Bacchus Capital Lends to Cameron Hughes

New wine industry finance company makes first deal with fast-growing négociant

by Paul Franson
Cameron Hughes
Sam Bronfman, co-founder and managing partner of Bacchus Capital Management, LLC (right), poses with Cameron Hughes, founder and president of Cameron Hughes Wine (left).
San Francisco, Calif. -- The first transaction for Bacchus Capital Management, an investment firm founded to focus on the wine industry, involves a négociant, Cameron Hughes Wine of San Francisco, rather than one of its main targets: wineries.

Bacchus Capital Management is featured in the cover story on alternative capital sources in the October issue of Wines & Vines (see, "Tapping Money"). The financing for fast-growing Cameron Hughes takes the form of a second-lien, five-year loan. Neither party would disclose to Wines & Vines the amount of the deal, but Bacchus has previously said its usual transactions would be $3 to $15 million, and the San Francisco Business Times reported the loan amount at $3 million.

Cameron Hughes plans to use the mezzanine financing from San Francisco-based Bacchus to buy wine inventory and expand distribution. Founder Cameron Hughes built his wine négociant business by selling wine largely through major retailers and discount stores.

Cameron Hughes purchases finished wine from high-end wineries globally and bottles it under a variety of brands. Many are sold exclusively through large retailers, such as Cameron Hughes Lot Selections in Costco and Sam's Club, and its Evergreen Series in Safeway, Vons and now Lucky Stores. It also sells through a national network of distributors and direct consumer sales, primarily in the west. It plans to use its new funds to expand in those accounts as well as in the states of Massachusetts, New York, New Jersey, Florida, Illinois, Colorado, Texas and Washington.

Bronfman told Wines & Vines, "Cameron Hughes might be in a nice place in the future due to the difficulties in the economy. Some high-end wineries might be looking to sell more wine in bulk if they can't sell it directly."

Ironically, Bacchus' focus is on wineries, not négociants, but it is interested in other wine companies, too. "Wineries are our sweet spot, but we're looking at many other deals," said Bacchus partner Peter Kaufman. He added that pure land deals are not of much interest, however.

Bacchus organized and announced its fund before the recent meltdown of the U.S. economy, but Kaufman said Bacchus is in an even better position now. "There's even less liquidity and secured debt available than before, and we're able to charge mezzanine financing fees," he said.

"We are excited to provide capital for Cameron Hughes Wine underneath its traditional bank loan," added Kaufman. "In today's roiled financial markets and constrained credit environment, Bacchus can be uniquely helpful in solving liquidity needs for wineries."

Hughes said, "Bacchus will provide us with the working capital we need to expand our inventory, organization and distribution so that we can continue our strong record of growth."

Bronfman, who capped a career in the wine business as president of Seagram Chateau & Estate Wines and chairman of Diageo Global Wines, emphasized that Bacchus provides more than money. "Through our experience in the wine business, people like president Mike Jaeger and me can add value to wineries, particularly in branding, marketing and distribution."

Bacchus hopes to create a portfolio of about a dozen high-end wineries. It will focus its investments in businesses with a track record of profitability and annual shipment volumes of up to 750,000 cases. Bronfman said, "We have money to loan. We are talking to quite a few wineries."

For more information about Cameron Hughes Wine, visit chwine.com. For more information about Bacchus Capital Management, visit bacchuswinefund.com.
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