Though it started out to help wine lovers make wines for fun, San Francisco's Crushpad micro-custom crush business quickly evolved into serving mostly commercial clients. That business has grown so rapidly that it recently partnered with Napa's Bin to Bottle custom-crush facility to serve clients who have outgrown its small-lot-oriented facility--and attract new commercial clients, too.
The venture with Bin to Bottle is the latest step in Crushpad's rise from what many observers initially dismissed as a wine club for dilettantes into a company that incubates and builds many new commercial wine brands.
The business started out in an old mayonnaise factory in a grubby section of San Francisco in 2004 when Michael Brill decided to abandon high tech for the wine business like so many before him. Instead of buying the proverbial small vineyard in Napa Valley to make expensive cult wines, however, he created a company that let wine lovers make professional-quality wines from top vineyards.
He signed up 60 top vineyards from the Santa Rita Hills in Santa Barbara County to Red Mountain in Washington and hired experienced professional winemakers to process the fruit.
Brill quickly found that his services were in great demand by budding commercial vintners, and he developed tools and services that helped them meet legal requirements, and promote, sell and ship their wines.
Most of Crushpad's commercial clients produce 50 to 1,000 cases per year. Almost all have other jobs, and they live in over 30 states so they sought a partner to provide capability from production to fulfillment so they could focus on marketing and sales.
Crushpad Commerce
Brill describes and markets these total services as Crushpad Commerce, which provides one integrated service that includes grape sourcing, winemaking, design, licensing, compliance, fulfillment, e-commerce and marketing support. "Basically a client needs to work with us on defining the type of wine they want to create, and get out there and market it. We do everything else. The rest is a huge distraction." He adds, "Of course, they can be as involved as they like in any step of the process, but they don't have to be."
He also found that he couldn't leave high tech behind. A significant part of his success has been due to the unique package of integrated software he developed to manage and monitor production, and then marketing and sales, for his small customers. Ten of Crushpad's 40 employees work on the software, in fact. "It's a huge barrier to entry," he claims, though he admits that he's considering spinning off some of his services.
The software initially allowed the customer to participate in the winemaking process and monitor its progress. Over time, Crushpad added features that allowed these customers to market, sell and ship the wines.
Crushpad Commerce now accounts for almost 70 percent of Crushpad's total revenue. It integrates proprietary and other technologies with human-based services into a single service with a single contact point for:
• Winemaking: Consulting winemaking, fruit sourcing and production
• Legal issues and compliance:All licensing, compliance and reporting in more than 35 states
• E-commerce and marketing: Brand development, shopping cart, clubs, social media
• Fulfillment: Storage; pick, pack and ship; FedEx/UPS/LTL
Brill says Crushpad Commerce now works with over 150 wine brands handling the details of the dozens of relationships, technologies and services necessary to support a successful wine brand.
The bulk of Crushpad's business is Cabernet Sauvignon and Pinot Noir, and in fact, he says those are the only varieties that are really economic with its cost structure. Crushpad does make other wines, however, and even has a cold room for fermenting whites.
Vineyards
The company grew rapidly, and Brill says Crushpad will process 40,000 cases this year. It's also moved to a larger facility in southern San Francisco. In all, it raised $13 million in equity. The first investors were mostly customers who kicked in $100,000, but last year, Crushpad decided to raise more. It turned down a $9-million venture deal and instead turned to individuals. Among the investors are Jean-Charles Boisset; Bill Price of private equity fund Texas Pacific, which bought and sold Beringer Wine Estates; Bill Fisher of the Gap; Jérôme François of Tonnellerie François Frères; and some investors in Tuscany who want to replicate the concept there. "We were 200 percent oversubscribed," says Brill.
Ironically, Crushpad initially intended to only raise $5 million; considering the subsequent developments in the economy, raising $9 million was very fortunate.
One of the keys to Crushpad's success is signing up good vineyards. Brill has served as the main interface with these growers but recently hired well-known viticulture consultant Mitchell Klug to manage its grower relations. Klug has been working with Crushpad for the past few years as vineyard manager at Premier Pacific Vineyards, where he has planted thousands of acres of high end vineyards. He previously headed up vineyard operations for Robert Mondavi Winery, including To Kalon and Opus One.
Crushpad has even acquired one vineyard of its own, a 13-acre leased Pinot Noir vineyard in Santa Rita Hills, an area made famous by Sideways.
The business has changed, however. While 20 percent of the business was commercial in 2006, it hit two-thirds in 2008. That's where Bin to Bottle comes in.
Bin to Bottle Partnership
The partnership combines Crushpad's unique wine business services, many based on proprietary and purchased software, with Bin to Bottle's larger custom-crush services. While Crushpad, for example, primarily ferments wines for its customers in half-ton bins, Bin to Bottle has a full array of tanks of various sizes. Bin to Bottle was founded in 2006 by John Wilkinson and veterans with over 85 years of combined wine business experience, including winemaker Marco DiGiulio.
The two companies together are targeting wine brands in the 500- to 5,000-case range that might be larger than Crushpad can economically handle. In the process, they hope to attract clients by saving them tens of thousands of dollars and hundreds of hours annually compared to the capital investment and expense of trying to produce and market wine on their own. Brill says his customers can get into the wine business for $20,000 to $50,000 rather than the typical $1 million or more required.
"Think about what you would need to do if you were to launch a new wine brand," he says. "You have to find fruit, get a winemaker, find a facility, buy insurance, get a graphic designer, get federal and state licenses, get packaging, store your wine somewhere, get an e-commerce system, ship wine (including direct to consumer in 36 states), file compliance reports, etc. All that stuff takes a huge amount of time to coordinate and costs a lot because you are using numerous different service providers. We have a 40-person company that has implemented and integrated best of breed solutions for each of these services.
"So now, instead of spending hundreds of hours and tens of thousands of dollars working on all the blocking and tacking, you simply sign up for Crushpad Commerce, pay a per-bottle fee and spend your time selling."
He adds, "We were 'forced' to create this solution because we needed something that a 100-case brand could use without going broke. Once we built it for a handful of these brands, it's no more expensive for us to offer it to hundreds of brands.
"It's an especially useful service if you plan on building a direct to consumer model," continues Brill. "We ship direct to consumer and do 100 percent of licensing/compliance reporting in 36 states."
The partnership with Bin to Bottle provides Crushpad with a lower cost production winemaking facility than the San Francisco facility, which is optimized for micro lots. "It's too expensive here," he says. "We miss a lot of opportunities."
Bin to Bottle also offers a step up point for Crushpad customers who grow, though Brill says only one winery has left for another facility so far. That was Vie Winery, which grew to 1,200 cases. "You can choose to use our entire service or select à la carte. Initially, we will find people just wanting tactical support (a license here or there, fulfillment, design support, etc.). However, as new brands are created or wine brands want to exploit the direct to consumer model, they will find that they can save hundreds of hours and tens of thousands of dollars (not to mention many headaches) in using Crushpad Commerce instead of doing it all themselves."
The partnership with Bin to Bottle extends these services to larger brands by utilizing Bin to Bottle's custom-crush wine production services. Crushpad has established offices within the Bin to Bottle facility, and both companies are selling the integrated service.
"It was the perfect fit," says Wilkinson. "All the services Crushpad offers are complementary to ours, and we don't offer any of theirs--except winemaking." He adds, "Now we can do everything for our customers, from grape delivery to delivering bottles to the customer."
Wilkinson says it also solved Crushpad's needs to serve large customers. "They were mostly a bin-fermentation operation, and we can offer tanks. We can handle 2,200 tons and large jobs they can't."
Future Plans
In addition to the relationship with Crushpad Commerce, Bin to Bottle is adding new wine treatment services for 2009, including alcohol reduction, which requires a DSP [Distilled Spirits Plant] permit, VA removal and cross-flow filtration.
It is also introducing its new Winemaker Concierge service for Bin to Bottle clients. It's a free service that provides office space, administrative support and even personal services such as dry cleaning and laundry drop off/pick up, car washing, and picking up lunch and cold draft beer during the hectic harvest period.
Bin to Bottle has also established numerous green initiatives including being a CCOF organically certified winery.
During 2009, Bin to Bottle will add a 25,000 sq. ft. barrel storage building with a 400 sq. ft. tasting room adjacent to the existing winery facility; in 2010, it will add 13,000 sq. ft. of case storage. Crushpad is also expanding its barrel and case storage.
Not content with his own success, Brill has set another objective for the partnership: "My goal will be to help Bin to Bottle compete with Napa Wine Company," Napa's premier custom crush facility.
In addition, while Crushpad has personal consumption clients outside of the U.S., all of its commercial clients are based in the U.S. This will likely change later in the year when it launches a venture in Bordeaux. wbm
Paul Franson of Napa, California writes on wine and business.
For more information about Crushpad, visit www.crushpadwine.com or contact Noah Dorrance at noah@crushpadwine.com or 415-864-4232.
For more information about Bin to Bottle, visit www.bintobottle.com or contact John Wilkinson at john@bintobottle.com or 707-307-4510 ext. 103.
