Wine in the Time of Poverty
by J. Tobias Beard
How Patricia Kluge’s vineyard reached beyond its means
Published in C-VILLE, 5/24/2011.
In Hemingway’s The Sun Also Rises, one character asks another how he went bankrupt. “Gradually,” he says, “then suddenly.”
In 2002, the Kluge Estate New World Red entered the world in an ebony trimmed wooden box designed by David Albert Charles Armstrong-Jones, a.k.a. Viscount Linley, son of Princess Margaret, nephew of the Queen and 14th in line for the British throne. There were only 289 of these beauties made, signed by the winemaker, naturally, but also by the winery owner, who saw fit to slap an embossed profile of her swollen head on every bottle. She also slapped a $495 price tag on the wine, by far the highest price we’re ever likely to see on a wine from Virginia.
Eight years later Kluge Estate Winery & Vineyard would be moribund, ending not with a bang, but with a fire sale. The New World Red, having long ago lost its royal trappings, would end its life being sold for $10.96 at a Downtown wine shop. Instead of being displayed in a custom case, customers were carrying it off by the caseload.
Gold digger hall of fame
“I envisioned all this a long time ago,” Patricia Kluge told a Los Angeles Times reporter in 1990. “I never had any doubt that I was going to be a great lady and do what I wanted to do. Not for a minute.”
Patricia Kluge achieved Great Ladyhood via a well-worn path: Take your clothes off and then divorce well. In 1981, the 32-year-old Brit and former professional naked-person married 66-year-old German immigrant and self-made man, John Werner Kluge, who in 1989 became the richest man in America, worth $5.2 billion. One year later, the marriage was over.
In 1990, the dissolution of Donald and Ivana Trump’s ill-fated union was grabbing all the headlines, but the Kluge divorce was the one that had everybody talking. “A divorce made in heaven” the New York Times called it, owing to the fact that Patricia Kluge reportedly received the interest on $1 billion per year, which if calculated at 8 percent, comes out to $80 million a year, or $1.5 million a week, plus a 23,500-square-foot, 45-room monument to excess called Albemarle House.
But, if she wanted to fulfill her destiny and become a Great Lady, she needed to be someone else, someone not defined by her ex-husband’s wealth. She needed an occupation, something that would rid her of her reputation as nothing but a strumpet-turned-gold digger extraordinaire.
Living in Charlottesville, right around the bend from the remains of the Ur-Charlottesvillian, the answer must have seemed obvious. What would Thomas Jefferson Do?
She decided she was going to make a world-class wine right here in Virginia.
Look on my works, Ye Snarky, and despair
“It would have been fun to grow a regional wine,” Kluge told the Daily Progress in 2006, “but I told myself it would be nice to grow a wine that is well-received elsewhere.”
Kluge Estate Winery & Vineyard was founded in 1999, and you could tell that Patricia was serious about her new occupation because she started wearing a Barbour jacket and Wellies in photographs instead of Chanel. Gone was the glamorous and sultry society woman; in her place was a self-described “working girl” who told W Magazine that she regularly got up at four in the morning to work the harvest. “It’s hard work,” she said, but “it’s also very romantic.”
The Kluge Estate Winery & Vineyard was built according to what seems to be Patricia Kluge’s philosophy of life: If you make it look great, people will believe it is great. To this end, she hired famous architect David Easton to design her tasting room (he was also responsible for Albemarle House), big name New York City chefs Dan Shannon and Serge Torres to make snacks to accompany the wine, and the co-owner of Dean & DeLuca, Tom Thornton, to oversee the whole gustatory operation, which in 2004 expanded to include Fuel, the purveyor of haute cuisine/gasoline that Mrs. Kluge planned to turn into a national McLuxury franchise.
But the single greatest sign that Kluge Estate was different from any Virginia winery that had come before it was the hiring of Michel Rolland.
At 67, Rolland is the world’s most famous wine consultant. He literally flies around the world giving winemakers advice, for which he’s paid as much as $1 million per client.
The wine world is fairly strictly divided between those who love Rolland and those who feel he is Satan incarnate, hell-bent on destroying wine. Rolland promotes a modern, slick style of wine that critics say does away with any sense of individuality, yet all but guarantees that the wine will get big scores and sell like the latest iPhone.
“Until I was brought here,” Rolland said during a talk at Piedmont Virginia Community College in 2006, “no one had imagined making world-class wines in Virginia.” While this is certainly not true (Barboursville, for instance, which is owned by the biggest winemaking family in Italy, had the same vision 30 years earlier), it is true that in 2006 Patricia Kluge’s winery was poised to take Virginia wine to new, Napa-esque heights. They were doing all the things that wineries do to convince consumers that they’re a success: winning medals, garnering glowing write-ups in glossy magazines, and telling everyone who would listen that they were going to be one of the best wineries in the world.
“Our success,” Kluge said in W Magazine in 2003, “will affect the other winemakers. They know that Virginia has the potential to be a major wine region, but they need someone to be a catalyst, to show the world what we can do.”
How not to live on $1.5 million a week
Much later, when the news finally broke that the winery was bankrupt, Bill Moses, Mrs. Kluge’s third and current husband, blamed it on the economy—a “perfect storm” he called it. But although the global financial collapse probably didn’t help, it doesn’t deserve the brunt of the blame. In 2007, as the financial crisis began, the Virginia wine industry was entering a period of strong growth that continues today, with more new wineries being started after 2007 than in the 10 years prior.
For Kluge Estate, 2007 was all about expansion. The previous year they’d started planting grapevines at a ridiculous pace, hoping to reach a final total of 300 acres, 10 times the size of the average Virginia winery. Total production had increased to around 30,000 cases a year, at the upper end for the state, with a goal of 50,000. All of this was being funded in part by a $34.8 million loan from Farm Credit of the Virginias.
But that was just the beginning. 2007 also saw the completion of the first house on a 511-acre gated community called Vineyard Estates. Twenty-three more homes were planned, custom-made for anyone capable of paying $6 to $23 million—the kicker being that each house would have access to vineyards, allowing the homeowner to be a mini-winemaker as well. Or, in essence, a mini-Patricia Kluge. She was franchising herself.
But not everything was peachy in Kluge world. In June of 2007, Fuel restaurant and gas station closed abruptly after firing numerous chefs and supposedly “hemorrhaging about $100,000 a month,” according to former general manager Ken Wooten. Wooten told C-VILLE that the restaurant paid a lot of money for “consultant chefs” who visited a few days a week, and for overpriced ingredients that rotted as tables went unfilled.
Two months later, Kluge Estate was sued in Albemarle County court for not paying a cleaning bill totaling $22,847. At the time, Kluge Estate spokesperson (and Patricia’s step-daughter) Kristin Moses Murray strongly denied that these two events indicated any kind of financial trouble at Kluge Estate.
There was one bigger big problem, however. The wine wasn’t selling. Where most local wineries were able to sell out the majority of each vintage to pay for the following one, the Kluge wine being shipped to stores was often several vintages old. One ex-employee described the warehouse as looking like the final scene of Raiders of the Lost Ark: row upon row of cases sitting forgotten, stretching as far as the eye could see. It’s not that the wine was bad. There were good people involved in making it after all, from consultants Michel Rolland and Laurent Champs (owner of high-end, cult Champagne house Vilmart), to accomplished sparkling winemaker Claude Thibaut (fired in 2005), red wine maker Charles Gendrot (also fired), and even local legend Gabriele Rausse. But there were two issues that kept it from selling: The owner’s name overshadowed the wine, and the wine cost way too much.
In 2008, Kluge Estate introduced a new sales manager, Mark Toepke, at a midday meeting at the Farm Shop over lunch and several bottles of Kluge sparkling wine. You could smell the desperation in the room. Toepke, who had previously been vice president of sales and operations for successful California producer Kendall–Jackson, had been brought in to reverse the flagging sales, and he had one simple recommendation: cut prices. And they did, bringing the price of their flagship wine, the New World Red, down from $50 to the vastly more realistic price of $24.99.
Rumors of an impending Kluge Estate bankruptcy started tiptoeing around the wine world at the beginning of 2008. That February, I was at the inaugural Virginia Wine Expo in Richmond when I heard two pieces of startling gossip. The first was that Kluge Estate had fired its primary winemaker, Charles Gendrot, and the second was that La Dame Kluge’s pride and joy was about to go belly up.
The rumor was that Gendrot’s firing was not pleasant (Gendrot wouldn’t talk to me then or now). Firing Gendrot made no sense, but he was by no means the first person Kluge had fired. Throw a rock in Charlottesville and you’ll hit someone who used to work for Kluge, and it’s almost guaranteed that person will be disgruntled.
The bankruptcy rumor seemed much more consequential. After several fruitless hours asking the same questions and getting the same answers, I talked to a friend of mine who for many years had actually run a successful winery. To protect his identity and make my job seem more important than it is, I’ll call him Mr. X.
“Look over my shoulder,” Mr. X said. “You see that guy behind me? That’s Todd Haymore, the state secretary of agriculture. If he even catches a whiff of what we’re talking about, we’re both in deep shit.”
“So, what’s going on?”
“Kluge’s toast. They’re going to declare bankruptcy any day now, but there’s no way anyone’s going to go on the record about it. In fact, I’m telling you not to write that story.”
“Why? If Kluge is going bankrupt it’s big news. Why shouldn’t I write about it?”
“Because,” Mr. X said, “if she goes under, it will be bad for all of us. Look, Kluge Estate is the biggest name in Virginia wine. Not the best, or the most important, but the most famous. Kluge is the name they know in L.A. and New York. And what will they say in New York if Kluge goes bankrupt? They’ll say, ‘If Patricia Kluge, with all her money, can’t make great wine in Virginia, who can?’”
Yes, we have no financial problems
In early October of 2009, The Kluge Estate Winery & Vineyard celebrated its 10th anniversary, and so Patricia Kluge donned her nifty winemaker costume—polo shirt, jeans and green rubber boots—and went out to help shovel manure.
Sitting down for an interview with The Daily Progress, Kluge and Moses tried desperately to give the impression that everything was O.K. Their wines were currently being sold in 15 states, Kluge said, but “ultimately, we want to be in every state in the country. We also want to be in Europe and Asia, and that’s what we’re working toward right now.” Indeed, Moses was traveling to China, entering Kluge wines in Hong Kong competitions and doing his best to flog the idea that, because they’re buying up expensive Bordeaux by the truckload, the Chinese would want expensive Virginia wine as well.
At the same time that she was talking up Kluge Estate’s big future, Patricia Kluge was beginning to divest herself of some of the trappings of wealth. She sold a bunch of silver objets d’art at Christie’s, and then, on October 30, 2009, it was reported that she was putting Albemarle House on the market for $100 million.
Once again we were told that this did not indicate any financial problems. “The house is beautiful, but it’s huge,” Mrs. Kluge told The Progress. “We have other properties we want to visit and we want to spend more time traveling. We’re not giving up the winery. …We just want to change our personal lives.”
March saw the first major blow to this façade of financial calm, as the first and only house that had been completed in the massively hyped Vineyard Estates project was foreclosed on and sold at auction. Oddly, the buyer was Kluge’s husband Bill Moses, who bid $3.7 million for Glen Love, a 6,500-square-foot “cottage” that would be their new home now that they were leaving Albemarle House. The beleaguered Estates project faced no sales and a $2 million lawsuit by the hapless real estate agent tasked with selling luxury homes long after the housing bubble had burst.
And so the sell-off continued, Kluge starting to look unavoidably like someone with a liquidity problem and not just an itch to travel. April 2010 saw the auctioning of several major pieces of Mrs. Kluge’s jewelry, which raked in around $5 million, and in June she sold most of her furniture, for $15.2 million. Meanwhile, the price of Albemarle House was cut in half and then in half again, to $24 million. Still, the song remained the same: Nothing would change the Kluge-Moses commitment to making great Virginia wine.
But in the waning months of 2010, the talk of downsizing and new lives ended as the Virginia wine empire that Patricia Kluge had so desperately tried to build began to crumble around her.
On October 30, Bill Moses announced that, due to the delinquent $38.4 million loan, Farm Credit of the Virginias had foreclosed on the winery and would be auctioning off the entire business: vines, barrels and Farm Shop. The auction took place in December with around 50 people in attendance, but no bids were placed, and so the bank bought back the winery for $19 million. In February, Albemarle House was foreclosed on for lack of payment on the $23 million mortgage, and Sonabank called in a $17.4 million loan for the Vineyard Estates project, causing the failed housing project to go into foreclosure as well.
And in the middle of all this, John Kluge, the benevolent ex who’d made Patricia Kluge famous and rich, died at the age of 95, his own fortune firmly intact.
Rising from affluence to poverty
On Saturday, December 11, roughly 30 people stood shivering in the Madison County warehouse that the now bank-owned Kluge Estate Winery & Vineyard had once rented to store its wine.
The building was cold and stark, the white walls and white cases of wine, some 15,000 in all, harshly illuminated by the florescent lights. The auction was an industry-only affair and the attendees were looking to buy a lot of wine for cheap. After a brief tasting of the wines, bidding began in five and 10 case lots, but that soon increased. Cheers went up from the crowd when Siips restaurant owner George Benford bought 50 cases. Despite the morgue-like atmosphere, the crowd was giddy, joking with each other about “how the mighty have fallen.”
The bidding sank lower. Cases started going for $14, in 10 and 20 case lots, until Richard Hewitt, the wine buyer for Keswick Hall, bought 100 cases for $2 a case. The bank halted the bidding and imposed a $35 minimum. Any cheaper and they couldn’t afford to keep the auction going.
Market Street Wineshop, my place of employment, purchased 140 cases and sold them all in 48 hours. It was a madhouse. Whole families came in to stock up on the poor little rich girl’s cheap wine. It was a smash and grab affair, like watching people loot stores during a riot. Certainly some people had actually liked the wine before, but most just saw it as a chance to grab a billionaire’s wine for $4 a bottle. For all of them, it was an opportunity to ruminate on the vagaries of fortune and fortunes, to shake their heads and grin and feel somehow vindicated.
Because she was friends with people like Robert Mondavi, Patricia Kluge’s understanding of success was severely twisted. Her only model of how to make it was the Mondavi model, success on a massive, worldwide scale. Taking a regional winery national doesn’t happen overnight, especially when that winery is in Virginia.
The Kluge Estate also suffered from a serious branding problem. It made the mistake of thinking that the name and face of Patricia Kluge was all that was needed to sell the wine. In a 2004 Los Angeles Times article, Kluge tells the reporter, over dinner and a $115 bottle of her 2001 New World Red, that her wealth and fame are enough to make the winery a success.
“Anyone who counts in Los Angeles knows who I am,” Kluge said. “They’re the people who’ll buy my wine. I don’t need a story in the Los Angeles Times.”
The reporter replied that the LA Times has over a million subscribers and perhaps a few of them hadn’t heard of her.
“I don’t need a million people,” she said. “I only have a limited number of cases, and I can sell all of them to my friends.”
But the number of cases didn’t stay limited. It grew to almost 40,000 a year, and it turned out that the name Patricia Kluge was not well-known enough to sell her wine nationally and perhaps not liked enough to help sell it locally.
In April of 2011, the majority of the Kluge winery was purchased by none other than Donald Trump, an old friend of Mrs. Kluge’s, who had in fact attended her wedding to John Kluge 30 years ago.
Trump says he plans on keeping Kluge and Moses around to help run the winery they just finished destroying, and he says he’s interested in buying Albemarle House, just not for the current price of $16 million. Let’s hope that never happens. In 1990, Mrs. Kluge expressed her desire to save Charlottesville from over development, telling Washingtonian Magazine that she saw “how easily it could be spoiled by unsympathetic developers.” Well now, thanks to her, one of the least sympathetic developers imaginable has been handed the Key to the County, and Kluge seems totally fine with it.
“Donald plans to open it to the public and make it the most amazing experience in the world,” she said in the Daily Beast. “Hopefully it will be the most visited place in America.”
Trump, with his three wives, operatic divorces and towering ego, resembles some mutated mirror image of Kluge herself. We’re probably stuck with both of them forever, twin towers of greed and hair, flailing around desperately for any possible way to maintain the illusion that they’re important.
But as spectacular as the Kluge collapse has been, it’s perhaps wrong to write the Kluge Estate Winery & Vineyard off as a total failure.
“To their credit,” Mr. X told me, “they set themselves on a path that broke new ground for a Virginia winery. They swung for the fences and it took them 10 years to collapse.”
Imagine if the top Kluge wine, the New World Red, had never paraded around in velvet-lined boxes, but had instead been priced at $25 from the start. With the Michel Rolland name to sell it, and without the Kluge name to hold it back, the wine would probably have sold five times as much as it did. Temptation fueled by rampant ego is the bane of the wine industry. Without it, Patricia Kluge’s winery might very well have been a success. And without it, no one else would try and do what she did.
At the beginning of May, I received an e-mail touting the initial offering from a new Virginia vineyard called RdV, whose top wine is available for the high, high price of $88. According to a recent article in the Washington Post, the goal of owner Rutger de Vink “is to prove once and for all that Virginia can produce wine that ranks among the world’s best.” It’s a familiar quote, as is the recipe being used for success: a famous French wine consultant (Eric Boissenot in this case), marketing that emphasizes exclusivity, and this question: What’s possible when you start with a lot, and aim for the sky?
Nothing beside remains
“Money, to me, is just there,” Patricia Kluge once said. “I never think of it at all.”
Maybe the fall of the house of Kluge is a kind of revenge, unfair though it may be, for all the Americans for whom money has ceased, no matter how hard they work, to be just there. Let’s move the tired, the poor, the newly foreclosed-upon masses into Albemarle house and feed them from her larders. Let them drink her wine while she drowns in it, a sacrifice for undeserved good fortune.
Or perhaps she’s already found her punishment. Glen Love, the multi-million dollar “cottage” that Kluge and Moses had already rescued from the bank once before, was foreclosed on again at the end of April and auctioned off for a second time three weeks later. A representative for Trump and another man bid against each other for about 15 minutes, but came nowhere near the $2.5 million assessment, forcing the bank to step in and buy it back. And so Patricia Kluge seems doomed to end up living like the rest of us, in a house she can’t afford, drinking a bottle of cheap wine in front of the television, with her un-famous husband who hopefully loves her for who she really is.