Verify, but trust: Cameron Hughes Wine

This couple survived debt, the dot-com bust, cramped quarters and two kids to build a bestselling wine brand.

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Cameron Hughes was mixing wines for fun at a dinner with friends when he experienced his eureka moment: Why not buy the surplus wine from high-end vineyards and, instead of blending them with cheap wines to make a mediocre brand (as many $6-a-gallon boxed-wine companies do), bottle them alone and offer luxury wines at an affordable cost to consumers online?

He asked Jessica Kogan, his girlfriend at the time, to join him in the venture. They drew up a business plan, sold Hughes's 40-case collection of Bordeaux and California cabernets for startup capital, borrowed more money from his father and their credit card, and in October 2001 created San Francisco-based Cameron Hughes Wine.

And then their lives proceeded to, as Kogan puts it, "hit rock bottom."

The dot-com boom went bust, and the Sept. 11 attacks put a damper on dinner parties nationwide. For Hughes and Kogan, the result was heavy debt and hectic days in their office, converted from a second bedroom, where they held appointments with credit officers and, later, tucked a crib in the corner for their newborn. To make ends meet, they found consulting work and shared a nanny with another family.

"We had phones ringing off the hook, two Labradors, and kids crying at all times," remembers Hughes. "Jess's mom used to call our home office Grand Central Station."

Experts say that positive cash flow makes an excellent adhesive for entrepreneurial couples. It took Cameron Hughes Wine almost four years to reach that point. But, against the odds, the founders stayed together, got married, and continued to believe in the product and each other. How did they do it?

"Respect and trust," Kogan says. "Not from a romantic standpoint - will he cheat on you? - but from a business standpoint: Do you respect the other person's abilities and skills and do you trust that he will make good decisions on your behalf? I have absolute trust in Cam's palate. I know that he can create blends that would appeal to our audience."

For his part, Hughes, 36, is awestruck by Kogan's e-commerce talents.

"I knew she worked at a Web company before," he says, " but if we didn't work together, I never would have known how deep her knowledge is - how she can build and implement a website and how effectively she's able to use it."

Kogan, who held marketing positions at high-end fashion houses before taking the dot-com leap, was adept at spreading the word. She built up the website for cheap, got back in touch with old Web and media contacts, and sent the wine out to tastemakers. Eventually, influential blogs and wine columns took notice. Wine sales exceeded $8 million in 2006 - and they doubled in 2007.

Hughes' and Kogan's company has since moved out of their house. The couple have added blended varieties to their brand's repertoire and now also source wines from high-end custom-crush facilities, selling them both at retail online and wholesale.

They moved to a real office and hired 11 employees, but still have "no social life," says Kogan. If they're not working, they're with their 6-month-old and 2-year-old daughters, eating takeout.

It's not always blissful, says Kogan: "We have knock-down, drag-out fights."

Picking your battles

The worst argument, remembers Kogan, involved a bad wine broker. Kogan grew impatient when they heard no feedback; Hughes wanted to wait it out. Four months passed until Hughes relented and called a key buyer the broker was supposed to pitch. It turned out the potential customer had never heard of their brand.

"And we almost went out of business waiting!" says Kogan. But the two made up. "We learned not to put our eggs in one basket," she says. They fired the broker and have been working directly with retailers until only recently, when they hired a good friend.

Hughes is the visionary, Kogan the cop. "It's challenging, but when your lives depend on income from the same entity," Kogan says, "you pick your battles with each other."

Occasional vacations apart help as well. While the family shared Thanksgiving dinner together, he took a short trip upstate while she enjoyed her downtime at home.

"It's healthy to have time away," Hughes says. "When you come back, you're happy to see each other."

Cameron Hughes Wine is now the third-best-selling wine brand (after Kendall Jackson and Veuve Clicquot) at the select Costco (COST, Fortune 500) stores that carry its wines. It has just rolled out a new label, Evergreen, with select Safeway (SWY, Fortune 500) stores. And though Kogan and Hughes are about to move again into a larger office and now have a nanny to themselves, their home is as hectic as ever.

"You wake up in the morning and get on the computer, you're changing diapers, racing to work, picking up the nanny, picking up the kids, you're e-mailing until you pass out at night, and you do it all over again the next day," Hughes says. "And it's a blast. I wouldn't have it any other way." -Joanne Chen

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.