Wineries Selling Up Doesn't Mean Selling Out

Many were shocked when Randall Grahm sold Bonny Doon – an even more so when he teamed up with Gallo.
© Bonny Doon Vineyard | Many were shocked when Randall Grahm sold Bonny Doon – an even more so when he teamed up with Gallo.
When your favorite boutique winery gets gobbled up by a corporate giant, is it always a bad thing?
By Kathleen Willcox | Posted Saturday, 11-Sep-2021

For people who like to think of themselves as culturally relevant and cool, "selling out" and getting into bed with a larger corporate entity is, essentially, a debased form of heart-and-soul-prostitution.

But increasingly, even among “cutting edge” celebrities and pop stars – Ryan Reynolds, Robert De Niro, Iggy Pop, the Cure – it is becoming expected for them to take on the occasional cheese-ball project, license their music for car or camera commercials, or launch the occasional $600 million line of gin.

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For much of the wine industry though, the news that a beloved winemaker or brand has been bought by a larger company is still met with dark suspicion and deep sadness. But is that quite understandable instinct misplaced? And do all winemakers without a bottomless pit of riches to pull from really have a choice? We scanned the landscape and consulted several winemakers and experts for their thoughts.

Backdrop to the sellout

Winemaking, especially in the US, is no longer the story of pioneers bootstrapping their way into new and promising regions to explore the terroir. The cowboys have come and gone, and now the big corporate congloms are moving in. According to the Silicon Valley Bank's most recent report, almost half of Napa and Sonoma wineries mulled selling.

But why? In the end, it comes down to numbers. Since 2009, the number of wineries in the US alone has grown by more than 50 percent to top 11,000. That's a lot of competition. But the number of distributors – the folks who actually get those bottles in the hands of consumers – has decreased, from 3000 in 1995, to around 935 today.

A quick glance at major deals shows just how tight the squeeze has gotten for brands. To name a few recent standouts: E&J Gallo bought Constellation Brands for $880 million; Southern Glazer's Wine & Spirits bought Epic Wine & Spirits and Delicato Family Wines snagged Francis Ford Coppola Winery (estimated to be between $500 million-$1 billion).

Uber also bought the alcohol delivery startup Drizly for $1.1 billion, which will arguably only further challenge the remaining bootstrapping mom n' pops seeking national reach.

Caveat vendor

In Europe, the Common Agricultural Policy shells out millions in support to the wine industry (about €337 million, or $400m, at last count); the US does not have a similar, national system in place. The challenging economic system means that sometimes surprising brands end up on the block.

Randall Grahm has surprised many of the most jaundiced observers in the industry with two recent moves. The first, was when he sold the iconic, rebel yell in a glass Bonny Doon Vineyard on California's Central Coast to WarRoom Ventures in January of 2020. While terms were not disclosed, aggressive plans to tighten the focus of the Rh?ne offerings and increase production from 20,000 cases of Vin Gris to 100,000, and Cigare red from 11,000 cases to 100,000 cases annually, over five years were disclosed.

The second, was when he announced plans this year to work with E&J Gallo on a collection of California Central Coast wines called The Language of Yes. In what he admits was a "complicated courtship", Grahm says he is pleased by his mandate "to make wines that I am most excited to make, establish the style and define production parameters".

The public seems to have forgiven Grahm's lusty embrace of Big Wine. The initial release of 75 cases of the 2020 Pink Wine (a Cinsaut and Tibouren blend) sold out in an hour. There will be 600 cases each of Grenache and Syrah to be released in October, and will likely sell out as fast as front row tix to Taylor Swift's next stadium tour.

Grahm discovered his own language of yes to corporate congloms when trying to manage the "very challenging" business of running a small wine business. In the end, it became and about the "business of business", instead of the pleasure of creation, a development he was desperate to change.

"The biggest challenge is connecting with customers," Grahm says. "If you're very small, you are quite dependent on your DTC [direct-to-consumer] customer base. Perhaps the brand is established well enough to not require face to face contact. But it's that interface – whether a tasting room or wine dinners or whatever – that brings in new customers, which would seem crucial for maintaining a vibrant business."

Off-loading that portion has helped him re-focus, but he admits that the transition has not been without bumps.

"Nothing ever goes precisely according to plan," he says. "I have been freed from many administrative headaches, only to have taken on other and new administrative duties."

Still, on the whole, "the new Bonny Doon is doing exceptionally well in sales, profitability and, most importantly, maintaining wine quality".

If and when, like Grahm, winemakers find it's time to sell or explore new partnerships, he recommends thinking deeply about what you want – boiled down, it's always going to be either a big pay day or a bid for creative control – before signing on the dotted line.

"Not all corporate partnerships are equivalent," he says. "Some corporations acquire brands only to essentially tear them down for scrap or rejigger them so they no longer resemble their former self."

Intentional selling

Champagne Bollinger bought the family run Willamette Valley Ponzi Vineyards, just as it celebrated its 50th anniversary this year. Ponzi acquiesced to the offer after years of careful thought, and many spurned marriage proposals, president and CEO Anna Maria Ponzi explains.

Anna Maria Ponzi saw the sale of her family's wine business as a blessing.
© Ponzi Vineyards | Anna Maria Ponzi saw the sale of her family's wine business as a blessing.

"We were very intentional in our decision," she says. "The Bollinger family shares the same values we do in terms of winegrowing, making and business. Excellence is in their DNA; they're a fifth-generation French winemaking family. Nothing they do is fast, and everything they do is carefully considered."

Anna Maria will continue to lead sales and marketing until a new CEO can be recruited, but her sister Luisa will remain on board as the director of viticulture and winemaking. The Ponzi family will retain 100 acres of vineyard land and grow and sell grapes to the vineyard under a long-term contract. The deal includes the winery, hospitality facilities and 35 acres of vineyards, all of which went to Bollinger. There are no plans to pump up production, which currently sits at 30,000 cases annually.

"Hell yeah, I'll step out of the way," Ponzi says of her decision. "We had the blessing of our children, and the guarantee from Bollinger that if they want to eventually join the company, they can, if they're qualified. Our parents also gave us their blessing. It became a question of how much gas do I have in my tank to continue to grow this business? I was wearing so many hats as the CEO, CFO, marketing director, DTC manager. For Luisa, she can do everything she wants to do, which is grow and make great wine. For me, I see it as a blessing to pass this business into another winemaking family's hands, with more resources to sell, market and distribute."

Controversial blessing

For some large winemaking families, the decision to sell was initially quite fraught. But for one family, it turned out to be hardest best thing that ever happened to them, says Jamie Benziger, winemaker at Imagery Estate Winery, and a member of the Benziger family, which helped create and build Sonoma's reputation for making great wine.

"When my Uncle Mike got sick, no one from our generation was ready to step up yet," Benziger explains. "He saw his health declining, and it made him nervous. He wanted to make sure his family was taken care of."

Mike Benziger was one of seven siblings who helped build the Benziger Family and Imagery Estate empire, but many had stepped back from the day-to-day work in the business, or were not interested in management. The family sought out an arrangement where they could still control the winemaking and growing arm of the business, but outsource the marketing, sales and distribution.

In 2015, The Wine Group acquired the biodynamic and organic Benziger Family Winery and Imagery Estate Winery in Sonoma Valley for an undisclosed sum (reportedly $70 million-$100 million), as part of the group's push into the super-premium category. At the time, the group's CEO Brian Vos said: "The Benziger family is not only celebrated for its outstanding wine quality, but their strong team will be a great cultural fit within The Wine Group."

Currently, The Wine Group has more than 60 brands under its umbrella, with holdings in California, Chile, France, Germany, Italy, New Zealand and South Africa, but, according to Benziger, the Group’s approach is hardly the micro-managing cold boardroom culture one might expect.

"When we sold, The Wine Group came onto our properties and let every single person know they could keep their jobs, and actually gave them a raise," says Benziger, who had at that point made her way through the classic family job plan: graduating from college, working a harvest as an intern, taking on an internship at the winery in an area they're interested in, then working in the "real world" for a few years. After that, they have to submit a resume for a job that's open, interview and, if accepted, step back in. "No one just gets a job because they’re a family member. My sister Jill and I were some of the few who were interested in returning, and it just happened to coincide with The Wine Group's purchase."

She admits that they were both trepidatious. "It was a controversial decision to sell," she says. "A piece of my childhood felt like it was no longer mine. But it has turned out to be a blessing. They give us complete creative freedom, and I've been able to make the kind of wine I want to make, and have allowed core values of hard work, true sustainability and creativity remain, while also ensuring our survival during the pandemic."

Without The Wine Group, she says she isn't sure if and how Imagery could have made it through.

"And now, we're actually planning on increasing production," she says.

The buyers' side

Amid all the hand-wringing over the fate of beloved brands, it's easy to forget the buyer's surprisingly vulnerable position.

"Small brands are high maintenance, not really well-suited for wholesale distribution in the main," Grahm points out. "For large corporations, it's a bit like the O. Henry story The Ransom of Red Chief. After the corporation has acquired the brand, they are often at a loss as to know what to do with it."

For a not enormous, but globe-spanning company like Foley Family Wines (they have 18 estate wineries in Washington, Oregon and California, plus their sister company in New Zealand), bringing on a new winery is a matter of noting an oversight: a scan of the closet reveals a lot of dress pants, but not enough cashmere sweaters.

"The driving force is company growth and the desire to fill a portfolio gap," says chief marketing officer Gerard Thoukis. "Varietals, price points, or region of origin typically. We seek out assets that align with our strategy of becoming the number one luxury wine producer in the US."

Thoukis says there's no precise formula for how deals are structured.

"Sometimes the brands' former owners want to stay involved, and other times they just don't," he says. "The reasons are different for everyone, and come down to personal choice. In most cases though, former employees, including the winemaker, join our organization. Many family-owned wineries want to focus on growing grapes and making wine. Aligning with us allow them to do just that, while our organization can handle sales, marketing, procurement, compliance and other important aspects of the business."

Foley Family Wines does not disclose annual case sales, but Thoukis says they will surpass 2 million cases of sales "soon".

Business partnerships, like marriages, often surprise observers. Sometimes what appears to be a doomed union spawns the greatest success and happiness; at other times, just the opposite.

Like it or not – given fallout from the pandemic and the increased number of small producers competing for attention – chances are, more beloved cult brands will be snatched up by eager suitors soon.

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