Digital Wine Ventures (ASX: DW8) is set to acquire South Australian-based fourth-party logistics provider Wine Delivery Australia in a $2.4 million agreement announced today.
Total consideration for the acquisition will be met by a $600,000 cash payment plus the issue of 40.6 million fully paid ordinary shares in Digital Wine Ventures at $0.04 each.
The issue price is equal to the 30-day volume weighted average price at the time the agreement was signed.
Digital Wine Ventures chief executive officer Dean Taylor said the deal will allow the company’s cloud-based wine distribution business WineDepot to add further efficiencies to the beverage supply chain for consumer and trade orders.
“This acquisition perfectly complements WineDepot’s existing business model and enhances our customer value proposition by providing a mechanism for us to fulfil orders from wineries which prefer to hold their inventory onsite,” he said.
“The combination of our respective freight volumes will also generate economies of scale that can be leveraged to reduce costs for our business and our customers.”
The acquisition will bring 186 new brands and associated products to WineDepot’s planned online marketplace, boosting the total number of brands on the platform to over 300.
Wine Delivery Australia provides a logistics service to South Australian wineries, allowing them to dispatch orders directly to customers in a more economical way than using mainstream carriers.
The company collects freight from winery cellar doors, consolidates it at a regional level, then transports it to capital cities where it is cross-docked and routed to final mile couriers, which deliver the orders to end consumers.
It also offers a state-wide and interstate pallet transport solution for regional wineries, leveraging the economies of regionally-consolidated freight volumes.
It is expected the acquisition agreement will allow Wine Delivery Australia to expand its cellar door-to-door model into other Australian wine regions as part of WineDepot’s broader smart logistics solution.
Wine Delivery Australia has experienced considerable growth during 2020 through an expansion of its customer base and the receipt of additional order volumes considered to be a by-product of COVID-19 lockdowns.
The company generated approximately $1.5 million revenue in the 2020 financial year – representing a 60% increase on the previous corresponding period – and produced an unaudited net profit of $110,000.
As part of the acquisition deal, Wine Delivery Australia founder and general manager James Munn will join the WineDepot executive team as head of business development (logistics).
Bringing more than two decades of experience in warehousing and logistics, Mr Munn said he is looking forward to working with WineDepot to release value and efficiency within the existing wine supply chain.
“For remote and regional wineries to dispatch customer orders from the cellar door often requires staff to travel to the nearest major township and lodge the order at a post office or courier depot… they end up wasting a lot of time on top of paying high shipping costs for a delivery which that often takes five to 10 days to get to the customer,” he said.
“Wine Delivery Australia sets out to solve this problem, by providing wineries access to a cellar door-to-door delivery service that leverages the combined volumes coming out of each region to improve service levels and reduce freight costs.”
Digital Wine Ventures today confirmed it will delay the launch of WineDepot’s direct-to-trade marketplace until March 2021 to allow sufficient time for Wine Delivery Australia and its customers to be integrated post-acquisition.
The delay could also potentially bypass a current lockdown of the Victorian hospitality industry, which is one of the country’s largest markets for fine wine and craft beverages.
“To launch a marketplace successfully, you need to have sufficient supply, demand and ideally both – if an online user’s first experience is disappointing, they are unlikely to ever come back,” Mr Taylor said.
“Allowing for additional growth between now and March, we should be able to launch with substantially more brands and products than is currently available from the largest three distributors in the country combined,” he added.