HomeAbout UsWine ReviewsArchivesAdvertiseContact Us

THE GRAPEVINE

Wine Columns

Wine Reviews

WineReviewOnline on Twitter

Critics Challenge

Distillers Challenge

San Diego Challenge

Sommelier Challenge

SpiritsReviewOnline

Winemaker Challenge

WineReviewOnline on Facebook

WineReviewOnline on Instagram

Winds of Change Reach Gale Force
By Linda Murphy
Jun 21, 2011
Printable Version
Email this Article

Gone are the days when the sale of an important winery or vineyard shocks those who follow the U.S. wine industry.  In the last decade, particularly in California, wine properties have changed hands nearly as often as I change the sheets on my bed.  Every week, a new transaction seems to take place, and it’s usually a big company swallowing up a smaller one.
 
The sale of Robert Mondavi Winery and its affiliated wineries to Constellation Brands in 2004 opened the floodgates to industry consolidation.  The economic downturn in the late 2000s quickened the pace.  When the groundbreaking, iconic Mondavi winery was no longer under family control, the world became wired for the possibility that any winery, anywhere, could be ripe for a sale -- history and familial ties be damned.
 
Since Constellation’s purchase of Mondavi, no winery or vineyard sale has stunned me.  I’ve been caught off guard by some transactions, and others seem to come out of nowhere, or make no business sense whatsoever.  Yet I’ve accepted that many family-owned wineries have or will be sold to larger firms, or to deep-pocket investors, and that the families likely will come out ahead, with cash in their pockets and peace of mind in knowing they don’t have to work so bloody hard anymore to sell wine.
 
The recent sale of Seghesio Family Wines to the Crimson Wine Group is a case in point.  Seghesio has been a model California family winery since founder Edoardo Seghesio arrived in Sonoma from northern Italy in the 1880s, and began planting Zinfandel vines in 1895.  He started the Seghesio winery in 1902, as a producer of bulk wines -- a common practice at that time.  Yet by 1980, family members abandoned the bulk wine business to focus on producing top-quality Zinfandels and other varietals from their vineyards in the Alexander, Dry Creek and Russian River valleys.
 
The Seghesio Zinfandels (Sonoma, Home Ranch, Rockpile, San Lorenzo and Cortina among them) have always been true to type -- exuberant, brambly and peppery, yet never overly ripe or alcoholic.  Seghesio produces other varietals, including Arneis, Fiano, Barbera and Sangiovese, yet Zinfandel is the flagship, and the wines have found favor around the world, including the stodgy United Kingdom, where “big” wines are considered bad.  Even the Brits have embraced Seghesio Zinfandels for their balance and complexity.
 
Four generations of Seghesios have tended the 400-plus vineyard acres in Sonoma County, and now a Napa-based firm owned by a New York investment company is running the Seghesio show.  This might be cause for alarm for some, except that Seghesio CEO Pete Seghesio and his cousin, winemaker Ted Seghesio, will stay on for as long as they wish, continuing the good work of the brand and ensuring that their name continues to represent quality wines.

The Seghesios are the poster children for a family-run wine business.  They exited ownership because several of their investors -- mostly family members -- wanted to cash out, to see a return on their investment before they passed on.  Crimson Wine Group, Seghesio’s new owner, has steered Pine Ridge Vineyards in Napa, Chamisal Vineyards in Edna Valley and Archery Summit Vineyards in Oregon’s Willamette Valley to continued success after purchasing those properties from their original owners, and there is no reason to believe that Seghesio won’t prosper as well.

As Pete Seghesio told the Healdsburg Tribune newspaper, “Trying to get businesses down to third, fourth and fifth generations is incredibly difficult as the family gets larger.  We had 11 owners, and our next generation would probably be up to 30 owners.” 
Herding cats is what that would be, and family-owned wineries have enough to worry about without the burden of deciding who inherits what.  The Seghesios smartly sold at a time when consumers are trading down to less expensive wines, and when medium-sized wineries that rely on the three-tier sales system to move bottles from producer to wholesaler to retailer, are losing clout because they don’t produce enough volume to gain attention with wholesalers.

The required hammering on wholesalers, retailers and restaurateurs to sell their wines, and the travel time and costs to support various markets, can wear heavy on vintners; Seghesio is likely one of them.  Pete and Ted Seghesio worked their arses off at the winery and in the marketplace (as did other behind-the-scenes Seghesios in sales, marketing, public relations and hospitality) to maintain business relationships that would lead to sales.  Yet no matter how many winemaker dinners they hosted, or market visits they made, or wine club parties they threw (and Seghesio is known for throwing great ones), nor critics’ positive reviews of their wines, could the 100,000-case-per-year winery measure up in the distributor-driven, large-volume, industry-consolidated wine business of 2011.   
 
The Seghesios are not alone in selling to larger companies that can take advantage of economies of scale and mass-brand power with wholesalers.  William Foley, who made his fortune selling home title insurance, has in the last four years purchased wineries and vineyards at bargain prices, including Sebastiani and Chalk Hill Estate in Sonoma County, Kuleto Estate and Merus in Napa Valley, Three Rivers Winery in Walla Walla, Washington, and Clifford Bay and Vavasour in New Zealand.  Before going on his buying spree, Foley founded the Foley Estates and Lincourt wineries in Santa Barbara County, and now has XX brands under the Foley Family Wines umbrella.

Jean-Charles Boisset of the Burgundy-based firm Boisset Family Estates, convinced his family to purchase De Loach Vineyards in 2003 (another recessionary time), adding to its previously modest California portfolio this major producer of Pinot Noir, Zinfandel and Chardonnay from the Russian River Valley.  In 2010, Jean-Charles picked up Raymond Vineyards in Napa Valley, breaking up its five generations of ownership by the Raymond Family.  Then just a few months ago, Boisset purchased Buena Vista Carneros in Sonoma from Ascentia Wine Estates, which has struggled to reduce debt.

Ascentia also sold Gary Farrell Winery in Russian River Valley to The Vincraft Group, owned by three former Beringer executives, which made another high-profile winery purchase in 2010, Kosta Browne Winery, another Pinot Noir specialist.
 
The U.S. wine industry continues to grow substantially, in both production volume and the creation of new brands, which reflect Americans’ growing thirst for wine.  Yet the family-owned winery is an endangered species, not big enough to have clout with distributors and chain stores, yet not small enough to be considered “boutique” or highly sought after.
 
That the Seghesios sold at the right time, and seemingly to the right buyer and at the right price, is to be applauded by anyone who has ever owned their own business and seeks longevity.  As long as Crimson allows Seghesio Family Wines to be what it has always been, such consolidation is a positive.