael, while Sam became ‘expert emeritus’ and the public face of Sherry-Lehmann. His opinions on vintages and pricing were taken hugely seriously, especially in the days before the advent of Robert Parker. 

New York was becoming increasingly important in the fine wine world and, where specialist wine retailers elsewhere had to compete with supermarkets, like its New York competitors, Sherry-Lehmann benefited from local laws prohibiting the sale of food and alcohol in the same store. Liquor stores controlled - and still control - wine retailing and the Aarons’ were at the top of the pyramid. Famous customers included Greta Garbo, Harrison Ford and Andy Warhol.

A key turning point for the business came in 2007 when the Madison Avenue shop was sold and Sherry-Lehmann relocated to the 9,500 square-foot corner site on 505 Park Avenue. At the time, it was still perceived as a family concern: Michael Aaron personally oversaw the move which was rumoured to have cost $5.5m in refurbishment, and hung the paintings and dressed the windows in the new store. The following year, however, he retired and passed the reins and ownership to a management team who had been working in the business for over a decade.

Mistaken Move?

In retrospect, relocating the business from premises it owned to ones that reportedly now cost nearly $2m a year in rent, may have laid some of the foundations for Sherry-Lehmann’s current woes. So, perhaps was its relative slowness in embracing online retailing when compared to its London counterpart Berry Bros & Rudd.

This form of business was certainly seen as a priority during the Covid19 lockdown when, as CEO Chris Adams told Leaders magazine “We have pivoted to heavy investment in our online business and are working to tell [our] stories online and continue to provide education and introduce new wines to our consumers” and that “brick and mortar will not be what it was before the pandemic”.

Working from Home

Adams may not have foreseen just how different life for New York City retailers might become following the apparently permanent shift to greater working-from-home. According to a 2021 study by Stamford University economist Nicholas Bloom, with colleagues at the University of Chicago and the Instituto Tecnológico Autónomo de México, the average New York City office worker is going to spend less than half as much money in the vicinity of their workplace as they did in 2019. People who previously spent $13,700 are expected to cut that figure by $6,730. 

Bloom’s research showed this trend to be most acute in New York. Second on his list came Los Angeles where Sherry-Lehmann had already invested in a warehouse in 2017 and was planning to open the first of a number of stores in other cities.

Closed Warehouse

Today, the California warehouse is closed, plans for the LA shop are on hold and the New York shop has sparsely-filled shelves and customers wanting a bottle for their weekend dinner party had better buy it on Friday because the store is now closed on Saturday.

According to Jim Gazzale,  Assistant Public Information Officer of the New York Tax office (quoted in the New York Post)  “We are trying to communicate with [Sherry-Lehmann] and find a mutually beneficial way to have them resolve [the tax bill] as quickly as possible. If we can’t come to some arrangement, we [can] seize the business.”

Wine producers across the world and US wine enthusiasts will expect Sherry-Lehmann to find a way to solve its problems, with optimists perhaps recalling Berry Bros & Rudd’s bounce back from the losses it was making in 2014 and 2015. 

Rather fewer people will mourn the passing of Winc.




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