Press | Cameron Hughes Wine

Wine Workout
Maureen Farrell, 03.11.09, 06:00 PM EDT
Forbes Magazine dated March 30, 2009

Cameron Hughes squeezes profits from struggling vintners' excess inventory.

The recession has been good to Cameron Hughes. A lanky 37-year-old with a preppy wardrobe and refined palate, Hughes provides liquidity in the $30 billion U.S. wine industry. He sops up excess inventory from vintners and brokers, bottles it, slaps on his own label and sells the stuff to retailers like Costco (nasdaq: COST - news - people ), Sam's Club and Safeway (nyse: SWY - news - people ).

Expensive wines aren't moving well these days. After growing at an 8% annualized clip for five years, sales of $14-and-up wine fell by 6% in 2008 to 22 million cases, estimates Gomberg, Fredrikson & Associates in Woodside, Calif. (The drop-off accelerates with price.) To keep cash flowing, some producers are willing to unload at desperation prices, provided they can keep the transaction confidential. Hughes can clean up reselling wine retailing for $8 to $14.

Sound schlocky? Combining the output of different wines into a regional blend (or simply reselling and relabeling one vineyard's overstock) is quite respectable in France, where the blenders call themselves négociants. Hughes is one of 100 or so in the U.S. He marshals 250 freelance salespeople--many of them out-of-work real estate and mortgage brokers--to hawk the wine in Costco, Sam's Club and Safeway Thursday through Sunday. Last year San Francisco's Cameron Hughes Wine, now with 19 full-time employees, clocked roughly $20 million in revenues. (Hughes won't reveal his margins but says the business has been profitable since 2004.)