Ep 610: How Full Glass Built a $200M Wine Rollup by Fixing DTC Unit Economics

0:00Neha Kumar:These companies that we've acquired had very, very good brands, very strong brands, and the people who set them up did a phenomenal job they did. What's missing, in my opinion, is there's three legs in a tripod. You need the marketing, and you can put marketing and branding if you want for a moment in one. You need the operations, and you need the finance. You need all three of those combined. Subscription was such a big thing. The more times you email them, the more times you talk to them, the more chances you're going to see unsubscribe rates. In the world of wine, people want to hear about it.

0:29Neha Kumar:They want to know about the discovery of wine. What are the new types of bridals that are coming up? Retention is the engine. That needs to be that way for the majority of direct-to-consumer companies, period. Everything really is built on their retention.

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1:57You'll hear from industry leaders and experts sharing practical, data-driven strategies you can actually implement. If you're ready to stop guessing and start growing, you won't want to miss it. Visit triplewhale.com slash Whaley's, that's T-R-I-P-L-E-W-H-A-L-E dot com slash Whaley's to get your ticket today. Hello and welcome to the D2C podcast. Today, I am joined by Neha Kumar, co-founder and COO of Full Glass Wine Co. They've acquired seven D2C wine brands and built a system of scale under one roof. Neha's background is in finance and operations. She was COO and CFO at Create and Cultivate through their exit, and now she's applying that lens to fix what's broken in D2C wine.

2:41Welcome to the podcast, Neha. How are you doing?

2:43Neha Kumar:I'm doing well. Thank you for having me. I'm always impressed with when people are in that acquisition mode, when they're willing to put it down and actually acquire wine brands. So maybe start by telling you what's the biggest challenge in the wine industry where it became an opportunity to do this acquisition play? I'd actually even take like a 10 ,000 step foot back even further, right? And I would say it's not even necessarily that there's something wrong. I think that if you take a really far standing back look and you look at a long enough timeline, every so many years, you almost need a tilling of the soil, right?

3:19Neha Kumar:So things start to get a little stale. People keep doing things the same way. People get caught up with the same items. The way in which a lot of direct consumer companies were looking at customer acquisition when you're looking at it in the, let's call it the influencer and heyday, you know, and also the subscription heyday of 20, let's say 13, 14, 15 up through 20, 18, 19 was very different. Then you throw in COVID, right? We have a global pandemic. So a lot of companies that were direct-to-consumer where products could easily be delivered at home were really seeing a very high peak during 2020, 2021, and even sometimes into 2022.

3:58Neha Kumar:The thing that you have, Eric, and I'm sure a lot of your listeners are very well in tune to this, is that a pandemic is not a frequently occurring item. them. It happened once and you need to take in as much cash as you can as a lot of these direct to consumer companies, but you need to manage your business model accordingly to looking at what do I think is going to occur in the next so many years. And so if you had looked at a lot of the companies in 2020, 2021, they were raising at very, very high valuations. They were bringing in, hoarding in, I could say to a certain extent, inventory, pulling in things as quickly as possible and really getting their fixed costs locked in.

4:36Neha Kumar:You look at someone like Peloton at the time, right? It's yes, they're starting to move things and turn it around right now. But essentially what you had is they said, listen, if we take our numbers of how many units we think we're going to sell and we extrapolate them out and we forecast it, we're going to keep going down that route. The challenge that companies like that had is then they started to go international and they started to basically open up all these facilities, these manufacturing facilities. You have fixed costs that are tied in, which make it very hard. So now kind of going from that lens to answer your original question, what was going on in the direct to consumer space?

5:13Neha Kumar:We happen to go into wine. I love wine. I love champagne. I'm sure you can see in my background. It is not a background. It is real. So it's a nice fun thing for me that it happens to be a product that I do really love. Having said that, a lot of direct-to-consumer companies at that time needed to modify the way that they are working. How so? Because you essentially are extrapolating out a model, a forecast that is based off of how things were in the pandemic. And people aren't going to keep sitting at home and buying. So right now today, our competitor is someone like a wine.com. You can even say Trader Joe's.

5:52Neha Kumar:Trader Joe's is a big one. Costco, right? Those are our competitors. During the pandemic of 2020, 2021, the alternative was is essentially going to a restaurant. Of course, people were going to go back to restaurants later on. So you're going to have that consumer going back and buying those products. So what we ended up doing is looking in the market and saying, OK, what kind of industries needed to have some love? A company called Wink ended up filing for bankruptcy in 2022. That was our first one that we acquired in 2023. And with the case of Wink, was it a problem of the fake or AstroTurf demand spike that COVID happened and then not being able to sort of reconcile that, having that big disappointment of being like, okay, people aren't going to keep drinking like this forever, having it come back to earth and then just not being able to reconcile it with the fixed costs that they maybe invested it in during that time?

6:46Neha Kumar:And a lot of this information, I'll share it with you here, Eric, and all your listeners as well. It's public information because Wink was public, but they bought a lot of inventory. So for example, I'll give you two things on Wink, which I always find interesting. The first one essentially is let's just say right now, you're selling 10 bottles a month, just to keep the numbers simple, right? So in one year, you're selling 120. The pandemic hits and those numbers go up by 100 a month. All of a sudden, and now you say, listen, this is what I'm going to see for the go forward for the next five years.

7:18Neha Kumar:I want to make sure I have enough wine for my consumers. Let me buy a lot of wine. They pre-purchased so much inventory and so much cash went into their inventory. So the challenge that you have is you have all this liquidity, this cash is now sitting locked up and tied into inventory. At some point in time, the company is going to need additional cash to just run basic operations. And then 2022, they ended up filing for bankruptcy. So that was one thing. The second thing was, is you essentially have, we are operators and you started off the podcast that way as well, right? We are operations people to the T operations and finance people.

7:56Neha Kumar:And one of the things with operations and finance, when you combine the two of them, and then you look at marketing as the third leg of the tripod, that's where you really make magic happen. One of the things that Wink did a lot was they would send four bottle monthly shipments. The tipping point essentially from a unit economic standpoint is between five and six bottles. So what can we do to take four bottle monthly shipments and move the customers into essentially a quarterly 12 pack? We could even give consumers one bottle for free a shipment, two bottles for free a shipment. We We can do all these modifications and change it around, but the unit economics weren't ideal.

8:40Neha Kumar:In 2020, 2021, when so much money was floating around and the interest rates were so low, everybody was just talking about how quickly can we grow our consumer base? How quickly can we get more customers in? The pendulum, if you look back, it swings back and forth all the time, every five to eight years, maybe 10. And so now there's a very hyper sensitive focus on profitability. We essentially take the companies in and we turn them profitable within 60 to 120 days. I think that's a really good point though, that if you don't, if you haven't thought of, you know, that deep level of operations where it's like, okay, this is where we'll make our money when we, when we get them to make this purchase or whatever.

9:19And you pour a lot of gas on it in marketing, even if you're making sales, if it's not set up from an operationally sound or margin sound perspective, you're just going to be pouring fuel on a fire that's going to burn you.

9:30Neha Kumar:That's exactly true. And so a lot of these companies that we've acquired had very, very good brands, very strong brands. And the people who set them up did a phenomenal job. They did. What's missing in my opinion is there's three legs and a tripod. And without the three legs, you don't stand. You have to make sure that it stands. You need the marketing and you could put marketing and branding. If you want for a moment in one, you need the operations and you need the finance. You need all three of those combined. And the challenge that you have, and this might answer your original question more in detail, the challenge that you have with this type of a product is one of the most expensive cost is shipping because it is very heavy as opposed to let's say you're looking at a beauty or skincare product that's a life product, margins are higher, so you have more to play with.

10:15Neha Kumar:Essentially for this type of a company, you have to be very, very hyper-focused in regards to the unit economics and the operations or everything in this business. Now walk me through a little bit. You mentioned the brands that you acquired having really strong brands, really great customer market fit. Walk me through your process for determining whether you were going to acquire one of these brands. Was it just the brand strength? What else were you looking for? And what were maybe the red flags that you were looking for that made you not want to buy one? The red flags. That's always a very fun one with this too.

10:45Neha Kumar:It's a really good question. We essentially were looking for one. So in the beginning, we were looking for companies that would help us fill out the infrastructure. Some of them, maybe not very sexy, but some of them had certain licenses that we needed. And direct-to-consumer alcohol, there are certain things that just take a very long time. So some might have had some certain licenses. One of them had a lot of work that was done on an AI algorithm that had already been in play. And so for us, we were able to inherit that. All of them came with really strong customer lists, which was great. But you almost want to look at it.

11:16Neha Kumar:I look at these as if it's all of them were pieces of a puzzle, but you're combining that with a very fast game of Tetris. because sometimes in life, there are pieces that come at you with some of these companies that you might not have wanted. So how do you manage it as quickly as possible to make all this come under one umbrella? So it was definitely very challenging. In regards to some of the red flags that were out there, some of it would have to do with the rapidly deteriorating customer base, right? So even if you have a great customer list that is there and it's a high number and the purchase price, et cetera, everything is good across the board.

11:54Neha Kumar:What we really want to look at are the trends of the customer list over the past two to three years, ideally, right? In addition to that, some of the companies were highly levered. How do we manage the debt that we're taking on or if we're taking it on? And then also we have the third part, which is the personnel. What is the infrastructure that they currently have in place? What are the things that we're missing that we need? One of the companies that we acquired, there was a multitude of reasons we acquired it as Wine Access. Their customer service team were required for an extended period of time to actually have taken the W set one and some of them the W set two as well.

12:33Neha Kumar:So there's three parts of learning for essentially for like to get really good wine knowledge. There's the W set one, two, and three. A lot of those customer service representatives were required to take one and some of them even too. For that type of a product, it is very helpful to have an extensive base of knowledge and understanding, even from a customer service standpoint, because people will be calling in to ask and they might want to know a little bit more about the wine, what's happening. Now, for us, it was very important when we take our customer service team to essentially segregate it out.

13:07Neha Kumar:So some people might be calling in for, hey, where's my shipment, right? And other people are calling for, well, I didn't like this type of Pinot, but there might be something else that's a little bit more suited towards my palette? How could I find something that works for me given my lifestyle? So when you acquire a company like that, do you then apply the customer service from that company to the rest of your brands? Or how much is it a game of keeping what works in a silo versus centralizing things into like the full glass way of doing things? Do you almost want to look at it? It's such a good question because that's almost the magic sauce of what we essentially have.

13:42Neha Kumar:I'm not going to say secret sauce because implementation of it is everything, but it's definitely the magic sauce that we essentially have. I almost would look at it as like the 80-20 rule. So 80 % of it gets integrated and then 20 % of it is going to stay essentially separate on its own, right? So of the customer service, what we can do is we can say 80 % of it is going to be any orders that people have coming in. Where's my shipment? I mean, that's always the biggest one, right? Did it come? Did it arrive? It got to my house. There's logistical kind of just questions that come up. We don't need specialized experts helping those people.

14:15Neha Kumar:So those kinds of customer service questions can now get routed over to a team that's going to be significantly more cost effective. The majority of the customer service team for us that does that type of work is actually abroad. And that's what really helps us from a cost standpoint as well. But then 20%, we make sure those calls are going over to that specific staff, that specific team. Now, what we have been working on, and it takes time to put all this into place, but what we've been doing slowly and slowly is for some of the other brands, when people are looking to get upsold or people want to go up tier essentially and buy more premium wines, we now want those calls routed over from the other storefronts over to these customer service to encourage them to get excited about higher price point wines.

14:59And then you mentioned like putting it together like a puzzle. And I'm sure there's lots of different like lenses that you can look at that puzzle through. Like, is it about the quality of the wine or the price point of the wine? Is it about making sure you have a Pinot and a Chablis and a, you know, a champagne essentially? Is it about completing the puzzle of varieties of wines? Or was it more about the customer type that each brand spoke to? I'm sure it's a medley.

15:27Neha Kumar:It's actually, it's very specific. It's the customer type that each one spoke to. So 90 % of our wines are private label. And we have the ability right now, just because we've hit such scale, that was the biggest thing with this business is can we hit scale? We've been able to hit scale, which gives us a lot of buyer power with a lot of our vendors, which is phenomenal. And we're allowed to then take on the benefits, the great things that we get the access essentially to a lot of different varietals. And we get to share that with our customers. In regards to what kind of companies we acquired, it was specifically on the customer type.

16:00Neha Kumar:So you want to think about it this way. Right now, we've just talked about two. We've talked about Wink and Wine Access. So if I have right now a Saturday, I'm having brunch with a bunch of my friends, I'm probably going to get Wink Wines, right? Cute, fun, different labels. They're very Instagrammable. We can talk about them on social. Wink had come out with last year a non-alcoholic rosé, which is one of the best rosés I've ever tried called Cheeky 0%. And so you get all these wines, you have fun. Now, the thing is, I might have my mother-in-law, let's say, coming over. My mother-in-law watches my two little kids.

16:32Neha Kumar:They're seven and five years old, and I need her for my life. So I want to make sure she's impressed, and she also has very discerning taste. She is an Irish woman. She has discerning taste when it comes to wine. So she's coming over. I'll probably go to Wine Access, get some help from someone there, and maybe buy her an$80 bottle of wine for a special occasion. Now, the whole point here is under full glass mind, we want to keep our consumers under one umbrella. We're okay if you go from brand to brand, whatever it is. Now, people might essentially in your life as a customer, your taste profile will change over time.

17:05Neha Kumar:So you might go from one brand to go to a different one. And in addition to that, your use case might be different. So it's received value as well, right? So one might essentially be going to wink for a certain purpose, a certain use. girlfriend's coming over for brunch on a Saturday, discerning mother-in-law might be a wine access drink. So she still helps you with childcare, right? So that's really how we're looking at it. So it wasn't for varietals or access to the wine. It truly was the customer base is what we were looking at. And then do each of the brands retain their own storefront or does it all get rolled up under full glass?

17:41Neha Kumar:Each one retains their own storefront. I'm actually just on fullglass.wine, which you should all go to in the audience here if you like wine like me. And I'm just seeing the article that was in Entrepreneur, and it's really piqued my interest. How did Willy Wonka inspire you to say yes to everything for a year? So do you have kids, Eric? Yes, I have a 12-year-old. Okay, so you'll remember these days, and I'm sure. My son, he's now seven. He was four or five years old at the time. He would watch Willy Wonka, the one with Johnny Depp, on repeat. And when I mean on repeat, it was like to the point of cringe, right?

18:19Neha Kumar:You're watching it every single day. I'm like, I can't even hear this anymore. And I have all the lines memorized. The thing that ends up happening is when you hear something on repeat, you start to actually listen to it a different way, which is really interesting. There's a scene in that movie where Johnny Depp is telling Charlie why he ended up doing the golden tickets and why he went out there And he said, I want to find some other people to come in and take over the business. Ultimately, he was in his annual haircut with an oompa loompa. And while he was getting his annual haircut, he found one gray hair.

18:51Neha Kumar:And the gray hair for him was an indicator, not that he's getting old necessarily, but that time is finite. Shortly after that time, I started to get some gray hair. And it wasn't about, you know, and I got gray hair at an older age. And so, which is nice. And I'm, I'm very grateful for that. Right. It wasn't about aesthetics, Eric. It was essentially about the fact that we think we have all the time in the world. And I always wait to put everything out there in the world when it was perfect. I didn't want to do a podcast recording. I wouldn't want to put an Instagram post out. I wouldn't want to show my ideas to, to capital providers until it was absolutely perfect.

19:33Neha Kumar:And when I was watching that movie on repeat every day, right? It really sunk in for me. We as human beings genuinely think we have all the time in the world, but we don't. The one thing we know is that time is finite and we don't know when something is going to happen. So I decided I'm going to make this, that time period, my year of yes. And anything that comes to my mind or any idea that comes from somebody else, I'm not going to hesitate. Of course you say no to things. You don't want to overburden your plate on things that are going on, right? Or things that are bad for you. But it's that hesitation that you have and you all know what I'm talking about, Eric, you included.

20:12Neha Kumar:You know that there's that moment where you're like, oh, I'm nervous. I want it to be perfect. And I said, you know what? I'm going to make this my time of yes. And I told myself I'm going to do it until X month. And it happened to be like one year later, right? So until next March, I'm going to do everything that comes up and I'm going to go out of my way. And everything shifted for me. We would not have acquired this many companies, we would not have moved so fast. I would have not have put myself out in the market because we all have self-doubt. We all have imposter syndrome. And when you come to the realization that that is just a human set of traits and everyone has that, then the next thing is, okay, now what am I going to do about it?

20:52Neha Kumar:And so getting out there, trying things, it has worked miracles for me. And I am so grateful that my son watched that movie on repeat. And now he gets to watch you living your Willy Wonka dream with a$200 million company within 17 months of that Willy Wonka inspiration, which is pretty cool. Thank you. It's been hard. Every coin has two sides, but it is really, really amazing to see everything come together. I don't know if you can pick a child, but what was the best acquisition you made during that period? I definitely cannot pick a child. I would say that each one had its benefits and each one had its challenges.

21:34Neha Kumar:That's for sure. Wink was one of those where it was the first one. So the first one's always going to have a special place in your heart, right? Because you ended up acquiring at the beginning. Wine Access is right now the last one that we did, which is probably why subconsciously I talked about both of those with you on three occasions now during this recording. because we each remember the first and the last one there. But I think each one of them brought something different and unique to the puzzle, which really helps us be a whole company. Okay. So you've acquired these brands. Walk me through what happens on day one after you acquire one of these brands.

22:07Neha Kumar:So Eric, we actually start on integration probably two to three months before we close on the transaction. That's how we were able to do so many of them so quickly. So the first thing is the tech. The first thing is we put everybody on the same sub stack because essentially everyone has to be on the same technology. Everyone has to be moving together. Otherwise, it makes it very, very hard to integrate and we can't move quickly. So the first thing we work on is tech integration. Now, you never know for sure if the deal is going to go through, but you'll have someone who's under the tent on the other side, on the acquisition side, and you start working with them through the tech to see what are all the things that need to get done.

22:43Neha Kumar:Is this something that's possible? Because a lot of that actually, Eric, has to do with our purchase price as well. So for example, if they're on the same tech stack as us, the integration work is going to be easier. And then therefore, it would be a modification potentially to the purchase price as well, as opposed to if there's a higher lift for our team to integrate it, it's going to be a lot more work. So the first thing is tech. Then the second thing is going to be our 3PL for shipping. Because by T minus 10 days, that has to be set up, teed up, ready to go. Because for the customers, it shouldn't even be a glitch.