The “Hottest” Business Model in California Wine
The Modesto Bee recently ran an interesting piece about the boon to negociants like Cameron Hughes from California’s wine surplus. Hughes is famous for bottling excess wine under his own label and selling it at Costco as well as on his website.
Hughes’ efforts embody one of the hottest business models in the California wine industry today: buying high-quality wine that is sitting in tanks and selling it under a different label.
As the industry becomes increasing competitive, this trend will likely gain momentum as producers look to cut costs and maximize profits.
This business is clearly booming; Hughes estimates that he will make about 70,000 cases this year, up from 29,000 last year. “We are absolutely on fire right now. We are rocking and rolling. We have so many wines in production.” Hughes is not the first nor anywhere near the largest participant in the negociant game. Fred Franzia’s Bronco Wine Company is much larger, producing labels like Charles Shaw “Two Buck Chuck.”
But Hughes sets himself apart, first and foremost though quality. Unlike many of the larger negociants, he very picky about the wine he buys. Hughes seeks out premium wineries that happen to have excess wine. As the Modesto Bee’s article points out, an amount of surplus wine is produced to give the winemaker more leeway in blending, as insurance against unforeseen problems, or simply because the winery stopped making a particular varietal.
Additionally, not every vineyard block will make it into the final blend, but this is the result of nuanced and subtle decisions rather than poor quality. This wine may very well be delicious on its own, but it simply does not contribute the winemaker’s vision for the vintage.
And this is where Cameron Hughes enters the picture. He buys this wine at a considerable discount and passes much of these savings to the consumer. While the net affect is higher quality at a lower price point; these practices have been criticized as there is a danger of undermining the premium market. For this reason, Hughes does not reveal who he buys his wine from and only labels his bottles by region and lot number.
Summing up his niche, he recently remarked, “The high-end business is always in oversupply. Guys always make more wine than they need.” As California’s wine industry continues to evolve, negociants like Cameron Hughes will continue to challenge the status quo.
Written by: Ben Bicais on Monday, January 08 2007
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