The Genius Financial Model
An excerpt from Rachel Hofstetter’s ‘Cooking Up a Business: Lessons From Food Lovers Who Turned Their Passion Into a Career—and How You Can, Too’
Wine aficionados Cameron Hughes and Jessica Kogan buy extra wine from high-end wineries and sell it under their own label for a fraction of the price.
The result: premium drink meets everyday value.
An English Major Goes Rogue
Spend five minutes with someone in the wine industry, and they’ll bring up their favorite joke. Question: How do you make a small fortune in the wine business? Answer: By starting with a large one! And as most clichés go, it’s based in truth—except when it comes to Cameron Hughes and his wife, Jessica Kogan, who started their wine journey with no fortune to speak of. Then they quickly went from having no money to being in debt, not the direction they’d intended! But today, they own one of the largest wine companies in the United States and are a notable exception to the rule.
Cameron Hughes was born and raised in California’s verdant agricultural hub, the Central Valley. Although his father, like many in the area, worked in wine, Cameron didn’t see himself going into the business; he majored in English and philosophy in college. But Cameron’s father didn’t give up hope: To entice his son into the profession he himself loved, he’d often send mixed cases of wine to Cameron’s dorm room. While Cameron grew to appreciate and love the vintages and varietals (and he and his friends enjoyed treating their palates to something a bit nicer than cheap college beer) he still considered wine a beloved hobby, not a career option. That is, until he graduated and found a nonexistent job market for English and philosophy majors. He set his sights on grad school and started taking classes to buff up his transcript, but when his father called with news of an easy part-time gig at value-priced label Corbett Canyon, Cameron jumped on it. If a job in his academic field wasn't in the cards, why not do something he really loved?
The job entailed going to retail stores and buying back any of the company’s boxed wines that were past their expiration dates. Then Cameron would head to the backroom, slice them open, and dump the wine down the drain. “I wasn't making wine, selling wine, marketing wine, talking about wine; I was simply destroying wine,” says Cameron. “But I was particularly good at it, I guess, so they soon offered me a job in sales.” Grad school fell by the wayside, and Cameron was officially in the wine business.
Cameron spent the next four years as a sales associate for the brand, selling wines to large retail chains. But after a while he was itching to experience that more romantic side of wine again: tasting, evaluating, and sharing something he believed in—and selling big box wines to big box stores was not his idea of romantic. Who was doing something interesting in wine? That’s where he wanted to work.
In quick succession, Cameron got jobs at two wine importing startups. Both companies tanked, but it was during his short time at each where Cameron learned all about the concept he would eventually use to launch his own business: négociation. The term refers to an old European business model of buying other vintners’ excess inventory— everything from grapes to fermented juice to completed wines—then handling the rest of the process and selling the wine under the négociant’s own label. The start-ups were perfect examples: They didn’t grow their own grapes, crush their own wine, or age their own juice, they’d just create blends from the high-quality leftover juice. “Then they’d bottle the wine, import it to the United States, and sell it,” explains Cameron. “Or in their case, not sell it, which is why they crashed and burned. And fired me.” But Cameron was intrigued. He looked around the California wine market; no one was doing anything like that with bulk wine. Could he be the first American négociant?
For the Love of Wine
While Cameron was learning the ins and outs of the négociant wine merchant business, he was also nurturing a long-distance relationship with fashion publicist Jessica (Jess) Kogan. It was a cross-country affair: He’d fly to New York, where they’d met, and she’d jet out to California. By the time the second start-up failed, he and Jess were officially serious. So when Cameron—fresh out of a job and with an idea burning a hole in his pocket—decided to start his own wine company, Jess was the first to jump onboard. “I’m sick of New York,” she said. “Why don’t I just come out to San Francisco, and we’ll do it together?”
Jess, who had helped launch Donna Karan’s inaugural line and marketed luxury goods at various fashion dot-coms, brought her own expertise to the new venture.
But when she first told Cameron that she wanted to join him, he hesitated: “You have no experience in the wine business,” he said. “But I do know what people like,” reasoned Jess. “And I know how to make people like the things I believe in.” As it turned out, the wine business was surprisingly similar to the fashion business: “They’re just one DNA sequence apart,” says Jess. “They’re both about fantasy, perceived luxury, and perceived value. And whether in fashion or wine, you have to create those for the consumer.” Cameron’s wine knowledge combined with Jess’s branding know-how was looking like a nice match. And with that, their little idea started taking on substantive shape.
In Search of Cinergi
Cameron’s key idea was this: He and Jess weren’t going to buy a vineyard. They weren’t going to buy grapes or a winery. In fact, they weren’t going to make their wine at all. They would instead focus on excess bulk wines, which were (and are) an open industry secret. Wineries have long made more wine than they need or plan on selling; they want various grape juice components on hand to create just the right blends or to ensure enough premium-level grapes for their brands.
Then came the era of cult status wines, where the asking price of some California vintages soared into the thousands of dollars. Part of the appeal was that these wines took extra care to produce (true) but also that there were a limited number of bottles on the market. So a small, famous winery in Napa Valley would release only x amount of bottles a year to keep demand higher than supply. But in any given year, that famous winery might have thousands of dollars’ worth of wine left over after bottling. Some produced “second labels,” distancing the wine from their higher-end lines. And some sold it to bulk wine merchants, who would mix the premium wines into barrels of low-end plonk to give it a little something-something.
And then came Cameron, with his négociant idea for bulk wine. At a dinner party, he noticed a friend struggling to finish an intense, pricey Zinfandel. Cameron had an outlandish thought: He reached for the other bottle on the table, a $10 red, and added a splash to the Zin already in the wineglass. The result was perfect: rich, but structured and infinitely drinkable. Blends like this were anomalies in a California market flooded with single varietal fruit bombs—and the offerings in the bulk market were similar. But what if Cameron bought single varietal bulk wines and then combined them, just as he had at the dinner table?
So in 2001, he and Jess started Cinergi (think synergy) Wines with the goal to make “funky, crazy” blends that had never been seen before. They bought some excess wine, mixed it together, and put their Cinergi label on it. Then they loaded up the trunk of Cameron’s old Volvo and started going from wine shop to wine shop, where they met mild acclaim. But as they tried to sell their blends, which critics called “ahead of their time,” all of Cameron and Jess’s limited cash was tied up in the cases of wine sitting in their Volvo. When promising new bulk buys surfaced, there was no way to add them to Cinergi’s inventory.
“It was a classic case of getting buried under the cash flow snowball,” says Cameron. “We couldn’t make enough money to reinvest in more inventory and grow the company. I still thought it was a great idea, but we couldn’t make it work financially.” By 2003, Cameron and Jess agreed they couldn’t invest any more time, effort, or money in Cinergi; they needed to return to the corporate world and bring in some paychecks. Cameron went to work for some area wine companies, and Jess joined a team that was rebranding Chevron gasoline. Was this the end of their wine dream?
The Genius Idea: Lot Wines
In the meantime, Cameron and Jess made their business partnership official in another way: They got married in May 2003. Then, in the following January, their winemaker friend Samuel Spencer dropped by to see Cameron. “I’ve got this 2002 Lodi Syrah that I just can’t sell,” he told Cameron, referring to wine from a local region. “I have similar Napa Valley Syrah, with a 93 score from Robert Parker, that I sell for twice the price. But I can’t move the Lodi stuff .” Samuel was going to discontinue the Lodi program and double down in Napa. Could Cameron find a home for the remaining Lodi Syrah?
And that’s just what Cameron did. Th e Syrah became the so-called Lot 1 of the brand-new, just-dreamed-up Cameron Hughes Wine Lot Series—limited-edition wines from famous, high-end wineries and regions, but sold at a fraction of the price. The catch? While the customer would see the grape type, year, and general origin of the wine, they wouldn’t know the small, name-brand winery it came from. Instead, they’d have to trust this eponymous Mr. Cameron Hughes to pick the best of the best wine values. The idea was that the Cameron Hughes Lots would be an ongoing program—with its own brand recognition— instead of disparate one-off sales of bulk wine bottlings.
And when an outstanding wine was gone, it would be gone for good. “Honestly, we were the original flash sale,” says Cameron. “In 2005, I sold out of our Lot 17—500 cases’ worth—in under two days. Now the business model is used with everything from fashion to art, but when we started it was still completely novel, especially in wine.”
But back in January 2004, Cameron still had to get Lot 1, of which he’d just committed to buying about 800 cases, out the door. He called up every wine store and buyer he’d ever worked with, and got the same response: “Eh. Send a sample over, I guess.” Finally, he cold-called the wine buyer at the local San Francisco Costco. “He didn’t know me from Adam,” says Cameron, who then dove into an explanation of why the Lot program was an absolute perfect fit for Costco: “It’s a small buy. It’s in today, out tomorrow. This is a total treasure hunt item.” The buyer was interested enough to have Cameron bring by a sample, but he was leaving for Europe the next morning; it would have to be after he returned. Cameron wasn’t willing to wait. “I set a land speed record driving from San Francisco to Livermore and dropped off a sample!” says Cameron. The next day the Costco buyer called from the airport. He would take everything they had. Lot 1 was really happening—a $28 Lodi Syrah selling for $8.99. Cameron and Jess were back in the wine business.
The Dynamite Business Model
Soon, their local Costco buyer, as well as the northern California regional buyer, was ready for more. Could Cameron Hughes Wine give them Lot 2—and beyond? Cameron and Jess masterminded a plan that would help them avoid the cash fl ow pitfalls they’d run into with Cinergi. They brought on a winemaker and together they’d come up with eight to ten samples crafted from the bulk wine market. Each was sourced only after the signing of nondisclosure agreements, and Cameron could never share exactly where each Lot had come from. Then Cameron and Jess would go into a meeting and present the wines, hinting at their storied pasts. The secret was that Cameron Hughes Wine hadn’t purchased any of the offerings the Costco buyers were currently tasting; all of their samples were on spec.
It was only once the Costco buyers had chosen the wines they wanted to carry that the real fun began. Cameron and Jess would sprint out to the parking lot, one calling the wineries and the other their bank. While Cameron was saying “We’ll take it!” to the winery, Jess was arranging financing, using the purchase order Costco had just made as collateral. The loaned money spent just seconds in the hands of Cameron Hughes Wine before it was transferred to the wineries and bulk wine merchants—and Cameron already knew a payment was on the way from Costco.
This solved that little cash flow problem they’d run into before. To grow the brand, they had to borrow, and spend, money only after they were already guaranteed a sale. In short, first they’d sell their wine and then they’d buy their supply. “It’s actually the way the fashion industry works,” says Jess. “You show your samples, get your orders, take your purchase order to a bank financier, and then you order your inventory and have it shipped in. It’s a well-known model, but no one was applying it to wine.” It was clear that Jess’s fashion know-how was going to be a boon to their wine business, after all.
And instead of using these bulk wines as silver bullets to fix lesser blends, Cameron and Jess were the first to say exactly what they were doing, introducing the American consumer to the concept of négociation. “We openly confessed that we didn’t make these wines, but that we were finding, sourcing, and marketing them,” says Cameron. “It was our story. But before that, it’d been an insider type of knowledge.”
Genius, right? “It wasn’t genius at all,” says Cameron. “We had no other choice. Let me remind you that Jess and I owed hundreds of thousands of dollars to the people who had invested in Cinergi. We figured that company was going to go belly up and we’d never be able to face our investors, who were mainly our family and friends, again. We had a very strong incentive to make something work.”
A $30 Wine for $8.99
Cameron, Jess, and Costco all thought they had accidentally stumbled onto a great model and product, but they still needed to convince their would-be customers. A few days after Lot 1 hit shelves at the San Francisco Costco, Cameron and Jess went in to see how it was selling. They rolled their cart to the wine aisle and could barely tell which boxes were theirs: just the tops had been cut off , and they couldn’t even see the bottles. Were customers really going to reach in and grab an unfamiliar product? No wonder the cases were full—not a single bottle was gone.
It took them only a few seconds to act. Jess pulled open boxes, filling her cart with Lot 1. And Cameron, who pretended he had nothing to do with the wine at all, started chatting with passing customers. “Wow! You’ve got to try this stuff . It’s basically a $30 bottle of wine for $8.99,” he’d tell them. It seemed like a no-brainer. People started putting a bottle or two in their carts. Within fifteen minutes, Cameron had sold about twenty-four bottles of wine. Whatever he had just done, it worked. “You need to plant your butt in this store,” said Jess. “That is how we’re going to make this work.”
Jess, who had spent many afternoons shopping at warehouse stores trying all of the food samples from vendors, was a firm believer in product demos. Standing in the aisles and sampling was how people were going to learn about their wines, and luckily, it seemed like Cameron had a knack for it. They called the Costco buyer. Could they put a table up and stand in the store? “Why not?” came the reply. “I don’t think we’ve done that with wine before, but give it a shot.”
Cameron put on what he calls his “carnival barking act,” selling the wine with everything he had. Customers would hear him all the way on the other side of the store and come over to see what was going on. Who was this guy, and what was he selling? “I had no credibility, no name recognition,” says Cameron. “And I was basically swearing that this was incredible wine. So I’d back my promise with all sorts of collateral, like that if a customer didn’t like the wine I’d go wash their car for free.” (He never had to make good on the offer.)
The sales strategy worked, and soon Cameron was selling twelve cases, eighteen cases, and then a pallet (fifty-six cases) of wine a day. “I’m not kidding you. That’s a ton of wine,” says Cameron. “That’s 720 bottles of wine times $8.99, which is over six grand of wine a day.” Costco had never seen anything like it, either, and they most definitely wanted more and more Lots from Cameron Hughes Wine.
There’s hard selling, and then there’s hand selling, and the latter became an integral part of what made Cameron Hughes Wine unique. Soon, Costco was sending them out to demo in every store in the state, and Jess left Chevron to work full time on the business. She and Cameron would spend every Thursday through Sunday hawking wine at Costco. Then they’d devote Monday, Tuesday, and Wednesday to actually running the company: selling, buying, sampling wines, and taking care of logistics.
“It was crazy, and unsustainable,” says Jess. They could keep it up for only so long. But then a guy named David, who was a big fan of the Lots, started chatting with Cameron during a demo. He was looking for a part-time job and had an idea. Could he help relieve Cameron on the store floor? Cameron was wary; until now, he’d been putting the personal Cameron Hughes magic touch into every sales pitch, and, well, this guy seemed a bit dorky. “Just let him try. It can’t hurt. You can’t keep standing at Costco four days a week,” Jess convinced him. So they put David in a store and let him work his own brand of magic. Here was an everyday guy who loved Cameron Hughes Wine—it was a marketer’s dream, and David made good on the premise. “David was so great, it became legendary!” laughs Cameron. “One Saturday he even sold 117 cases of wine, something we had never imagined.”
If an employee could rack up numbers like that, then this demo idea could truly work. And Jess didn’t stop with hiring a few salespeople. They were going to make their wine sampling service scalable, not just for Cameron Hughes Wine but for other wine and spirits brands as well. “The owners can’t do it all themselves,” she says. “Obviously, most sales people aren’t as good as the owner of the company, but if you can get them to be 50 or 60 percent as effective and multiply that by a sales force of 500 people, you’ve more than made up for it.”
Cameron Hughes Wine was running such a successful demo enterprise for their own line that other wine and spirits companies were willing to pay for a chance at the Midas touch. So over the past five years, Jess has grown that part of the business into its own separate company, Sales Pros. It manages in-store demonstration services for Cameron Hughes and other wine companies, holding wine tastings (wet demos) or simply talking about wines (dry demos). Today, that little spin-off idea that came out of the carnival barking act employs more than 500 people across the United States.
World Wine Web
Jess had another prescient requirement for Cameron Hughes Wine, picked up from her days in dot-com marketing: the wines needed to be sold online. So starting with Lot 1, Cameron Hughes had an e-commerce-enabled website (chwine.com). Jess was convinced that people would buy a $15 bottle of wine online, even though every industry and Internet expert was telling her otherwise. And by 2005, Jess was proving all of the naysayers wrong. If you marketed it (and kept shipping costs low) people did want to buy their affordable wines online. Lots regularly started selling out in forty-eight hours, and customers would pick up twelve or twenty-four bottles at a time. “Our online business is what kept us going for a long time,” says Jess, “because that’s where the greatest profitability was (and is).” Plus, it let Cameron Hughes Wine reach a market outside of California long before they had moved into physical stores across the country.
While the business of food is filled with lots of regulations and oversight during manufacturing, the business of alcohol is especially rife with regulations governing the sale and shipment of goods— especially when it comes to selling alcohol across state borders. Cameron Hughes Wine had to deal with the legacy of the Twenty-First Amendment, which broke up one American alcohol market into fifty different markets (we know them as, of course, states). “Each market is its own battleground, with its own rules and paperwork,” says Cameron. Today, they can ship to thirty-seven states. But don’t fear that there’s a vast unconquered market in the remaining thirteen states—the thirty-seven allowed include 90 percent of the wine-drinking public. Only two states (Massachusetts and Pennsylvania) are left on their shipping wish list; the remaining no-ship states don’t matter in their big-picture view. Like presidential candidates after electoral votes, Cameron and Jess instead focus their energy on the heavyhitting states. That means California, New York, Texas, Florida, and Illinois, where the big sales (direct ship and in store) are made.
The Rise of Competition and a New Model
Once Cameron Hughes Wine was successfully buying, marketing, and selling premium bulk wines, it was only a matter of time before copycat competitors wanted in. While at first it seemed that Cameron and Jess had buttoned up the market, two events eventually opened the model up to competition. First was the unprecedentedly large harvest of 2005, which caught grape growers and winemakers off guard. Everybody had more grapes than they knew what to do with, and an abundance of supply came onto the bulk wine market. “It didn’t change things initially, but it made people start to think about what they should do with all that excess wine,” says Cameron. Suddenly, it wasn’t a minor market but a large and potentially profitable one. As a result, things like Two-Buck Chuck, the Charles Shaw wine sold at Trader Joe’s, began to come down the pipelines.
But Cameron Hughes Wine didn’t see true direct competition until after the financial meltdown in 2008, when consumers simply stopped buying expensive premium wines. High-end wineries began to struggle and ask, “How do we sell this wine and at least break even, instead of selling it at a loss?” One solution was the private label brands that started to pop up and quickly became the go-to solution for excess and unsold wine. Most riffed on the Lot concept that Cameron had introduced so successfully, marketing the wines as limited and special purchases. Then the flash sale websites, like WineShopper and Lot18, surfaced to take advantage of the recessionary wine glut. “But now that true distressed wine inventory is gone, and they’re all struggling,” says Cameron. “Today I saw a deal site selling a $65 bottle of wine for $59. Why would I buy that from you?” The difference, he says, is that Cameron Hughes Wine was never just about distressed inventory, the easy pickings that you just slap a label on and sell. Instead, the idea was to use their relationships to source the bulk wine deals that have always been available, good economy or bad.
And today, Cameron Hughes Wine isn’t struggling because when the competition started to appear, Cameron and Jess shifted their own model just slightly. Now the company essentially owns its full supply chain, but in an outsourced, négociant-inspired way. And so while other private labels and flash sales are left scrounging for bargain finished wine, Cameron can find excess and glut opportunities at every step of the wine-making process, from vineyard space to ripe grapes to blending facilities.
Over the years, as the stream of bulk wine has both flowed freely and dried up, Cameron has sought to secure a constantly larger supply. And as a result, the Cameron Hughes Wine team has moved into what they call “virtual wine making.” First, Cameron Hughes leases empty wine barrels (which can cost upward of $700 apiece new). Then they find wineries or growers with excess production capacity—not that they’ve grown too many grapes or made too much wine, but that they could grow or make more if there was a right-priced market for it.
The wineries with excess production capacity go out and source and buy grapes on Cameron’s behalf and sell them to Cameron Hughes Wine by the gallon. “Then we bring our barrels and winemakers to the party, and we make the wine together,” says Cameron. It’s win–win: it lowers the wineries’ per-bottle overhead cost, allowing them to keep a more experienced staff on year round and to obtain better pricing on grapes.
Once Cameron figured out what makes wineries tick, he started going to grape growers too. “We love your fruit,” he says. “What if we partnered you up with a high-end custom facility and we all make wine together in a triangular contract?” Cameron’s goal is to engineer a system of mutually beneficial agreements so that he doesn’t pay for a drop of wine until it comes out of the barrel (it’s analogous to his strategy of buying the bulk wine after selling it to Costco). By bringing growers, wineries, and Cameron Hughes Wine together, he could maintain a positive cash flow. (It’s a common business tenet; similar strategies exist at places like Costco and Walmart, where manufacturers and companies aren’t paid until, or after, their product actually sells.)
Cameron found high-quality growers across the state who would gladly do business with him and carry the cash flow obligation of the deal. “We can control the style, the direction, and the quality of the wine,” he says. “But financially, it’s like a bulk wine deal in that we don’t pay for it until it’s ready to go into the bottle.” Most of the deals also have nondisclosure agreements attached to them, and as a general rule, Cameron Hughes Wine doesn’t say who they’re working with. But now they don’t have to wait for the once-in-a-lifetime bulk wine buys; they can create their own. “This is how the Europeans have been doing it for centuries,” says Cameron. “It’s just a modern evolution of the California wine business.”
Growing Beyond Costco
Obviously, Costco was a boon for Cameron Hughes Wine; from day one, Lot 1, its buyers were incubating the company. And by 2007, Costco was also the largest retailer of wine in the world—and not just in value wine but in fine wine, too. But, eventually, Cameron knew he had to build the brand beyond Costco’s walls. “It’s a great place to start, but it’s also a risky proposition,” says Cameron. Costco doesn’t want a company to have all their eggs in one basket: The buyers are continually rotating products, and they’re well aware that if they drop you for a cycle, you’ll likely go out of business. “They wanted us to have other accounts,” explains Cameron. But he and Jess found that it was a tremendous challenge to grow outside of Costco. First, they had to convince other retailers, who didn’t want to compete with the bargain-priced behemoth down the street, that it could work. And second, they needed to increase their inventory dramatically because Costco would immediately take the majority of what Cameron Hughes Wine could find and finance.
To solve the conundrum, Cameron Hughes Wine would need to increase their credit limit so they could finance more wine. Their solution was to take on a large, high-interest loan for a short period of time, which acted as collateral and let them secure a larger credit limit from their main bank. With that in place, they built their inventory up to a five-month supply—enough so that they could guarantee a continued selection of Lots to other stores, not just Costco. “Then we went out and scorched the earth. It’s taken years, but we’ve finally built a really healthy business outside of Costco,” says Cameron. “Today, if there’s a place you can sell wine, we’re there. And it’s sustainable.”
Marketing Magic in a Bottle
Today, Cameron Hughes Wine is selling over 6 million bottles of wine a year. How are they getting the attention of so many customers, when they’ve never run a single advertisement and have a marketing budget that covers just their demos and meet-and-greets? “Our goal has always been to let the wines speak for themselves, and then our customers will speak for us,” says Jess. It’s all about the grassroots power of word of mouth: people tell their neighbor about a great Cameron Hughes wine, and maybe gift a friend or family member a bottle or two. “Plus we know how to talk about wine, and we’re passionate about where our wines come from,” says Cameron. “We know the quality, and we know what other people sell them for. It’s easy to benchmark it, like in our original $30 wine for $8.99 line.”
One benefit of their low-overhead business model is that they’re able to essentially put their advertising and marketing budgets straight into the actual product. Customers want a $40+ bottle of wine to feel expensive, which means heavy glass bottles with fancy labels and corks and marketing campaigns to create an aura of luxury. “But we don’t need the exterior of our bottle to market our wine,” says Cameron. “We buy cost-effective glass that costs half the price of other guys’ glass. We buy cost-effective, fantastically well-made corks that cost a tenth of other guys’ corks because I don’t care what they look like. Our labels are classy, but they’re inexpensive.” Because their total product cost is relatively low, they don’t have to hire advertising agencies and convince customers that the wine is worth it—at this price, people will try a bottle for themselves.
Cameron calls their strategy “foxhole-to-foxhole marketing”: They convince one customer, and one store buyer, at a time. “It’s still a handshake business, a relationship business,” says Cameron. “There are tens of thousands of different wine brands now, and people want to know you’re real. The retailers want to have a relationship with you. People always come up to me and go, ‘Oh! There’s a real Cameron Hughes? I thought that was a made up name.’ That’s how you sell wine once. To sell it again, it has to be worth it.”
So You Want to Be Like Cameron?
Ah, but first you have to remember the cardinal rule of the industry: How do you make a small fortune in the wine business? By starting with a large one. “Anyone can get into the wine business with a little bit of capital,” says Cameron. “But then you have to actually sell the wine, which can prove difficult.” For the long term, he believes it’s easier to start at the bottom in the industry and work your way up. Then you can build the contacts you’ll need in this relationship-driven, handshake-based business.
But then, whether you’re flush in cash or relationships, make your wine the way Cameron does—virtually. “Don’t go buy land, grow grapes, and build a winery; it’ll suck up more cash than you ever thought possible,” he says. Instead, source your grapes and/or wine and give your venture a try first to see if it flies. “I think that’s one of the only ways for a start-up to actually be profitable in wine . . . we got lucky. I found the right buyer at the right time at the right place, and I was holding the right bottle of wine. That’s it,” says Cameron. “There’s a certain amount of initiative involved in that, but at the end of the day, the stars were aligned.” And, one might say, a genius financial model helped keep those lucky stars in action.
TAKE AWAY
■ Consider cash flow in the beginning. Be wary of tying up your limited cash in large amounts of inventory before you have a track record of sales. Work with small-batch prototypes as much as possible, so you can pivot and be nimble as new opportunities arrive.
■ Borrow—and spend—money only after you’re guaranteed a sale. Jess and Cameron applied the fashion industry model to wine, using their purchase order as collateral on a loan and then using that loan to pay their suppliers. Can you wait to make large amounts of product until after you have a purchase order? Or will suppliers work in tandem with you, supplying raw ingredients while you handle manufacturing and sales?
■ Keep overhead and advertising spending low. If you operate on a lean and mean budget, you can make a value-priced product and skip the advertising and marketing it takes to sell a premium-priced item. Then put that money into creating or sourcing a great product, and grassroots and word-of-mouth marketing will move it off shelves—every consumer loves a secret value find.
Filled with inspirational stories and applicable lessons for every type of food enterprise, COOKING UP A BUSINESS (Perigee Books) is the perfect primer for anyone who dreams of owning his or her own food business.
Rachel Hofstetter received a degree in economics from Miami University and lives in New York City with her husband, Lorne.
