The Biggest Deal in the History of Shark Tank

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Almost every entrepreneur is eager to get their product in front of millions of viewers and earn the chance to attract the attention of investors. Shark Tank gives company owners and those with an idea that chance. With almost eight million viewers across the globe, developers and innovators cannot wait for their chance to appear on the show. The exposure alone is invaluable. The chance to partner with one of the so-called Sharks, leaders in their industry, is also priceless. However, the biggest perk of appearing on the show is impressing one of the Sharks enough to convince them to invest in your brand.

There have been several big deals made on the show, with various Sharks investing in a variety of products. Most of these deals are for hundreds of thousands of dollars, trading cash in exchange for part ownership in the company. There is one deal, however, that stands out above the rest. The biggest deal in Shark Tank history involved Mr. Wonderful himself and an innovative wine company.

About Mr. Wonderful

Kevin O’Leary, aka Mr. Wonderful, is a Canadian investor who has achieved notoriety the world over. He got his reality TV start appearing on Canadian programs such as The Lang and O’Leary Exchange, Redemption Inc., and Dragons’ Den, Canada’s version of Shark Tank. Since 2009, he has also appeared on Shark Tank, as one of the main Sharks. He is known for being abrasive, arrogant, and incredibly successful. O’Leary has an eye for success and knows how to market just about anything.

Zipz Wine

In season six, Andrew McMurray, the founder of Zipz, presented his product to the Sharks. Zips is an innovative wine product; one that caught the eye of all the Sharks present. It is a single-serving wine, served in sealed, strong plastic glasses. While the idea has been around for decades, Zipz is unique because of its longer shelf life, the fact that it is resealable, and the glasses are much more durable.

Shark Tank fans may remember a similar product presented in season two, called Copa Di Vino. Founder James Martin is infamous as being the only person to appear on Shark Tank to decline a deal from the Sharks on two separate occasions. The Sharks do not remember him well and considered him to be obnoxious, frustrating, and arrogant. This was mostly because Martin did not want to investigate licensing deals. McMurry, on the other hand, has already made licensing deals. Specifically, a $130,000 deal to get his wine into six MLB stadiums. At the time the show was filmed, McMurray was also considering licensing deals with three major wine producers, including the internationally known Yellow Tail. In his pitch, McMurray compared his packaging to the aluminum can, stating that it can revolutionize the industry.

Impressing the Sharks
The fact that Zipz already has invested funds also impressed O’Leary. 25 investors, mostly from Wall Street and including three professional sport team owners, had expressed interest before McMurray sought out the additional support of the Sharks. By the time McMurray made his pitch, Zipz was already in over 1,200 stores across the United States, including in Wal-Mart. Overall, the company had sold $650,000 since it began.

With the success McMurray had already achieved, one may wonder what he wanted a Shark for. His goal was to take his product to the next level, looking for a long-term distribution deal with a major retailer, such as Costco. Costco happens to be the biggest wine vendor in the world, with almost $1.5 billion sold in 2013 alone.

While each Shark was initially interested, one by one they declined to make an offer. Most of them disagreed with the direction of the company; some of them even questioning McMurray’s ultimate goal. However, O’Leary saw something in Zipz that the other Sharks missed. O’Leary happens to be the resident wine expert, and has his own brand of wine as well, called O’Leary Fine Wines. He also has a connection with Costco.

The Costco Connection

O’Leary had been trying to get his own wine into Costco stores for years. He had spent the two years prior to McMurray’s pitch proving that his brand had strong enough name recognition to succeed in their stores. He also had to find a way to make the wine itself cheaper, since he had to compete with the rest of the market. In the US, over 95 percent of the wine sold is less than $10.

Thanks to his recent experiences, O’Leary cautioned McMurray about the per-glass price of Zipz wine. Despite the fact that McMurray had received no push-back from the $2.99 price, O’Leary insisted that Costco would not stock a product at that price. In order to sell close to $20 million through Costco, O’Leary recommended that McMurray lower the price to $1.49 per glass. If that could be done, O’Leary felt he could easily get the product on the shelves.

Lowering the price of a product by that much is quite a challenge, especially if the goal is to do so without comprising the quality of the product itself. However, McMurray felt it was possible by examining the manufacturing scaling and changing the package. This was enough to convince the Shark to invest.

The Biggest Deal in Shark Tank History

Once O’Leary was thoroughly impressed with the company, its product, and its prospects, so he made his offer; the biggest one in Shark Tank history. In exchange for only 10 percent equity in Zipz, O’Leary offered to invest $2.5 million. There was a condition attached to this investment – O’Leary wanted to purchase another $2.5 million’s worth of the company at a $25 million valuation if there is an exit. For example, if Zipz is sold for $50 million, O’Leary then owns 20 percent of the entire company, with a $10 million value, for only a $5 million investment.

When deals involve large sums of money and with only very little of the company being offered up in exchange, most people jump at it. In this case, it took some convincing for McMurray to agree to the deal. It was contingent on O’Leary securing a Costco contract.

Ulterior Motives

While known as Mr. Wonderful, O’Leary is not widely known as a generous man, which made this deal initially surprising. Lori Greiner, a fellow Shark, accurately pinpointed O’Leary’s true intentions: using Zipz as a way to get his own wine into Costco stores.

After the Deal

Zipz is still going strong today, though there were several struggles in the years after the deal was made. While sales were impressive, it came with numerous challenges. The largest problem focused around finding a co-packer that can handle production volumes, since the current line was at maximum capacity, packing 400,000 cases per year. McMurray sought out O’Leary’s advice on that matter. He also considered using the packaging with other brands of wines, to meet increasing sales demands and gain extra cash flow.

To help increase exposure, O’Leary was able to get Zipz into a major restaurant chain. This major contract would bring in much needed cashflow and get Zipz major credibility in the market. McMurray was eventually able to find a reputable co-packer with an impressive capacity levels, packing two million cases each year. Zipz also partnered with Arctic Beverage for distribution.

The company now primarily focuses on selling to other businesses, rather than customers themselves. By focusing on the innovating packaging, instead of the wine itself, Zipz managed to transform their biggest competitors into their biggest partners. In 2016, the company was able to make deals with several major wine manufacturers, including O’Leary’s Fine Wines, Fetzer, Beringer, and Yellow Tail. Introducing a new wine into the marketplace is always a challenge because most consumer are loyal to their own type of wine. However, introducing a revolutionary new way to package, store, and serve wine became very lucrative.

Zipz is now available online or in stores. There are four different sizes available, and the company focuses on wine and cocktails now, not just wine alone. Each one looks and feels exactly like glass and is recyclable. Newer versions even have a resealable lid that can also act as a coaster.

Appearing on Shark Tank can truly change a person’s life. In a worst-case scenario, the Sharks all pass on your product, but you are still able to get it in front of nearly eight million viewers. This kind of exposure is something that money cannot buy. In best-case scenarios, a Shark may invest, helping to take your brand to a whole new level. Success often depends on the strength of your pitch, your knowledge of the industry, and the potential for success of your product. McMurray was able to get the biggest deal in Shark Tank history by knowing his stuff, being flexible when faced with production challenges, and remaining committed to his product. Entrepreneurs looking for ways to attract investors should keep McMurray’s poise and industry knowledge in mind when making their own pitches.

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