Cameron Hughes Wine Co. being sold by court-ordered receiver

PLEASE NOTE: links to court documents are available to premium subscribers of Wine Executive News.

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The Clara Street Company, dba Cameron Hughes Wine (CHW) is quietly being offered for sale by its court-appointed receiver. CHW was placed in receivership by the Superior Court of San Francisco at the request of its lender, Union Bank.

 

On Oct. 20, William Brinkman of Jigsaw Advisors became the new court-appointed receiver. He replaced John Hawkins of St. Helena who was appointed the original receiver on March 24, 2015.

 

According to court and court-related documents, due diligence by potential buyers and meetings with CHW management are currently being conducted and will end Dec. 19. Formal bids are due Dec. 20 with a final decision by the end of this year and a closing by the end of January 2017.

 

Receiver’s post-judgment inventory filed with court Includes bottled and bulk wine inventory, plus fixed and cash assets as well as lists of trademarks and web domains (Premium subscriber link)

 

CHW blindsided by bulk wine shortage, hampered by debt

CHW’s founder Cameron Hughes was quick to take advantage of the wine glut that began in 2001. He quickly established himself as a gifted negociant whose selections offered maximum quality at reasonable prices.

 

CHW has been offered for sale for several years as the company struggled to recover from a shortage of quality  bulk wine that hit it most severely in 2012. The company has tried several times to restructure its debt-heavy balance sheet but its efforts proved unacceptable to its main lender.

 

In an email to Wine Industry Insight, Cameron Hughes wrote:

“Cameron Hughes Wine has been in receivership since March of 2015 and has been working tirelessly to repair its balance sheet and get back to selling wine profitably.

“However, as you know, banks don’t provide growth capital. With the bank indicating they would like to exit their position, we are excited about the prospect of a deal with a new financial partner.

“We are actively looking for partners who see the potential of our business and have an interest in taking CHW to the next level. Until that process is completed, quite frankly, it’s business as usual.

“We deliver to consumers the best values in wine today and we plan on continuing to do that for many years to come.”

The company has also previously laid some responsibility with its lender, Union Bank, for causing the crisis. A March 6 court filing  stated:

 

“From the beginning of 2013 through the end of 2014, Clara Street Co. has been subjected to ever changing, ever tightening borrowing restrictions placed upon it by Union Bank, and has substantially, if not fully, complied with them.”

 

Growth brought unsustainable debt

The company grew quickly, boosted by a major Costco contract in 2005. That contract reportedly produced more than $10 million per year up until 2014. Gross annual revenues for the company have reached as high as nearly $50 million.

 

However, the company’s expansion of its sales force and new efforts into the Direct-to-Consumer channel loaded the balance sheet with debt which prompted losses that begin around 2012. Those DtC revenues have approached $10 million per year.

 

Previous Wine Industry Insight Coverage

• Cameron Hughes Wine Forced Into Receivership, Sale/Merger Likely

Postscript

The wine glut that Hughes so presciently took advantage of had been predicted in 1995 by then-Wine Business Monthly founder Lewis Perdue who expanded on that issue in his 1999 book, The Wrath of Grapes. Barron’s Weekly based a cover article on Perdue’s research. That article greatly displeased the ruling industry brahmins whose persistent assertions that there was no glut, eventually drowned beneath a tsunami of bulk wine.