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8/31/2009

Business Journal

With absolutely no vintner experience, three college buddies have grown True Fabrications

While they were undergraduates at the University of California, Berkeley, good friends Dhruv Agarwal, Nik Patel and Ben Inadomi came up with an ambitious plan: forming a fraternity. It was a challenging task, particularly because the Greek system was “not a huge deal” at the university, said Patel. But by the time the three friends graduated, their chapter of Sigma Phi was one of the largest at the school, with about 40 members. That’s probably why the three friends were undaunted by the idea of starting True Fabrications, a Seattle-based maker of wine bags and accessories. They went into it with no experience making a product or setting up a computer server — and very little knowledge of the wine industry. But the business was profitable in its first year and grew to about $5 million in sales last year, with a projection of $6 million by the end of 2009, largely because of the initiative of the owners and their ability to diversify, even through the recession. “We had a lot to learn because none of us had any idea of what to do or how to do it,” said Patel; who, like Inadomi and Agarwal, is 29. The business started with a phone call from Agarwal, who was finishing up a degree in business and economics and political science at UC Berkeley. He called Patel, who was working at a political science think tank in San Francisco, and Inadomi, who had majored in English and was a waiter. The three friends hadn’t been in touch for several months. “He said, ‘Hey, I think I have an idea,’” said Patel, recalling the conversation with Agarwal. “I wonder if we could make really cool bags?” Agarwal, the only partner among the three who liked wine, was talking about the type of gift bag used to hold a wine bottle. At the time, those kinds of bags were hard to find. Within a few months, the three partners had moved to Seattle, which they determined had many people who drink wine and had the potential to accept a relatively new idea. Using $100,000 raised from family and friends, the partners started True Fabrications in June of 2004. When it launched, the company had no budget and founders did not have a lot of experience in graphic design. They had to learn how to use Photoshop to design their bags and find a manufacturer to make them. Persuading wine shops to carry their product wasn’t easy either. “Because it’s always been considered a very sophisticated industry, a thing like a fun wine bag isn’t an easy sell,” said Patel. “It could cheapen the bottle of wine.” But the business was profitable during its first full year in 2005, with revenues of $200,000. By last year, sales had increased to $5 million. Its 10,000 customers range from independent wine stores to grocery stores like QFC and Safeway, and even a salon and a sausage company in Oregon. It also has a retail component that’s a small part of the business. “We’re really nice people and everybody we hired ever since are really nice people – our customer service is really unparalleled and that really played a big part in it too,” said Patel. That’s one of the reasons why Sixth Avenue Wine Seller in Seattle has carried True Fabrications products for the last several years, said owner Bev Shimada. Another reason — innovation. “They’re pretty cutting edge with new products — they listen to the consumer and they’re always out there and on top of it,” said Shimada. Despite the company’s growth, the company hasn’t been untouched by the recession. The owners laid off 10 percent of their staff earlier this year and are now operating with 17 employees. In addition, the company has had trouble extending its credit line in the face of the downturn in the financial industry. Even though alcohol sales were holding steady through the recession, Patel said, they’ve now started to falter. As customers buy cheaper bottles of wine — or none at all — they’re not shelling out cash for bags and other frills. “It’s taken its toll on the market,” said Patel. True Fabrications has combatted the slump by zeroing in on its inventory — making sure it’s not carrying too many extra items and getting rid of items that weren’t selling. The business is also constantly looking at expanding its offerings and is particularly interested in new wine technology. Since its founding, the company has expanded far beyond wine bags. Now it offers everything from a wine aerator to a pocket corkscrew, according to its website. “Our five-year plan is basically to be the one-stop source for wine accessories,” said Patel. “We’re all having a blast doing it. It’s a great industry to be in.”