Special Report: GEERLINGS & WADE
IT WAS A VERY GOOD YEAR
Most customers who get lousy service from a retailer just take their business elsewhere. But former Coopers & Lybrand accountants Huib E. Geerlings and Phillip D. Wade turned their bad experience with a liquor store into a fast-growing small company. After waiting three months for a case of wine to be delivered, they decided they could sell wine more efficiently themselves. So they started Geerlings & Wade, now the nation's largest direct-mail wine marketer and No.7 on BUSINESS WEEK's Hot Growth list.
Selling wine by mail is hardly new. But Geerlings & Wade developed a formula that no one in the $5 billion U.S. wine trade matches. It markets wines in all price ranges through mass mailings and an 800 number. Last year, sales swelled 64%, to $20 million, while profits more than quadrupled, to $1.3 million. "We've been absolutely fanatical about delivering on time and with flawless execution, and it's working," says Wade, the 38-year-old president.
MORE CONTROL. The partners started the business in 1987 by linking up with an acquaintance of Geerlings' who ran the Wine Exchange, a Connecticut mail-order wine merchant owned by a Dutch company. Initially, they used the Wine Exchange's marketing materials and wine inventory to sell in Massachusetts.
But the arrangement fell apart in 1988, when Geerlings & Wade wanted room to expand and more control over delivery schedules. The Wine Exchange sued to stop them from competing. The suit was eventually settled, and Geerlings and Wade, who had already put $180,000 into their business, kept going by raising another $100,000 from family and friends.
When Geerlings & Wade went out on its own, sales exploded. Prospecting for customers from subscriber lists for Gourmet, The Economist, and other publications, it carved out a niche selling wines ranging from $5 California chardonnays to $100 bottles of Chateau Margaux. Last year it raised $11 million in a public offering that valued Geerlings' and Wade's initial investments at a combined $14 million. The company, based in a warehouse in Canton, Mass., now operates in 20 states.
The question now is whether the company can stay out in front in a business wide open to competitors. Mitchel H. Sonies, an analyst with Brean Murray Foster Securities, thinks high barriers to entry will slow rivals. A key obstacle: complying with a patchwork of state regulations on liquor sales--a legacy of Prohibition.
The real threat to Geerlings & Wade's growth may come when it has penetrated all 30 states where mail-order wine sales are legal. But Wade says that his firm has plenty of room for expansion through acquisitions, possibly of catalog companies selling oenophile paraphernalia. Geerlings & Wade can only hope that, like fine wine, its results will keep improving with age.By Geoffrey Smith in Boston