California's Oldest Winery Files for Bankruptcy After Nearly 170 Years

Gundlach Bundschu Winery, one of California's oldest family-owned wineries, has filed for Chapter 11 bankruptcy protection, succumbing to nearly $39 million in debt. The winery, founded in San Francisco in 1858, has survived numerous historical challenges including Prohibition, the 1906 earthquake, wildfires, and the COVID-19 pandemic, but a combination of mounting debt, decreased tourism, and declining wine consumption ultimately led to its financial distress.

The winery will continue to operate during the restructuring process while seeking an outside investor, which will require the Bundschu family to relinquish majority ownership. CEO Jeff Bundschu stated that this Chapter 11 filing is an unprecedented moment for the company and his family, expressing remorse for the impact on employees, vendors, lenders, customers, and the community.

The financial difficulties are partly attributed to a significant expansion shortly before the COVID-19 pandemic. In February 2020, the winery purchased a 60-acre estate for Abbot's Passage, a separate wine brand founded by sixth-generation family member Katie Bundschu. This acquisition, intended to fuel growth, coincided with pandemic-related restrictions that severely impacted tasting room and hospitality businesses. Court documents identify the debt from this purchase as the immediate cause of the winery's crisis, as the expected growth did not materialize, and the subsequent industry contraction exacerbated the challenges.

Abbot's Passage has since closed its operations, with the Bundschu family aiming to refocus on Gundlach Bundschu. Over the past 18 months, the winery has implemented cost-cutting measures, including multiple rounds of layoffs that reduced its workforce from 102 to 63 employees. The family also sold non-company real estate holdings to inject capital into the struggling business.

The winery owes approximately $20 million to agricultural asset manager Tiverton at a 14.75% interest rate, about $17 million to agricultural lender American Ag Credit, and an additional $1.7 million in unsecured debts to about 120 vendors and service providers. Attempts to find a buyer or investor resulted in three viable offers, but lenders rejected them as they fell below the secured debt amount.

Facing these pressures and unable to reach an out-of-court agreement with creditors, Gundlach Bundschu turned to Chapter 11. The restructuring aims to provide the 168-year-old business a chance to survive while preserving jobs and relationships with stakeholders. The family's historic home, reconstructed after being destroyed in the 2017 wildfires, was previously used as collateral for the winery's debt.

This situation reflects a broader downturn affecting California's wine industry, with other producers also facing financial challenges. Gundlach Bundschu currently owns approximately 100 acres, produces about 42,000 cases of wine annually, and hosted around 30,000 visitors in normal times, a significant decrease from its peak of over 75,000 annual visitors.