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Shark Tank Season 6 Episode 11, which aired on December 5, 2014, saw Andrew McMurray seek $2.5 million in exchange for 10% equity in his company, Zipz, which sold single-serve wine. While most Sharks hesitated to make such a significant investment, Kevin O'Leary agreed to, only if Andrew could lower the price of each unit from $2.99, claiming it would go out of business otherwise.
"I know it's getting delisted. It's not gonna work," Kevin said.
The Shark Tank investor believed the product would not sell if retailed at $2.99, when 97% of the wine in the States was sold for under $9.95 per bottle. He stated that although the packaging idea had "so much merit," it failed on its pricing. He was convinced that the average consumer that could have five and a half glasses of wine for $9 - $10 would never agree to pay almost $3 for a single serve.
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After the other investors removed themselves from consideration, Kevin presented Andrew with an offer contingent upon getting into Costco. After reviewing the offer with the other investors of Zipz, Andrew ultimately finalized the deal with Kevin.
Zipz left Shark Tank with a deal considered one of the biggest in terms of investment. The company continues to be in business, however, only licenses its packaging technology to other organizations. They stopped producing and selling their wine in 2017.
"Huge mistake" — Shark Tank investor Mark Cuban refuses to invest in Zipz from a quality perspective
During his presentation before the Shark Tank investors, Andrew stated his single-serve glasses were not only durable but also specially-crafted to give the wine a one-year shelf life. Each glass came with a UV-protectant outer covering that kept the wine away from sunlight. Moreover, the lids of the glasses could be unscrewed and used as coasters.
After testing the samples, the Sharks asked Andrew how his company differed from Copa Di Vino, another single serve wine company that appeared on Shark Tank twice. The business owner stated that the primary difference was the shelf life. When panelist Robert Herjavec asked the business owner if he wanted to license the packaging and sell it to organizations and wineries, he said:
"The answer would be no and yes, and yes and no."
He then explained that Zipz was their own brand that worked in collaboration with Fetzer Winery. Andrew revealed Zipz did $130,000 in licensing fees by sending the product into six major league baseball parks. He further disclosed that he had $8.5 million invested in his company from over 25 investors.
When asked about the sales, Andrew said they had sold products worth $650,000. He further stated that each unit cost $0.95 to make and was sold for $2.99. Upon hearing that, Kevin expressed concern about the pricing of the product and said that their sales, despite being in 1200 stores, was "poo poo."
While the two went back and forth, Shark Tank investor, Mark Cuban backed out of making an offer, saying:
"Look, I'm not a wine connoisseur but even then I would take MD 20/20 from a quality perspective over a brand with a zipper named Zips. Huge mistake. I'm out."
Kevin then took the opportunity to explain how he got his company, O'Leary Wines, into Costco. Meanwhile, Robert wondered why Andrew was not licensing just the packaging instead of "putting up enormous amounts of capital."
Panelist Daymond John refused to make an investment, citing risk as his primary concern. Shark Tank expert Lori Greiner followed suit and removed herself from consideration, despite appreciating the concept of the product. Robert, on the other hand, saw Zipz as a licensing deal only. He bowed out of discussion, disapproving of the direction in which the company was headed.
After some back and forth, Kevin made an offer, proposing $2.5 million for 10% equity with the option to buy another $2.5 million worth of equity at a $25 million valuation in the event of an exit. He added that the offer was contingent on getting a deal with Costco. After a brief discussion with the CEO of Zipz, Andrew accepted Kevin's offer.
Shark Tank Season 16 airs new episodes every Friday at 8 pm ET exclusively on ABC.
