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Harsh Reality in the Wine Business
By Linda Murphy
Jun 24, 2008
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The recent announcement that five California wine brands and three in the Pacific Northwest--including Geyser Peak, Buena Vista and Gary Farrell in Sonoma County--have changed hands is one more buzz kill to the notion that winemaking is romantic. 

Lush, emerald-carpeted vineyards are still bucolic and green, wineries in chateau and redwood-barn structures remain charming and inviting, and the fine wines produced within them continue to ignite amorous sparks between people and the mating of food to wine.  Winemaking and wine drinking remain seductive; it's the business of it all that can crush one's heart. 

Large companies such as Constellation, Diageo, Fosters and E&J Gallo, and smaller companies seeking to muscle up, purchase brands, wineries and vineyards in order to increase their sales and distribution clout and take advantage of economies of scale in sales, marketing and production costs.  The incessant brand-swapping of the past 10 years has basically created a two-class system--big guys with power, and little guys with prestige.  Those in between, the mid-size and/or under-funded wineries, try to stay alive ... or cash out. 

Napa Valley's Chateau Montelena, for example, one of California's most accomplished wineries (its Chardonnay beat the French in the 1976 "Judgment of Paris" tasting), is reportedly on the market, and a sale could be announced any day now.

One year ago, Warren Winiarski rocked the wine world by selling Stag's Leap Wine Cellars to a partnership of Ste. Michelle Wine Estates in Washington state and Tuscan winemaking king Marchese Piero Antinori.  Winiarski's 1973 Cabernet Sauvignon--his first vintage--bested Bordeaux at the 'Judgment of Paris,' giving California a shocking sweep of the red and white taste-off. 

Insurance magnate William Foley II, owner of Foley Estates Vineyard & Winery and Lincourt Winery in Santa Barbara County, in 2007 purchased Firestone Vineyards in Santa Barbara County, Merus in Napa Valley, and in early 2008, took a majority share of Three Rivers Winery in Walla Walla, Wash.  He recently purchased Venge Vineyards in Napa, as a home for Merus, and he's said to be shopping in Sonoma County, too.

And then there is Sonoma's Richard Arrowood, the poster child for torture by revolving-door ownership.  The pioneering winemaker for Chateau St. Jean and then his own Arrowood Vineyards & Winery, Arrowood sold the latter to Robert Mondavi Corp. in 2000 and stayed on as winemaker.  Since then, the Arrowood brand has had three other owners: Constellation, which bought Mondavi in 2004; The Legacy Estate Group, which purchased Arrowood from Constellation in 2005; and Jess Jackson, who bought Arrowood out of bankruptcy in 2007.  Remarkably, Dick Arrowood has stayed on as winemaker, and the quality of his wines, equally remarkably, hasn't suffered through the chaos. 

Constellation Brands' June 10 announced sale of Geyser Peak, Buena Vista and Gary Farrell, plus Atlas Peak and XYZin in California, Columbia Winery and Covey Run in Washington state, and Ste. Chappelle in Idaho, to Ascentia Wine Estates appears to be a positive move for the transient wineries and their fans.

Constellation acquired Geyser Peak, Buena Vista, Gary Farrell and Atlas Peak when it bought the Beam Wine Estates portfolio from Fortune Brands--presumably to get its hands on the 1.5-million-case producer Clos du Bois--and has since off-loaded them to Ascentia, a partnership that includes Jim DeBonis, the former chief operating officer of Beam Wine Estates; W.J. Deutch, the sales agent for Yellowtail and Georges Duboeuf, among others, and GESD Capital Partners, a San Francisco private equity firm.

Whether Ascentia maintains the quality and cachet of its newly acquired brands remains to be seen, though I've heard through the grapevine that winemakers and grapegrowers are relieved to be out of the clutches of Constellation, and hopeful that answering to Ascentia will be much smoother than conversing with Constellation. 

While it may not seem right that the dynamic and dedicated Aussie Daryl Groom is no longer associated with Geyser Peak (he left during the Beam-to-Constellation transition), and that Nick Goldschmidt, senior vice president/executive winemaker for Beam Wine Estates, left his job in the merger, it's heartening to know that both are making terrific wines on their own: Goldschmidt's Goldschmidt Vineyards and Forefathers brands, and Groom with his Groom Wines in Australia and a new project, Foggy Bridge Winery, being developed at the Presidio in San Francisco.

And as for Arrowood? He's doing just fine, thank you, under the ownership of Jess Jackson and with his own brand, Amapola Creek, Cabernet Sauvignon and Zinfandel made from his Mayacamas Mountains vineyard north of the town of Sonoma.

The romance may be gone from the 'industry,' yet it's not likely to disappear from the wines.  Corporations can do only so much; individuals can do far more.