If you’re into wine, Cameron Hughes is a name that will most likely be well known to you at this point. For the uninitiated, Cameron Hughes is what is known in the industry as a wine negociant, only with a twist.
Hughes focuses on buying small available ‘lots’ of premium wine, doing a bit of blending and then selling the wine directly to his retailers. What does this mean for the consumer? Premium wines without the traditional premium price tag.
We tracked down Mr. Cameron Hughes himself and asked him a few questions–read on to learn more about his company’s business model, the upcoming release of Lot 33, a Spring Mountain Cabernet, the company’s plans to add more chains to its distribution model and more…
CB: Talk to us about your business model–you’re essentially a virtual company with extremely low overhead, meaning you’re able to bring high quality wines to consumers without the high pricetag that we’ve become accustomed to. Tell us how this works and who you see as your biggest competitor?
Hughes: Billions of gallons of wine are bought and sold in bulk each year the world over. The traditional role of the negociant, or wine trader, has been to buy bulk wines and package them for direct sale to grocery chains and broad market (small shops and restaurants) in Europe. The negociant role in the US is a fairly recent development evolving as the wine industry has grown. Many wine brands are made by negociants or big companies that act like negociants but they rarely disclose that.
My company has been in the bulk business for about 6 years now and recognized early on that there were these small lots of very high-end bulk wine that were either A) bottled up and sold as ultra-premium wine with HUGE margins or, most likely, B) bought by other negociants/big wine companies and back blended in to lesser quality blends to raise overall quality (these high-quality wines are usually referred to as “silver bullets”). The Cameron Hughes “Lot” program was designed around buying these small productions, bottling them up as a particular “Lot”, assigning that “Lot” a number, and then selling the wine direct to Costco or on our website www.chwine.com.
We do not own any facilities, not a tank not a barrel. We use other people’s bottling lines on a contract basis. Since the wine itself does not cost a lot to make (your average $25-$30 Napa cabernet costs about $5-$6 to make but, remember, its not that the winery is ripping you off, its just that the wine business is so inefficient) we are able to purchase the wine, bottle it, and sell it direct to Costco or consumer with anywhere from 50% to 75% savings over what you would pay for the same wine under other labels.
Competition? We realistically have no direct competition. No one does business this way and very few could. Those that are financially equipped to do so have channel or distribution conflicts that would harm their existing business should they try to go direct to retail or consumer at rock bottom prices. Those without the channel or trade conflicts might have the capital but they don’t have the industry production knowledge nor do they have a retailer like Costco, which is the main amongst only a few retailers that have the sales volume to make a program like this work. Big chains retailers are simply not set-up to manage the in-and-out nature of the program–one day the wine is there the next it’s gone. Not only that, but Costco works on a 10-14% margin that no other retailer can touch consistently.
CB: As of right now, I can purchase your wines at my local Costco (if they carry it) and through your website. Are there any plans to add additional retail outlets in the near future? How many cases of wine do you expect to sell this year and in 2008?
Hughes: The wines are available at your local Costco in CA, AZ, TX, FL, NC, SC, AL, IL and will be coming soon to OR, WA, MI, IN, MN, VA, DE, NJ, and MA. The best way to track our wines is to join our mailing list (www.chwine.com) which announces Lot releases including the exact Costco stores the wines were released to. As well, fans can go to the “Lot Locator” on our homepage www.chwine.com and put in their zip code for the nearest Costco stores with the current Lots they have in stock.
As well, we have other chains that will be soon be carrying our wines. We will announce those stores when they open up. This year we will sell over 100,000 cases of wine from 8 different countries all under one label.
CB: You recently released three Napa Valley Cabernet Sauvignons (Lot 36 from Rutherford, Lot 35 from Yountville and Lot 34 from Rutherford). As we’re focused on all things Napa Valley, tell us about each of these wines and what makes them special.
Hughes: Each of them is quite reflective of their “terroir” but I think what makes them special is that we are selling them for about 75% off what you would pay for the same wines under other labels. Lot 34 2005 Rutherford Cabernet comes from a winery that doesn’t sell a bottle under $60. It’s young and tight right now but it’s the broadest of the bunch. Lot 35 comes from the cooler climate of Yountville, think Bordeaux meets Napa Valley. Lot 36 is another grower wine made in a high-end, custom-crush facility. Each of these growers knows they have to make these wines to super/ultra-premium standards or they just won’t sell in this oversupply environment. High-end cab sells at premium prices in 24 hours on the bulk market, mid-to low end languishes for months and then sells at a steep discount. We are finding more and more wines from growers who realize they make far more money having the wines made at high-end custom crush facilities with dynamite winemakers and then selling them to guys like me than they do selling grapes. It’s the nature of the beast these days, immediately accessible wines with known quality that can rapidly be turned into product and sold are far more valuable than grapes which may or may not turn out a quality product and eat up 18-24 months of cash flow.
Now to be quite frank–these wines are too young to enjoy just yet. They have emerged from bottle shock but are just beginning to develop bottle bouquet, fleshed-out mid-palates, complexity and length. We also are about to release Lot 33 Spring Mountain Cab which also falls under the same designation–wine for the cellar. That said, Lots 34-36 should be drinking quite nicely for the Holidays. Lot 33 will be released to those folks on our mailing list only–we do this with quite a few wines and have coming up Lot 38 2005 Barossa Shiraz–100 yr old vines and Lot 42 2005 Barossa Shiraz–75 yr old vines as well.
CB: Your wines have developed a bit of a cult following over the past couple years. What’s been the most surprising thing you’ve encountered since starting your business?
Hughes: The thing that surprised me the most was what lead me to start the business in the first place: that is, wine does not cost a lot to make. When I learned the actual cost of producing wine I was shocked. By removing all the inefficiencies from the business, by sourcing a broad selection of wines globally, we are able to offer a continuous supply of dynamite wines at rock bottom prices.
The other thing that surprised me was the power of word of mouth. Our business has grown exponentially purely by word of mouth.
CB: What does the future hold for Cameron Hughes Wine?
Hughes: We will continue to flesh out our sourcing ability around the globe. As well, are already sourcing branded wines purchased direct from small ultra-premium producers and selling them in small lots direct to our mailing list, again, at rock bottom prices. These items include high-end wines form around the globe that primarily do not have distribution in the US or have limited distribution. I was amazed to find out how cheap wines were to purchase direct from Bordeaux Chateau versus the retail price -I could usually cut off at least 40% and often far more.
CB: Cheers, thanks Cameron!
Be sure to read The Cork Board’s previous interviews too!