ZIPZ Wine vs. Copa Di Vino Wine
Let’s take a quick stroll down memory lane with Copa Di Vino wine. Just typing the company name makes me cringe remembering the exchanges between Mr. Wonderful (Kevin O’Leary) and James Martin during Copa Di Vino’s two appearances in the Tank. This season we were introduced to a new player in the packaged wine category: ZIPZ. Here’s how ZIPZ’ dip in the Tank differed from Copa Di Vino:
- Packaging – Similar packaging technology to Copa Di Vino but ZIPZ claims a 1-year shelf life. Both have patents on their packaging.
- Licensing – Copa Di Vino refused to license the packaging. He wanted to keep it unique to Copa Di Vino wine. ZIPZ has licensed the packaging to wine producers and offers their own ZIPZ wine line.
- Equity – While Martin didn’t accept a deal, he did retain 100% equity of the business. ZIPZ accepted a deal and has diluted his equity with a 26th investor, Kevin O’Leary.
From an investment perspective, each business came in with some hurdles to overcome. O’Leary believes the potential for growth is in licensing the packaging. Since Copa Di Vino wouldn’t budge on that point, their negotiations halted both times. A dramatically different philosophy, ZIPZ believes their packaging will be to wine what the aluminum can is to the soda industry. They are engaged in licensing agreements with wine producers and are interested in growing this business model. Agreeing on this point allowed Kevin to continue negotiations with ZIPZ Wine.
Most of the Sharks don’t want to swim in complicated waters. ZIPZ has 8.5 million in funding from 25 investors (Yes 25!). Regardless of what percentage each investor owns, the pie is divided by 25 investors! Every time a new investor comes on board, that adds another opinion regarding the strategic direction of the company.
Kevin O’Leary invested $2.5 million for 10% equity with an option to buy another 10% at the original $25 million valuation. The contingency is he has to get ZIPZ into Costco, which O’Leary believes will skyrocket the company’s value and position it for a buyout. While Patrick is on the phone, we learn that’s ZIPZ’ packaging is O’Leary’s secret weapon. Remember, O’Leary has been trying to get into Costco for 2 years. The key thing to understand is that O’Leary is diluting each investor’s share value, but ZIPZ is gambling on his ability to increase the company’s value by getting it into Costco. So each investor owns less, but hopefully their shares will be worth more.
It will be interesting to see how the company grows with O’Leary’s involvement. Opening the door to the largest buyer of wine (Costco) would be a huge win that could make ZIPZ packaging as commonplace as the soda can. And how will the proliferation of ZIPZ packaging affect Copa Di Vino’s business? It’s going to be an interesting race to watch. Ready, set, go!
Dan Casey, founder and CEO of purchaseorderfinancing.com, believes every business has a story to tell. He’s been listening and helping small businesses grow exponentially since 2002 using a creative combination of finance tools. He’s been featured in publications including Entrepreneur Magazine, Entrepreneur Online, Small Business Trends Online, The Washington Post, Crain’s Chicago Business & American Express Open Forum.
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