January 2014 Issue of Wines & Vines

Duckhorn Deal Ends Year of Northwest Investment

by Peter Mitham
Benton City, Wash.—When the Aquilini Investment Group of British Columbia on Nov. 23 bid $8.8 million (including buyer’s premium) for 670 acres that the Kennewick Irrigation District was offering in the high-priced grape-growing district of Red Mountain, tongues started wagging.

Aside from a dairy farm at Sunnyside, Wash., the Aquilini company’s activities were little known to the 38 other parties vying for a slice of one of Washington state’s most desired viticultural areas. But with a stated commitment to developing vineyards, Aquilini is keeping its neighbors watching to see what comes next. And according to industry observers, that may be more of the outside investment the region has seen in recent years.

Mario Zepponi, a partner at Santa Rosa, Calif.-based Zepponi & Co., contends that Washington state makes wines to rival those of California, but the economics of vineyard establishment and production are often more attractive than in Sonoma, Napa and California’s Central Coast.

He points to Long Island, N.Y.-based Banfi Vintners’ purchase of Pacific Rim Winemakers in 2010 as an acquisition that gave an outside winery a significant producer in a relatively low-cost region. Similarly, Duckhorn Vineyards has announced a new Washington state label, Canvasback, focusing on Cabernet Sauvignon—one of the grapes that built its reputation in California, but at a discount from California.

But if Banfi bought a winery—as Precept Wine Brands did with Waterbrook Winery in 2006 and Canoe Ridge Vineyards and Sageland Vineyards in 2011, and E. & J. Gallo with the purchase of Columbia Valley and Covey Run in 2012—transactions this year have focused on vineyard purchases.

Zepponi expects these to become more common. “It’s easier for a lot of outsiders to purchase vineyards and experiment with branding and wine quality,” he told Wines & Vines.

This is what makes the new Duckhorn label different from many other ventures. The label has been launched without a physical site (the initial vintages are being produced at Artifex in Walla Walla, Wash.), and a winery on a 20-acre site Duckhorn acquired in December remains “dreams, not plans,” according to Duckhorn president and CEO Alex Ryan.

Jackson Family Wines purchased 1,369 acres west of Salem, Ore., in the Eola-Amity Hills and Yamhill-Carlton AVAs, while Seattle-based Precept acquired the 374-acre Yamhela property, also in the Yamhill-Carlton AVA.

Precept also acquired a 174-acre vineyard in the Yakima Valley, south of Red Mountain, with grapes supplying its existing program.

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