Gundlach Bundschu Winery files for bankruptcy, as industry trends hit California’s oldest family-run winery
Sonoma Valley’s Gundlach Bundschu, California’s oldest repeatedly owned household winery, is poised to quickly lose that designation beneath a chapter restructuring that superior this week.
The winery, which started working within the late 1850s, is the most recent amongst a string of well-known wine producers in Sonoma and Napa counties to hit the brink of insolvency, battling the identical downward trends in wine consumption that threaten gamers massive and small throughout the area and state.
The family-run Bundschu Co. filed for Chapter 11 chapter Wednesday, Sept. 23, including one other ripple to that world shakeout.
The firm grew to become overleveraged in a current acquisition, in line with representatives. Negotiations are underway with a big, unspecified “possible new investor” to maintain the operation afloat. The firm expects to retain a minority possession curiosity, and the winery will stay open in the course of the court-supervised restructuring.
“The decision to commence this case was not made lightly,” CEO Jeff Bundschu wrote in a authorized declaration supporting the Chapter 11 petition. “It followed years of operational restructuring, cost reductions, asset rationalization, family capital contributions, negotiations with the Debtor’s lenders, and an extensive effort to obtain new investment or sell assets on terms that would preserve the business and maximize stakeholder recoveries. Those efforts did not produce a consensual, out-of-court solution.”
Jeff Bundschu runs the enterprise, formally registered as Vineburg LLC, alongside along with his sister, Katie Bundschu Tynan.
Gundlach Bundschu has taken extreme steps to stability its books, decreasing its working prices by greater than 50% — roughly $7 million in financial savings — over the previous 18 months. That included decreasing its workforce from 120 workers to 63.
The firm in July ceased retail gross sales at Abbot’s Passage, the label it began in 2020, and can shut that Glen Ellen facility altogether in early October. Bundschu Tynan beforehand instructed The Press Democrat her household would promote its Abbot’s Passage acreage, although that could possibly be restricted by the chapter.
In any case, none of these steps have been sufficient to fend off insolvency.
Gundlach Bundschu is hiring Finestone Hayes as its basic chapter counsel and Amory Securities as monetary advisor.
Christopher Chung/ The Press Democrat
Jeff Bundschu, CEO of Bundschu Company, left, Katie Bundschu, chief advertising and marketing operator of Bundschu Company and proprietor of Abbot’s Passage Winery, and Towle Merritt, basic supervisor and vice chairman of operations of Bundschu Company, at Abbot’s Passage Winery & Mercantile close to Glen Ellen. (Christopher Chung/ The Press Democrat)
Christopher Chung/ The Press Democrat
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Jeff Bundschu, CEO of Bundschu Company, left, Katie Bundschu, chief advertising and marketing operator of Bundschu Company and proprietor of Abbot’s Passage Winery, and Towle Merritt, basic supervisor and vice chairman of operations of Bundschu Company, at Abbot’s Passage Winery & Mercantile close to Glen Ellen. (Christopher Chung/ The Press Democrat)
Upheaval hits historic winemaker
The chapter, filed by a winery that has labored the identical land repeatedly since 1858, comes amid a broader monetary upheaval in U.S. wine, the place declining gross sales, extra grape provide and tight credit score have added stress on producers already carrying substantial debt.
Other notable North Bay chapter filings this 12 months embody Robledo Family Winery in Sonoma Valley and Signorello Estate in Napa Valley.
Rob McMillan, founder and principal model strategist for Silicon Valley Bank, a division of First Citizens Bank, instructed The Press Democrat that gross sales are nonetheless declining, however at a slower price this 12 months. Based on present trends, the financial institution’s forecast expects the industry to succeed in a backside subsequent 12 months or in 2028, however the timing will differ throughout areas and worth segments.
The quantity of wine offered is predicted to maintain declining by way of 2029, McMillan stated, whereas the greenback worth of what’s offered ought to start recovering sooner. The hole between wine manufacturing and gross sales quantity is also narrowing, with this 12 months anticipated to be the third consecutive 12 months of enchancment, the banker famous.
“There are some signs in the data that confirm we are approaching a bottom. But we haven’t arrived yet,” McMillan stated.
Stronger gross sales, somewhat than smaller harvests alone, would be the crucial sign that the wine’s contraction is ending. McMillan expects this correction to lead to an industry that’s completely smaller, extremely consolidated and much much less forgiving of passive enterprise fashions.
That correction could come too late for the Bundschu household.
Gundlach Bundschu has weathered devastating earthquakes and fires, phylloxera, Prohibition and a number of recessions over the previous 170 years, solely to come across a brand new existential menace in twenty first century market economics.
Bavarian immigrant Jacob Gundlach and a enterprise associate bought 400 acres from the son-in-law of General Mariano Vallejo in 1857, about three miles east of the Sonoma mission within the Mayacamas Mountains. Gundlach referred to as the parcel “Rhinefarm,” a reputation nonetheless connected to 100 acres there. He planted vineyards a 12 months later, with European rootstock he introduced from house.
Jeff Bundschu is Jacob Gundlach’s great-great-great grandson.
By 1906, the Gundlach Bundschu Wine Company owned an enormous warehouse, wine vaults and headquarters that spanned two metropolis blocks in San Francisco. All of it was worn out by the earthquake and hearth that 12 months, together with practically 1 million gallons of wine and the household house on Telegraph Hill.
Gundlach Bundschu constructed again its reserves, solely to close down beneath the nationwide alcohol ban of Prohibition in 1920. The household wouldn’t bottle a classic for 50 years. They ripped out half their vines and planted pear bushes, and continued to promote grapes to different vintners for sacramental wine and grape juice.
In 1969, as the delivery of California’s wine renaissance stirred, the Bundschus started replanting Rhineland with premium varietals of grapes. Gundlach Bundschu Winery opened its doorways in 1976.
But the wine industry has stumbled in recent times as millennials and Gen Z-ers, maybe delay by the rising sticker shock of high-end wines, have opted for different methods to get buzzed.
As Jeff Bundschu wrote in his declaration, “Wine demand has contracted throughout the United States and different main markets. Consumers are consuming much less continuously, youthful customers haven’t adopted wine at historic charges, and inflation and better journey and hospitality prices have made customers extra selective about wine purchases and winery visits.
“At the same time, vineyard acreage, production capacity, inventory, and distribution infrastructure were built to support higher demand and pricing.”
These situations, he argued, have hit premium wineries particularly onerous. Their enterprise mannequin typically depends on direct-to-consumer gross sales to help “high fixed costs, long inventory cycles, vineyard investment, production facilities, and lower-margin wholesale distribution.”
Under Jeff Bundschu’s management — he succeeded his father, Jim, in 1999 and have become CEO in 2002 — the winery staved off monetary hardship by way of diversification. Jeff, a lover of indie rock, turned the property into a daily cease for touring mid-level bands of crucial acclaim.
The pinnacle of that technique has been the annual Huichica Music Festival. First staged in 2012, it has featured notable performers such as Yo La Tengo, Devendra Banhart and Robyn Hitchcock.
Sam Singer, a Gundlach Bundschu consultant, instructed The Press Democrat that the deal with music has been a internet optimistic for the corporate, and should have prolonged its independence.
Problematic growth
For the winery, the monetary challenges intensified in February 2020 after it purchased 60 acres off Madrone Road in Glen Ellen and developed hospitality and manufacturing capability for a by-product label, Abbot’s Passage, that’s helmed by Katie Bundschu Tynan. The buy worth was $11.6 million, and it got here with a hefty mortgage.
“In retrospect, the Company expanded at precisely the wrong time and assumed more operational complexity and leverage than its business could sustain,” Jeff Bundschu wrote, noting that the acquisition got here two vintages after a spherical of devastating fires and instantly earlier than the COVID-19 pandemic disrupted winery visitation.
Gundlach Bundschu tried to rebound by way of e-commerce, private-label manufacturing and expanded use of the Abbot’s Passage facility. It deserted plans for a decrease priced label, “Gun Bun,” and exited two long-held winery leases.
Still, margins remained “inadequate,” in line with the declaration.
The firm then pursued potential third-party funding, and even outright gross sales, working with a wine-and-spirits funding financial institution and advisory agency. They acquired three letters of curiosity, in line with Jeff Bundschu. But Gundlach Bundschu’s two principal lenders refused to log out, and likewise declined interest-rate reduction and refinancing.
Instead, a type of lenders, North Carolina-based Tiverton Advisors, filed an utility in Sonoma County Superior Court requesting a court-appointed receiver to handle the winery’s debt.
“The court granted the request without a hearing,” Jeff Bundschu wrote.
Gundlach Bundschu’s different lender is American AgCredit. Between the 2, the winery carries a debt of about $37 million, in line with the declaration. Tiverton additionally holds the deed of belief on a Sonoma residence owned by a household belief, with $3 million in fairness.
Gundlach Bundschu owes a further $1.7 million to distributors and repair suppliers.
On high of the layoffs and shutting Abbot’s Passage, the household offered off actual property away from the winery, together with the patrimonial house, which was rebuilt after the 2017 Nuns Fire destroyed the circa-1900 authentic.
To a big extent, these efforts labored. Gundlach Bundschu’s earnings earlier than curiosity, taxes, depreciation and amortization, a standard measure of an organization’s profitability, elevated from a bit of over $800,000 in 2023 to a projected $3.28 million in 2026. It wasn’t sufficient.
In the top, nevertheless, the winery’s debt exceeded its property. The household’s solely reasonable choice, it stated, was Chapter 11 safety.
Gundlach Bundschu at the moment farms 160 acres of vines, together with the 100 it owns at its Rhinefarm property, and produces about 42,000 circumstances of wine yearly, with varietals starting from cabernet sauvignon to dry Gewürztraminer. The winery hosted roughly 30,000 guests in calendar 12 months 2025, in line with its chapter submitting.
The firm declined to state what number of wine membership members it has, nevertheless it’s “the biggest part of the business,” in line with Singer.
You can attain Staff Writer Phil Barber at 707-521-5263 or phil.barber@pressdemocrat.com. On X (Twitter) @Skinny_Post. Jeff Quackenbush joined North Bay Business Journal in May 1999. Reach him at jeff@nbbj.information or 707-521-4256.