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Geerlings & Wading Into a Wine-on-the-Web Swamp

Pity poor Geerlings & Wade, whose timid offerings don't stand a chance against some big industry newcomers.

Like a farmer hearing thunderclaps from just over the horizon, Geerlings & Wade (GEER) is working like crazy, plowing money into its fledgling Internet business in hopes of producing a sturdy crop that can withstand the tough weather ahead. President and CEO Jay Essa said Net sales were growing well, up to nearly 10% of total sales in June.

But despite that progress, it remains to be seen whether this venerable wine direct marketer can root itself into its market niche fast enough or deeply enough to maintain its grip against the $80 million cyclone of venture-backed competition bearing down on it.

Take , which

Drinks & Diversions

first told you about on

March 14 and

March 18. Back then, said it had raised $35 million under the umbrella of lead venture capital powerhouse

Kleiner Perkins Caufield & Byers

. president Peter Sisson said that sum has since been raised to $46 million., not up yet, promises a launch by year-end.

Not to be outdone,

Virtual Vineyards snagged a cool $30 million in June, in the company's fourth round of financing since its founding in 1994. The new money was led by

New Millennium Partners


GE Equity


MediaOne Ventures

, according to president and CEO Bill Newlands, who left the top wine job at

Canandaigua Brands


on June 30 to take the helm of what is arguably the best-known wine e-tailer. is looking at a potential IPO next year. And while Newlands says that Virtual Vineyards isn't thinking about it right now, its venture backers certainly are.

Then, when you add in the $2.2 million raised by

evineyards and another couple of million in seed funds raised by a handful of other wine e-tailer wannabees, it's clear that Geerlings & Wade will have its hands full in the coming months. That's particularly so because Geerlings & Wade's Internet bookings in the quarter ended July 28 resulted in sales of only $421,000. While that's considerably above the $248,000 registered in the same quarter 12 months ago, it's still a drop in the bucket compared with the potential demand.

Geerlings & Wade isn't talking about what it's spending to boost those numbers, but regardless of the amount, it is surely less than the big money that's being thrown at the problem by the competition. Not only that, but Geerlings is spreading its resources over multiple Web sites, including both a major renovation of its major site to incorporate more than 2,000 vintage wines from around the world and the construction of a new Web supersite. Slated for launch by the end of the year, Winebins is Geerling's supersite answer to and Virtual Vineyards.

All that Web development work has not come cheap for Geerlings & Wade, which showed a loss of 2 cents a diluted share for the six months ended June 30, reversing year-ago earnings of 10 cents. Biggest hit in the operating statement? Sales, general and administrative costs, which rose to $8.4 million for this six months from $6.8 million for the same period in 1998.

And with Internet sales still registering in the bush leagues, management would have to be prepared to spend a lot more to prepare for the hailstorm of competition that is about to come its way.

Lewis Perdue is editor and publisher of

Wine Investment News, and the author of The Wrath of Grapes: The Coming Wine Industry Shakeout and How to Take Advantage of It. While Perdue does not hold any positions in any securities mentioned in this column, he is the chief technology officer (on a consulting basis) to the e-tailer Wine Society of the World, which may, from time to time, discuss purchasing or other agreements with wine companies. He can be reached at