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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Soaring Sales? Wholesalers Say Not For Them.
EDITOR’S NOTE: We need more data points. Please email lperdue@wineindustryinsight, or post to the comments sections on this and the previous story. All confidences respected.
WHOLESALERS NOT SEEING SALES BOOM
The astounding retail sales for the four-week-period ending January 25, 2009 0ver the same period in 2008 (Wine Sales Skyrocket…) are not being seen by wholesalers who have emailed Wine Industry Insight.
“I’m not seeing increases in wholesale to trade,” a major West Coast distributor told WII. “Perhaps retailers that we sold to in December are cleaning out their inventories.”
Other distributors and wholesalers have told WII about January 2009 declines of close to 40% depending upon the wine varietal and origins. Overall, dollar sales of European and California wines from the wholesale channel have both slipped in the 20 to 3o percent range.
The only category to grow — Chilean wines – have eked out modest single-digit growth.
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My distributor in MO was up 1% for December on all brands.
KS was flat, NE was down 2% all brands.
I’ll see what January brought. When I did fall surveys, the floor was packed with $5.99 and $6.99 wines, but IRI for my markets showed that $11.49-$14.99 was up 9% (the highest) for OND. To me that shows that retailers loaded up on the cheapest wines they could find, but consumers still bought KJ, Sterling, Clos du Bois.
Thanks! We need more comments like this to help make sense of this strange dataset.
Hi-
Well, I don’t have any hard numbers, so this comment might not be overly valuable. However I have an observation that might account for a bit of this trend. I have a small winery in MO. After trying to sign up with a distributor and not getting anywhere, we hit the road ourselves. We’ve had good success getting our wines into independent retailers in the last two months.
Interestingly, this past weekend I attended the Midwest Grape & Wine conference where I talked with many other small midwest wineries that are in the same boat as I am with even greater success (some with chain stores working with them on a local or regional level). My interpretation is that the ‘buy local’ trend is helping us out quite a bit. If there are many others like me then perhaps that is a part of why the wholesaler’s numbers are down while retail is up.
Katie,
Wineries selling directly to accounts is a very good thought, and could explain a difference between wholesale and retail numbers, but there’s no way it could make up for all the volume growth in the IRI data. The winery-to-retail route to market is tiny compared to the market overall.
I think Lew’s Obama comment is likely the case - a momentary aberration in sales caused by people who wanted to raise a toast to the new president. The blue states are some of our largest wine markets too (CA, NY, IL).
Looking forward to getting my Nielsen data to see how it compares! We’re still a few weeks away from that though.
I own a small winery in California. We tried for years to get distribution in the three tier system. It has not worked. But, we sell to over thirty wineries in 25 states. These are small wineries that sell direct to consumer. Our business was up 120% last year, and up 400% this year so far. We can’t compete price wise in the wholesale market where the battle seems to be a race to the bottom. Yet our wines can be sold profitably by us and our customer wineries, in the same markets we can’t get distribution.
I think on reason for this is we have eliminated one unnecessary layer of mark up, the wholesaler, and then we can make a profit, and so can our retailer, i.e., our small winery customer.
I would like you opinion on this analysis.