Vintage Wine Estates is reducing the number of SKU positions in order to cut expenses.

Vintage Wine Estates Winery

has almost halved the number of products in its portfolio, reducing its SKU range, as part of its drive to return to profitability.

The company, which yesterday (May 10) reported first-quarter and deferred results for the second quarter, third quarter and year-to-date, cut its workforce by 4% and sold some of the plots in its vineyards in an effort to reduce its $306 million debt.

The company is also reducing its wholesale spirits inventory to focus solely on wine and its growing cider business.

Interim CEO John Moramarco told investors and analysts Wednesday that Vintage Wine Estates will look to further optimize in the coming months. "We still have a lot of work to do," he said. "As I mentioned, we've cut the number of SKUs almost in half, which had less than a 2% impact on revenue but should have a significant impact on our operations."

Moramarco noted that most of the portfolio reductions came from "tertiary SKUs" in wholesale and manufacturer-to-consumer direct sales. He added that he believes the company could cut its remaining products in half.

In its quest to improve liquidity and cash flow, Vintage Wine Estates sold a portion of its Laetitia Vineyard in San Luis Obispo County for $8.7 million in December. In March, the company also sold Tenma Vineyard in Napa for $11 million. It now has $306 million in debt, up from $328 million at the end of June 2022.

Moramarco declined to comment on what other assets Vintage Wine Estates might sell to raise funds, but said "everything is on the table" as the company evaluates its remaining merchandise. "We're still looking at the various assets we want to monetize," he said.

For the nine months ended March 31, 2023, Vintage Wine Estate reported net revenues of $224.7 million, up $6.5 million from the same period a year earlier. Loss from operations was $157.1 million due to $139.1 million in non-negotiable write-downs made in the second quarter. The company attributed this to "more than expected lower sales in certain wholesale and B2B business categories" as well as revised expectations of future net sales for its Layer Cake wine brand. Excluding the impact of this write-down, Vintage Wine Estates said it would have been in a loss of about $18 million in the first nine months of its FY23 fiscal year. The company also recorded an Adjusted EBITDA loss of $1.4 million for the year-to-date period, compared to $40.5 million in the corresponding period in fiscal 2022.