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Liquid assets flow again

When Crushpad, the custom-crush operation that had been running out of the Sebastiani Winery since 2011, closed this summer it left about 850 barrels of wine – and 220 clients – in limbo. And while the future of much of that wine remains foggy, the ghost of Crushpad clattered back to life at a facility on Eighth Street East (in the form of destemming equipment) after grapes began arriving last week at a new company constituted from its parts.

As most likely know by now, Crushpad succumbed to its crushing debt this past summer, even after an influx of $3 million cash from Sebastiani owner Bill Foley. Its foreclosed assets, including the wine already in-barrel, were auctioned off on Aug. 7, when CastleGate Capitol, a Tiburon-based private equity firm, picked them up for $654,866. CastleGate, led by Philip Von Burg and Aaron Hayos (now principals of the new custom-crush venture called The Wine Foundry), moved quickly to satisfy some of the many liens on Crushpad’s assets, including those held by Groskopf Warehouse, the storage facility where the wine (which Crushpad clients had been unable to access at all since as far back as June) was kept. Many grower liens have also since been satisfied according to Steve Ryan, The Wine Foundry’s vice president of sales and operations (a title he also held at Crushpad – Ryan is one of several holdovers).

Back in June, the owners of the floundering Crushpad had originally contacted CastleGate with hopes that an investment, similar to the one made by Foley, would keep the company afloat. CastleGate examined Crushpad’s finances and decided to pass because, says Hayos, “Its liabilities far exceeded its assets.” But CastleGate was the only bidder when the wreckage of Crushpad was auctioned off in August.

At that point, all the wine Crushpad’s clients had made (and paid for) that was in storage became the property of CastleGate, which could have elected to liquidate the literally liquid assets. It did not.

Instead it created the new custom crush company – The Wine Foundry – in effect rescuing the wine from the bulk juice market. But don’t mistake the company’s move to give former clients an opportunity to access their wine for an act of charity. The company is likely getting far more for the wine this way than it would have gotten on the bulk market. Should this juice have hit the open market — some of it still may — industry analysts speculate that, given its mixed provenance, it might have fetched as little as $10 a gallon, potentially putting the bulk market value of a barrel at less than $600.

In August, The Wine Foundry began contacting those who had wine in-barrel with an offer that went like this: Former Crushpad clients could pay a fee, which Ryan estimates could reach as high as a few thousand dollars a barrel depending on a variety of factors (such as where the grapes were from and what money had been owed in liens), to have Wine Foundry “finish and bottle” the wine. If those with wine in-barrel didn’t opt to pay The Wine Foundry to bottle their wine, they were free to take the barrels elsewhere, after compensating the company for any liens on the wine; add that to the cost of bottling and cellaring the clients would have pay to someone else, and the combined cost almost always exceeds the fee The Wine Foundry is charging, though probably not by much.

In addition to having paid Crushpad for “their own” wine until it was aging in barrels, many clients had paid in advance for the 2012 vintage – for grapes that it seemed would never be harvested.However, The Wine Foundry has made good on some of Crushpad’s contracts with growers, as well as buying grapes from other local growers, and offered to make good on the 2012 vintage for those who paid in advance – for an additional fee, which Ryan estimates at about one-third of what they’d already paid.

Ryan is adamant in pointing out that Wine Foundry is an entirely new and different company from Crushpad. He originally began working with CastleGate on the transition of the company’s assets, because he explains, not only was he an employee of Crushpad, but he was also a client, one with barrels in the same precarious boat as the other clients.

Hayos is equally stubborn about dissociating The Wine Foundry from Crushpad. Mention Crushpad to him and he says, “We don’t say that word.”

Others, however, do use the C-word. John Clendening, a former Crushpad customer from San Francisco who signed on with The Wine Foundry to have his barrels finished said, “The client has been through utter hell.” Clendening, an executive vice president in investor services at Charles Schwab, knows his figures and says that with “the way [The Wine Foundry] did the pricing,” the client was basically between a rock and a hard place. And though he’d like to make more wine, he’s not yet committed to the Sonoma-based company. “I’m in a wait and see mode,” he said, unimpressed by the way The Wine Foundry has treated its inherited customers. “The new guys need to win us over.”