What is it they say about the major mistakes we make in life? Good judgment comes from experience, and experience comes from bad judgment.
Cameron Hughes was once on top of the wine world. As California’s first serious negociant, he built a multi-million dollar business on packaging up leftover and unsold wines from wineries. Under iron-clad contracts swearing him to secrecy, Hughes would then sell that wine (which would often retail for $40, $60, or even as much as $80) in numbered lots under his own label, Cameron Hughes Wines, for much less than half the original retail price.
Hughes exploited a little-known aspect of the wine world to which consumers have little visibility. Almost every wine producer (save the very biggest of them) invariably makes more wine than they sell each year. Sometimes there are barrels or tanks of wine that just don’t make the cut—they don’t meet the quality standards of the producer. Not every row of every vineyard produces fruit of the same quality, and such variation is simply the reality of agriculture.
But even more commonly, wineries have excess wine at the end of a season because they don’t think they can sell it all. You see, that 3000 case winery whose mailing list you’re on has both a vested interest in making sure that not everyone who wants to buy their wine can do so (oh, the psychology of scarcity), as well as a very real fear of being stuck with bottles they paid to produce but that no one wants to buy.
Hughes hit it big by making what looked like two brilliant moves at the time. First, he struck a deal with Costco to sell the wines there, tapping into that retailer’s rise as one of the top sellers of wine in the country. Second, he managed to squarely target the weakest, softest part of the fine wine world’s underbelly: the wines we pay $50 or even $100 for cost only a tiny fraction of that to produce, in part due to the idiocy of the Three-tier System, and the 50% markup forced at each tier of distribution.
The flip side of that soft underbelly is the psychology of many a wine buyer, for whom a $20 wine that drinks like a $50 or $100 wine is the oenological equivalent of mainlining heroin. The furor of delight at the prices, and endless speculation about the sources of Hughe’s juice, led to sold-out frenzies for the wines as they hit Costco shelves and the Cameron Hughes web site.
Hughes, however, made one fatal mistake when he came up with the idea for his business. And that was simply the formula for his business model. It went something like this: identify a parcel of wine available on the bulk market; buy it; blend it if necessary; bottle it; sell it.
That might not sound problematic to most of us, which is why it was such an easy mistake to make. After all, it’s basically the same formula that any winery follows, with the exception that they have to plant, grow, and harvest grapes and then make them into wine at the front end.
The issue comes down to a question of growth and scale. The reason that wineries can’t grow their revenues and profit very fast comes from the fact that all those steps require a lot of money, even if you’re starting with wine already in a tank somewhere. Keeping up with demand, let alone growing at a reasonable pace means forking over more and more money for wine, more money for barrels, more money for bottles, more money for places to store them—before you have sold a single bottle.
Which is why in 2015, with $15.3 million in debt, the banks decided they had better things do than keep lending Hughes money, and so they placed the business into receivership. Unable to pull himself out of the hole, Hughes watched the company he founded sold to the highest bidder, and soon found himself an employee of Vintage Wine Estates, owners of several other wine brands including Clos Pegase, Girard, Cosentino, and Swanson among others.
Cameron Hughes Wine is still an active brand, doing exactly what Hughes had been doing all along. At last count they’re up to Lot 732 and they’ve still got Cameron on their web site talking about why it’s crazy to pay $60 for a 92-point Cabernet when you can buy it from Cameron Hughes for $18.
After a few years of being an employee, and licking his wounds a little, Hughes began exploring other ventures. His first efforts were trying to do roughly the same thing with beef that he was doing with wine. The result was the Holy Grail Steak Co. which is the place to go if you want some seriously good beef, and don’t mind paying for it. Warning: the prices are not quite as “value-oriented” as they were with the wine project. On the other hand, it’s not so easy to get your hands on high-grade Japanese wagyu.
Along the way Hughes realized the flaw in his original business model and in a flash of insight, saw how to fix it.
The solution was simple: you have to sell the wine to consumers before you buy it from the producer.
In a word: futures.
Presumably at a certain point earlier this year, a particular non-compete clause in a certain receivership purchase contract expired, and Hughes decided it was time to take a second swing at the whole negociant model, but this time with cash flow as his prime directive.
The result is de Négoce Wines.
Here’s how it works.
Hughes goes out, as he always has, and finds parcels of high-quality wine on the bulk market. He signs a purchase contract with the winery with fairly generous payment terms that give him a little while to pay the bill. He then turns around and offers most, but not all, of that wine via e-mail to his customers for sale at a shockingly low price per bottle, with the stipulation that customers must purchase in quantities of 12 bottles.
Customers place orders for however many cases they want, until the quantity he has decided to offer is sold out. Money in hand, Hughes then pays the producer, buys the bottles, fills them, and ships the wine off to his soon-to-be-very satisfied customers.
In a stroke of brilliance, Hughes has decided to take a page from drug dealers the world over and hold back a certain quantity of each wine, which he plans on making available to purchase by his customers at a later date, albeit for roughly 20-30% more than the wine sold for on release. Fall in love with that $10 Cabernet? You can get more in 6 months, but for $13 a bottle. First come, first served.
It’s hard not to admire the chutzpa of this business model, especially when it’s backed by a quality product. And I guess that’s what I have to admit here as the guy who got to sit down and taste through twenty or so of de Négoce’s past and future releases. Somehow Hughes has managed to pull off the hat trick of both improving the quality of the wines he’s offering while dropping prices to astonishing levels.
The idea of selling wine that would retail for $125 per bottle for $18, and wines that would sell for $60 for $10, forces us to confront some fairly nasty truths about just how margins in the wine world really work. Now, it’s not like the folks who are selling wine to Hughes are still making a profit on it. In all likelihood, they’re at best breaking even on the costs of producing it. But still. The idea that several barrels that could have easily been blended into a wine that is sitting on the shelf for $60 can make a profit for a guy like Hughes when he sells it at $10 is enough to make your head explode. And if the wine is really good, and you’re the person who’s paying $10 for that wine, it’s enough to send you into paroxysms of consumer delight.
In case you’re wondering, yes, I can vouch for those numbers.
Hughes shared with me the “secret” list of his first 80 or 90 wine lots, so I got to see the names of the producers and vineyards that these wines come from. They are blue-chip names that I receive samples from. Wineries whose principals I interact with at trade tastings, whose tasting rooms are situated along the main arteries of Wine Country. That is to say: they’re more than legit.
As usual, there’s some variability to the wines. I don’t love them all. Some aren’t wines that I’d write about. But quite honestly, as you can see from the scores and the notes below, most of them are wines that I would be prompted to feature in my weekly wine sample reviews.
And some are so spectacularly good for the prices that Hughes is charging it even makes my fingers twitch towards the “subscribe” button on his web site. I have way too much wine already, and this wine writing gig leaves me with plenty of open samples to drink when I want something with dinner, but who among us doesn’t feel the urge to buy something that we know is amazing when it goes on sale for 80% off its normal price?
Hughes is approaching the release of his 50th wine for de Négoce, and seems to be going strong, gleefully managing the whole business on his iPhone like someone who’s figured out how to get paid really well for doing what he loves most in the world, which I suppose is really what he’s managed to finally accomplish.
Of course, while he might have figured out how to protect himself from the financial risks of a bad business model, he still remains subject to the forces at work in the wine industry, and this year, there are a lot of those.
“Yeah, about a million gallons of wine just got pulled off the market in the last week,” Hughes admits while rubbing the back of his neck with one hand and looking up at the smoke-tinged skies above us as we sit outside tasting these wines.
Like many, Hughes will be looking farther afield than normal when it comes to 2020 vintage wines, but with a market that was already in a state of over-supply, I’m betting even the apocalypse vintage won’t slow Hughes down for very long.
Tasting Notes
2019 de Negoce “No. 16” Sauvignon Blanc White, Sonoma County, California
Palest greenish gold in the glass, this wine smells of kiwi and gooseberry. In the mouth, candied green apple and gooseberry mix with a touch of kiwi. There’s a faint sweetness to the wine and great acidity. Fermented in a combination of cement and oak barrels. 14% alcohol. Score: between 8.5 and 9. Cost: $108 per 12-bottle case.
2019 de Negoce “No. 23” Chardonnay White, Carneros, Sonoma, California
Pale greenish gold in the glass, this wine smells of cold cream and lemon curd. In the mouth, slightly bitter notes of lemon cream and unripe apples have a nice crispness thanks to excellent acidity. Other than the bitterness, there’s not much sign of wood. Saw 35% new oak and a good measure of whole-cluster-pressed fruit. 14.4% alcohol. Score: around 8.5. Cost: $108 per 12-bottle case.
2017 de Negoce “No. 7” Pinot Noir Red, Sta. Rita Hills, Santa Barbara County, California
Light to medium ruby in the glass, this wine smells of bright cherry and raspberry fruit. In the mouth, notes of herbs and raspberry and cedar. Good acidity, length. 14.4% alcohol. Score: around 8.5. Cost: $120 per 12-bottle case.
2018 de Negoce “No. 19” Pinot Noir Red, Santa Cruz Mountains, California
Medium garnet in the glass, but headed towards ruby, this wine smells of cherry and raspberry with a hint of herbs. In the mouth, bright cherry and raspberry fruit mix with dried herbs and faint, dusty tannins. Citrus notes on the finish. 14.5% alcohol. Score: between 8.5 and 9. Cost: $144 per 12-bottle case.
2019 de Negoce “No. 24” Pinot Noir Red, Carneros, Sonoma, California
Medium garnet in the glass, this wine smells of herbs and raspberry and raspberry leaf. In the mouth, meaty notes of raspberry and cranberry. Juicy fruit, no trace of oak, and nice acidity. 14% alcohol. Score: around 9. Cost: $108 per 12-bottle case.
2018 de Negoce “No. 31” Zinfandel Red, Dry Creek Valley, Sonoma, California
Medium garnet in the glass, this wine smells of blackberry and licorice. In the mouth, juicy blackberry and bramble flavors mix with licorice and a touch of black pepper. There’s a faint heat on the peppery finish. 14.9% alcohol. Score: around 8.5. Cost: $96 per 12-bottle case.
2018 de Negoce “No. 61 – Tank Sample” Zinfandel Red, Dry Creek Valley, Sonoma, California
Medium garnet in the glass, this tank sample smells of floral blackberry and blueberries. In the mouth, bright and fresh blueberry and blackberry flavors have zingy acidity and really nice length. There’s a touch of heat in the finish but otherwise, this is a very pretty wine. Alcohol is unknown as of yet. Score: between 8.5 and 9. Cost: $120 per 12-bottle case.
2018 de Negoce “No. 32” Cabernet Sauvignon Red, Dry Creek Valley, Sonoma, California
Dark garnet in the glass, this wine smells of faintly minty cherry and cola notes. In the mouth, black cherry and cherry flavors mix with green herbs and earth draped in a heavy blanket of leathery tannins. This wine retails for $50. 14.7% alcohol. Score: between 8.5 and 9. Cost: $144 per 12-bottle case.
2018 de Negoce “No. 43” Cabernet Sauvignon Red, Napa Valley, California
Very dark garnet in the glass, this wine smells of cassis and blueberries. In the mouth, blueberry and pencil shavings mix with leathery tannins and a bit of cedar. The tannins flex their muscles through the finish. 69% Oakville, 39% St. Helena. Producer in Oakville. Would have sold between $50-$60 a bottle. 14.7% alcohol. Score: between 8.5 and 9. Cost: $120 per 12-bottle case.
2018 de Negoce “No. 17” Cabernet Sauvignon Red, Napa Valley, Napa, California
Dark garnet in the glass, this wine smells of cherry and plum and bright fruit. In the mouth, juicy plum and cherry and black cherry fruit are wrapped in supple tannins and quite bright with excellent acidity. Very tasty. Includes 5% Merlot and 5% Petit Verdot. 14.5% alcohol. Score: around 9. Cost: $144 per 12-bottle case.
2018 de Negoce “No. 30” Cabernet Sauvignon Red, Atlas Peak, Napa, California
Inky, opaque garnet in the glass, this wine smells of black cherry and blueberry fruit. In the mouth, rich, ripe and extracted black cherry and blueberry jam. Fleecy tannins. Decent acidity but super-ripe and rich. Well-integrated oak. A bit much for me. 14.7% alcohol. Score: between 8 and 8.5. Cost: $192 per 12-bottle case.
2018 de Negoce “No. 42” Cabernet Sauvignon Red, St. Helena, Napa, California
Dark garnet in the glass, this wine smells of black cherry and cocoa and cola. In the mouth rich black cherry and cola flavors are supple and wrapped in putty-like tannins. Excellent acidity and very good balance given its 15.1% alcohol. Normally sells for $125 a bottle. Score: around 9. Cost: $216 per 12-bottle case.
2018 de Negoce “No. 01” Cabernet Sauvignon Red, Napa Valley, California
Dark garnet in the glass, this wine smells of black cherry and toasted oak. In the mouth, black cherry and cassis mix with dried herbs and a hint of bitter bark. Good acidity but a bit bitter. Normally a $50-a-bottle Cabernet. 15% alcohol. Score: between 8.5 and 9. Cost: $120 per 12-bottle case.
2017 de Negoce “No. 02” Cabernet Sauvignon Red, Napa Valley, Napa, California
Inky opaque garnet in the glass, this wine smells of sweet oak and black cherry. In the mouth, bright black cherry and cassis flavors mix with blueberry and hints of herbs. Drying, fine-grained tannins but quite well-knit together. Excellent acidity keeps this wine quite fresh. Excellent, but perhaps with a bit too much oak for my taste. Most people will love it. $90 a bottle under its own label. 15% alcohol. Score: between 9 and 9.5. Cost: $180 per 12-bottle case.
2019 de Negoce “No. 70 – A – Tank Sample” Pinot Noir Red, Chehalem Mountains, Willamette Valley, Oregon
Light to medium garnet in color, this tank sample smells of candied raspberries. In the mouth, bright raspberry pastille fruit is juicy and offers a hint of herbs. Excellent acidity. Very tasty. Alcohol unknown. Score: around 9. Cost: $TBD per 12-bottle case, which will feature 3 bottles each of No. 70 wines A thru D.
2019 de Negoce “No. 70 – B – Tank Sample” Pinot Noir Red, Chehalem Mountains, Willamette Valley, Oregon
Light to medium garnet in the glass, this tank sample smells of raspberry and redcurrant. In the mouth juicy redcurrant and prickly pear jam flavors are bright and juicy. Fantastic acidity. Alcohol unknown. Score: around 9. Cost: $TBD per 12-bottle case, which will feature 3 bottles each of No. 70 wines A thru D.
2019 de Negoce “No. 70 – C – Tank Sample” Pinot Noir Red, Chehalem Mountains, Willamette Valley, Oregon
Light to medium garnet in color, this tank sample smells of raspberry and herbs. In the mouth, raspberry and sour cherry flavors have fleecier more muscular tannins than this wine’s peers. Nice acidity and length. Alcohol unknown. Score: between 8.5 and 9. Cost: $TBD per 12-bottle case, which will feature 3 bottles each of No. 70 wines A thru D.
2019 de Negoce “No. 70 – D – Tank Sample” Pinot Noir Red, Chehalem Mountains, Willamette Valley, Oregon
Light to medium garnet in color, this tank sample smells of juicy sour cherry and raspberry fruit. Wonderfully bright, mouthwatering acidity lingers long with citrus peel and a touch of watermelon. Pretty killer stuff I’d drink a bottle of in a heartbeat. Alcohol unknown. Score: between 9 and 9.5. Cost: $TBD per 12-bottle case, which will feature 3 bottles each of No. 70 wines A thru D.
2018 de Negoce “No. 82 – Tank Sample” Red Blend Red, Walla Walla, Washington
Inky garnet in the glass, this tank sample smells of cigar box, black cherry, and cassis. In the mouth, rich black cherry fruit is clasped in a muscular fist of tannins. Excellent acidity keeps it quite fresh and bright. Powerful and broad-shouldered. But not overly rich. An excellent wine that will turn a lot of heads. 56% Cabernet Sauvignon, 21% Merlot, 23% Petit Verdot. 45% new oak. $95-per-bottle normally. Score: between 9 and 9.5. Cost: $180 per 12-bottle case.
2018 de Negoce “No. 50 – Tank Sample” Cabernet Sauvignon Red, Walla Walla, Washington
Inky opaque garnet in the glass, this tank sample smells of black cherry and tobacco. In the mouth, black cherry, cassis, tobacco, and graphite have a smooth, even polished complexion. Faint powdery tannins coat the mouth. Excellent acidity. 100% Cabernet. 41% new oak. $165 on release under its own label. Score: around 9. Cost: $180 per 12-bottle case.
These wines can be purchased only via e-mail offers which you can get by subscribing at de Négoce’s web site.
