SONOMA -- Small-scale custom vintner Crushpad has new owners, who are busy trying to find a place to crush grapes for a few hundred hobbyist and commercial winemakers as harvest approaches.
A group of investors assembled by private-equity sponsor Castlegate Capital Advisors of Tiburon was the only bidder in an auction for Crushpad's assets, which were assigned to Sherwood Partners, according to Philip Von Burg of Castlegate. For about $654,000, the firm had acquired a secured note Silicon Valley Bank made to Crushpad. Before the sale Crushpad had 140 commercial customers, half of which were active, and a couple of hundred private customers.
"We very much like the microvineyard business model," he said. "We did a fair amount of due diligence and found fairly active demand on the commercial and products sides. The company needed to adjust a couple of business practices, and if it started with a clean slate it had a chance to succeed."
Immediate changes will be a new name and adjusted business model. Last summer, after winery portfolio owner Bill Foley invested about $3 million, Crushpad moved its production and tasting room to leased space in Mr. Foley's Sebastiani Vineyards facility near Sonoma. In June of this year, Crushpad's fiscal problems became public, but the company denied it was looking for a half-million-dollar infusion.
The new owners of Crushpad hope to lock in this week a contract with a custom vintner for the 2012 harvest and are looking for 7,000 to 10,000 square feet of winery-suitable industrial space to be the new home for the operation, according to Mr. Von Burg. The new owners retained five Crushpad employees.
One business-model change will be the way customers are billed for services, Mr. Von Burg said. Customers had paid in advance, increasing their exposure, he noted.
A second change to the way Crushpad does business will be moving commercial customers to a subscription model, Mr. Von Burg said. Currently, the company gets paid when commercial clients sell bottles to consumers and the fulfillment side of the business ships the orders.
"Historically, it would provide services to the customer until the bottle was sold, so it was losing significant money advancing services before it was getting paid," Mr. Von Burg said.
Another potential change for the business is how grape purchase contracts are structured, he said. Prices Crushpad has paid for grapes over the years have raised more than a few eyebrows among industry sources.
With an eventual new location for the microvintner business will come a change in how client wine is produced, using not as much equipment, he said. Within a week, the assets of Crushpad will be divided between Structured Solutions and a second entity recently created, and excess assets would be sold, according to Mr. Von Burg.