The Wine Collective bags $8.3 million, as COVID-19 drives demand for boozy e-commerce

Aussie wine startup The Wine Collective has raised $8.28 million and unveiled its revamped premium wine marketplace, as COVID-19 drives a boozy e-commerce trend.

The startup has secured backing from experts both on the tech side of things and from the world of wine, founder and chief Lloyd Heinrich tells SmartCompany.

The round is led by the Fogarty Wine Group, with chair Peter Fogarty joining The Wine Collective as chairman.

Melbourne’s Constant Innovation Group also contributed to the round, bringing expertise in marketplace platforms, in particular.

The Wine Collective was created in something of an unusual fashion in 2016, when Heinrich acquired the databases of existing direct-to-consumer wine merchants, and set out to bring them into the digital age.

Coming from a strategy background, and having worked at Boston Consulting Group and on Coles’ digital offering, he became curious about the move from bricks-and-mortar retail to e-commerce.

Then, a stint working in strategy at RedBubble introduced him to the idea of marketplaces. Naturally, his instinct was to pair that with his passion for wine.

“I thought I would go out and have a bit of a crack at building a marketplace for the wine industry.”

You can come at that mission from two angles, he suggests. Either, you start with the supply side, building up inventory and setting out to recruit customers.

Or, you can start by building the customer base, and creating an inventory base to serve their needs.

“Our strategy has been to go and mop up some old direct-to-consumer databases,” Heinrich says.

That includes the database of The Wine Society, which the founder says is the oldest Aussie wine club, and more recently Cracka Wines, a “digital pioneer” in this space.

“Those two databases bring us a really big jump-step or a springboard into launching a marketplace,” he says.

Ducks in a row

The funding round comes at a time when COVID-19 lockdowns have driven growth for The Wine Collective.

Sales are up 75% year-on-year for 2020, and in the first quarter of this financial year, sales are up 120% compared to the same period of 2019.

But, the round was already in the pipeline pre-pandemic, Heinrich says.

“We were starting to see some significant growth towards the end of last year,” Heinrich says.

“We were starting to see the strategy play out — people were going to be shopping more online and less in physical stores,” he explains.

Then, of course, COVID-19 struck and forced people to adopt digital habits in all aspects of their lives — and fast.

“We’ve really brought forward three to five years of growth into a very compressed period of time.”

And, already on the cusp of a growth spurt, The Wine Collective was in “a perfect position” to meet a sudden demand for wine delivered-to-your-door.

“When our demand started ramping up significantly, we had all our processes in place.”

Here the value of acquiring existing assets comes into play, Heinrich explains. The businesses come with established capabilities.

“We consider ourselves to be experts in wine logistics,” he says.

“Often, launching a new digital business, there are some parts that aren’t in place for explosive growth — one of those would be in the back end,” he adds.

“We were fortunate that when COVID came along, we had all of our ducks in a row.”

“Nine months of Christmas”

Now Heinrich is gearing up to make a whole string of additional tech investments to grow the marketplace.

The funding is pegged for building out the tech in the back end, allowing more wineries to access the platform, he says, as well as bolstering its warehousing and logistics operations.

“We’re in a good position,” he says.

“But we’ve just had nine months of Christmas back-to-back.”

With actual Christmas fast approaching, he’s expecting more than double the volumes of last year, and “potentially even triple”, he says.

The startup will also be investing in customer acquisition and its search engine and digital marketing strategies.

COVID-19 may have led to increased demand for booze delivery. But, once the health crisis passes, this is a trend that will remain.

That said, this is a shift Heinrich has seen coming for 10 years or more. COVID-19 hasn’t changed anything, it’s just reduced the timeline.

In the US, the prediction pre-COVID was that e-commerce would overtake physical retail by 2025, he explains. In Australia, we were looking at 2030.

“I think those timelines are slow now,” he says.

“I think e-commerce is going to overtake a lot quicker than that, and the alcohol industry is absolutely no different.”

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