A Blow to the Wine Industry
Underground Cellar‘s groundbreaking subscription wine sales and storage service is also breaking hearts and wallets after filing for Chapter 7 bankruptcy protection on May 1, 2023. Its meteoric rise abruptly ceased two weeks ago, leading investors and customers alike speculating whether they’re doomed to suffer the same fate shared by those burned by Premier Cru’s alleged Ponzi scheme business plan.
As noted on their still-operational website, Underground Cellar blamed “recent market headwinds” and the lack of financial options in “an increasingly challenging capital market” for their decision. The company is unlikely to survive with over 37,000 unsecured claimants, mostly customers with unfilled orders and “Cloud Cellar” wine storage. It’s also unlikely that its huge wine inventory will be distributed any time soon.
Underground’s unique value proposition was its Cloud Cellar program, allowing customers to purchase and then store wine in its climate-controlled cellar. Unfortunately for these folks, a legal battle’s brewing to determine ownership and disposition of the stored wine. Some claim that Underground holds thousands of their bottles, acknowledging they may never receive a drop.
The San Francisco Chronicle interviewed Gregg Thatcher, admin of the Underground Cellar Customers Facebook group and an Underground Cellar client. “It’s just horrifying. Everybody is feeling robbed,” Thatcher lamented. He states he’s owed a little over $1,000; other customers have tens of thousands at risk, and one Facebook group member claims he’s facing over $200K in wine losses. “People built up these vast collections, and they don’t know what they will do. It’s a tremendous loss for them.”
Another Premium Cru?
It all leads to the question of whether the wine exists or if this is another Premier Cru. According to the Chronicle article, a former Underground Cellar warehouse employee confirmed that the company had over 500,000 stored bottles and was shipping 200-300 cases weekly before the shutdown. Despite his assertions, the bankruptcy filing shows $2.7 million in missing wine.
Time will tell if Underground Cellar was a good idea gone wrong or a scam unearthed. Either way, it’s another blow to an industry already reeling from bank failures, environmental threats, changing consumer tastes, and a loss of trust.