While prospects for insolvency have captured the attention of those following the W. J. Deutsch's lawsuit against Ascentia Wine Estates (AWE), the process has unleashed a series of corporate mismanagement allegations against CEO Jim DeBonis.
"Eight Estates [a former name for AWE] may or may not be insolvent in a purely technical sense," said one source associated with the process. "But there is no denying that it has serious sales and financial problems, most of which result from executive mismanagement. That said, the company's only way out of its financial jam may be to file Chapter 11 in order to force debtors to restructure its debt."
That source, along with 17 others interviewed by Wine Industry Insight, spoke only upon a guarantee of confidentiality, some because they were not authorized to speak with the media and others fearful of "blowback."
"This is messy and going to get a lot messier before it's over," explained one source. "There will be collateral damage. People are going to get shot in the crossfire."
ALL SOURCES GIVEN OPPORTUNITY TO CORRECT & COMMENT
On Sunday evening, Wine Industry Insight emailed a draft of this article to DeBonis, Peter Deutsch and to all sources requesting corrections and additions by noon Monday. While not a standard WII practice, the shortcomings inherent in articles that rely heavily on unnamed sources demand an extra effort to insure a fair, accurate, complete and contextually accurate article.
Information from anonymous sources is never used by Wine Industry Insider unless it is corroborated by legitimate documents or by two or more independent sources.
Neither Deutsch nor anyone from his organization had any comment.
An email from DeBonis read, "Thanks for the opportunity, you definitely have your facts all wrong. I cannot get back to you by noon, but I will later on."
WIN had not received anything from DeBonis by 4:30 p.m. when this article was sent to subscribers,
In addition to its sources, Wine Industry Insight also relied upon W. J. Deutsch's legal complaint filed in Delaware Chancery Court.
DEUTSCH RAN OUT OF PATIENCE, FILED SUIT
"Bill Deutsch got tired of being ignored," said a source familiar with the controversy. "He felt stonewalled, lied to and believed that his legitimate concerns had been ignored. But you have to remember that he's also in litigation with another investment, Renwood Winery. I think he pulled the legal trigger so quickly on this one because he felt his patience with Renwood had been taken advantage of and he was not going to let that happen again."
"Even though WJD has a 27-percent interest, the rest is in the hands of Jim's allies, with GESD holding a whopping majority," said the source.
Ascentia acquired eight orphan Constellation Brands in June of 2008 as part of the $208,770,900 million deal that created AWE.
In that deal, all of AWE's land and wineries were acquired for $115 million by SBV VinREIT, an LLC operated by Kansas-City-based, Entertainment Properties Trust (NYSE:EPR). All the wineries and vineyards were then leased back to Ascentia.
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Also In This Article:
The full text of the following sections is available to
VIP Premium Subscribers).
- GESD PROVIDED BULK OF FUNDING, GOT HEFTY FEES
- GIRAUDO ONLY INVESTOR NOT SUED
- AGREEMENT KEPT DEUTSCH FROM PROPER DUE DILIGENCE
- IMPOSSIBLE FOR ASCENTIA TO MAINTAIN PREVIOUS SALES LEVELS
- DEBONIS SHOULD HAVE KNOWN ABOUT "INFLATED FINANCIAL PROJECTIONS"
- GESD THREATENED TO SUE IF DEUTSCH INVESTIGATED
- MEDIA GIVEN WILDLY CONFLICTING ASCENTIA SALES FIGURES
- ASCENTIA: NO STRATEGIC PLAN + INABILITY TO MOVE QUICKLY
- DEBONIS NO "FREDDIE FRANZIA"
- FINANCIAL WOES PROMPTED ATTEMPT TO SELL BUENA VISTA WINERY
- VINREIT NIXED BUENA VISTA SALE
- BUENA VISTA "LAME" BRAND HURT POTENTIAL SALE
- BUENA VISTA NOW MOTHBALLED, HOPING FOR CUSTOM CRUSH
- BARGAIN BASEMENT SALES OF WINE TO INVESTORS & INSIDERS PROVIDED STOPGAP CASH, DEPLETIONS
- ASCENTIA TOO "BIG CORPORATE" FOR OWN GOOD
- TOP EXECS FAILED TO HALT "TOXIC ENVIRONMENT"
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Wine Sales Skyrocket! Is it Obama & Optimism? - Part 1
In the midst of a global recession with one gloomy report after another, wine sales for the four-week-period ending January 25, 2009 (0ver the same period in 2008) have shot through the roof. According to data from Information Resources, Inc. (IRI), table wines sold through U.S. food and drug stores increased 6.4 percent overall and sparking/Champagne soaring with a 39.5 percent increase.
The data reverses a series of steady bad news delivered in previous reporting periods.
OBAMA + GLOOM FATIGUE = BIG SALE INCREASES
Celebrations of the election of Barack Obama probably accounted for a big increase in the consumption. In addition, IRI Vice President Doug Goodwin said, “people realized that despite all the gloom news in the media, the sky han’t fallen in. I think consumers decided they needed to kick back and enjoy themselves.”
GREAT NEWS ACROSS THE BOARD
IRI’s numbers showed many varietals and price categories — especially value brands — displaying double-digit dollar volume increases.
Click image to enlarge
VALUE AND ULTRA-PREMIUM RACE NECK-AND-NECK
Not surprisingly, value brands led the way with box wines costing more than $2 per 750ml equivalent posting a 40.5 percent gain. But even more significantly, every other price category also showed substantial increases. As the enlarged version of the table, below, shows, 750ml wines costing more that $20 and box wines under $2/750ml both increased 9.2 percent.
Click to enlarge
IRI PRICE POINT SEGMENTS
Key to IRI Price Points
Non-varietal domestic table wines in 1.5 liter bottles increased almost 16% while every other category showed increases except 1.5-liter imports.
ARGENTINA, WASHINGTON LEAD INCREASES
While California posted a respectable 7.4 percent increase, Argentina topped the chart with a 44.4 percent increase. Washington state wines showed the greatest domestic growth, with dollar volume climbing 13.5 percent.
Click to enlarge.
MORE MICRO-ANALYSIS OF DATA IN NEXT INSTALLMENT
The next installment of this multi-part series will take a more micro-look at the data by varietal, price-point and size category.
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Great piece. I’m in the industry and work for a winery (one that has several pieces on your front page). I found your site a couple weeks ago and have been checking several times a day. I’ve also shared it with several of my colleagues. Good writing. I like the fact that you seem to go a little more in depth rather than just consolidating existing news.
Don;t forget to post your twitter username on the front page and then twit when you have a new post.
Continued luck!
Our numbers have just rolled. I’ll do a dive and see what happened in flyover country. Let you know. enjoying your site tweaks
AC
Small, family-owned winery guy here. Our Jan. 09 was 10% over forecast and 13% up versus last year. Our Feb. 09 looks good so far…keep pushing people!
We’ve gotta hope that this isn’t a blip; resurgent wine sales would not bring us out of this nosedive but would be a bright slice in consumer spending. Maybe people just needed a pick-me-up in the January gloom with a little boost from the Inaugural. For sure, wine retailing is still tough sledding right now.
Yep. One month does not a trend make. But we can hope & pray.
Can anyone tell me what their # 1 month is (on average). Is it December? I’m doing a little research and I’m finding it hard to find relevant information to the wine and vineyard industry & statistics.
Cheers,
Josh
Great site (just made you my new home page) and great piece! I would be most obliged if you could share some of the details of the champagne/sparkling segment in your next analysis!
I am absolutely GIDDY on account of this news. Fingers crossed we’ve seen the bottom and are heading upwards, although that certainly doesn’t seem likely.
Sure the wine sales increase! but the profit margin is decreasing in an alarming rate.
In 2008, because of the fuel cost, the cost of making wine increased by 10-15%. The 2008 harvest was lower than expected and in conclusion the cost of one gallon of wine increased significantly.
Selling higher volume is great but if numerous wineries sell at loss in order to supply the cash flow, it will become a severe downturn for the wine industry.
In conclusion, I will not be surprised to see the number of existing wineries decreasing by the end of 2010.
Also, Italian and Spanish wines will become the major competitor for US big brands. In these two countries, Bank are seizing inventories and are selling to wine negociants for a stunning low price.
This is not how much you sell but how much money you make by selling!
@ Harvardwine:
Yes, profit is still important as is the flow of cash. When the banks sh*t the bed, lines of credit dried up and wineries were probably forced to move inventory to bring cash in (to produce the next releases). I know of many virtual brand that did not produce a 2008 vintage for this reason.
Our company was not impacted in this manner, but you mentioned higher prices of making wine and those are valid. Our response to those increased costs were simple:
1. wear out our suppliers for better pricing, sometimes making long-term relationship commitments for best deal prices
2. reduce costs by going with cheaper inputs (e.g. some corks are more expensive just on cosmetics, not performance)
3. cut spending below the line (e.g. travel, competitions, charitable donations and all things not *directly* related to sales revenue)
4. suspending raises and bonuses temporarily
5. shifting production to more profitable wines
My conclusion, much like yours, is that many small wineries or virtual brands (e.g. wine maker labels) will disappear. In the short run, we will have to compete with inventory blow outs clogging up the retail channel. In the long run, I believe the strong will survive and be better for it.
Would be curious to know to what extent, if any, increases in off-premise wine sales were offset by decreases in on-premise sales.
Obama ????? Really ???????? I didn’t realize I was reading an op-ed piece. Unless you have something concrete to back up that assertion, you’re merely politicizing something that may or may not have any relevance; to advance some agenda. Yes, we needed a “Change”, but to bestow laurels on an individual for just being . . . I guess we’ll just have to see whether all the grand ideas and eloquent rhetoric will translate into something tangible. This is just an observation from someone who paints most politicians with the same brush.
Bill, the numbers are the numbers and that’s NOT Op-Ed.
The reasons? No one knows . That was clear. The Obama thing came up frequently. If you have a better idea of why this happened, then post it here.
Meanwhile, focus on the numbers.