The assets of Sonoma, Calif.-based Crushpad are scheduled to go under the gavel Aug. 7 following months of speculation about the company’s solvency. Those assets include wines made by current customers of the do-it-yourself custom-crush winery.
As many as 500 customers have wine in barrels at the Crushpad facility located at Sebastiani Winery in Sonoma that they have already paid for. The company, founded in San Francisco in 2004, has struggled since the 2008 economic crisis. But in June of this year—after CEO Peter Ekman warned investors the company would fail without additional financing—customers began reporting that Crushpad would not let them remove wine from the facility.
Crushpad officials were not available for comment but, in a recent e-mail, spokesman Steve Ryan wrote, “Because of the complexity of the creditors and the potentially competing rights between these parties, liquidation of Crushpad is a real possibility. If the company were to be liquidated, there is a risk that many clients will lose their wine.” Sherwood Partners of Mountain View, which will oversee the auction of Crushpad's assets, did not return repeated phone calls or e-mails.
“It’s not clear what they owe but it’s fairly significant,” said Philip Von Burg of CastleGate Capital Advisors, a Tiburon, Calif.-based investment firm that is considered a top bidder. “It’s in the couple of millions at least.” Along with its customers, Crushpad’s creditors include grapegrowers, barrel makers and label and packaging suppliers. Many customers also have already paid deposits on harvest 2012 as well as up-front costs for labels, bottling, etc., according to Ryan’s e-mail.
Bill Foley, a financial-industry executive and owner of more than a dozen wineries on the West Coast and in New Zealand, is both a creditor and backer of Crushpad. After moving from San Francisco to Napa in 2009, the company tapped Foley as a principal investor in a $3 million cash infusion in 2011. That same year Crushpad moved into extra space at the Foley-owned Sebastiani. Foley, through a spokesman, said only that he was disappointed that the Crushpad concept was unsuccessful.
Sarah Francis of Napa used Crushpad as a custom-crush facility for her small self-named label. She said she was never informed that her wine was being moved from Napa to Sonoma. Additionally, Sebastiani workers that staffed the new location operated under a labor contract. “They wouldn’t let me touch a thing,” Francis said.
In June, fearing the worst, she tried to move her two barrels. “For weeks Steve Ryan wouldn’t answer my calls so I cornered him in his office and said, ‘It’s going to get ugly. You might as well kidnap my children as take my wine.’” Ryan could not be reached for comment.
With some help from a friend at Sebastiani, Francis moved her wine in June but said she will have to tap into her 401K for several thousand dollars to bottle the wine, buy labels and get everything re-approved by the federal Alcohol and Tobacco Tax and Trade Bureau (TTB). Those were all things she had previously paid Crushpad to do.
Reece Hornibrook of Traben-Trarbach, Germany, worked with Crushpad on a project to supply 10 cases of 2011 Mosel Riesling to nine clients in the United States and Australia. “They were expecting their wine to arrive in September 2012,” said Hornibrook, who now holds out little hope for the wine. “What started as an interesting concept for all involved, has now become an embarrassing [potential] case of online fraud, with a total sum of $2,695.”
Cindy Cosco, a former winemaker at Crushpad, had three barrels of Pinot Noir for her own label Passaggio scheduled to be bottled this week. “I just had a feeling that wasn’t going to take place,” she said. So back in June, concerned about the company’s stability, she decided to transfer her wine to another facility.
The company didn’t make it easy. Ultimately, Cosco said she was only given access to her wine after she signed an agreement releasing the company from responsibility for bottling and labeling the wine, which she had already paid for.
Crushpad was an ambitious project that offered a variety of services for wine lovers who had always dreamed of making their own wine. Clients ranged from hobbyists to small-scale professional winemakers. Despite the tough economy of 2008, Crushpad kept growing. In 2009, it announced a new Bordeaux Crushpad, working with Château Teyssier’s Jonathan Maltus. That division was recently acquired by the owners of Château Lynch Bages.
“When I started at Crushpad I was so excited to be a part of it,” said Cosco, who was hired as a lab manager in 2007. “There were so many different styles of wine being made.” By the time the company moved to Sonoma, the writing was on the wall. Promoted to winemaker for white wines, Cosco said that by early 2011, “We weren’t able to pay bills. I couldn’t order stuff.” She left in August 2011.
Von Burg said Crushpad customers have been calling his firm, hoping to gain access to their wines. “We can’t really execute anything we want to do at this point,” said Von Burg, who has 25 years of experience as a specialist in turning around businesses. From his research, Von Burg believes few, if any, other bidders will join the auction Tuesday.
“With a little tweaking of the business model, maybe we can restart it and get it back on the right foot,” Von Burg said. It remains to be seen how much more, if any, customers will have to pay to get their wine. “Hopefully we’ll resolve this issue. Not everybody is going to be happy. But the process will be better off with us involved.”