Gary Farrell Winery
-- Capping a complex series of interrelated acquisitions and sales in the last few years, newly created Ascentia Wine Estates, the public face of Eight Estates Fine Wines LLC, is buying from Constellation Brands eight wine brands representing a million annual cases, and other assets including 634 acres of vineyards. For this, Constellation gets $209 million in cash, plus as much as $25 million more based on brand performance.
Constellation, the world's largest wine company, had been expected to sell at least some of the wineries, notably popular Geyser Peak Winery
in Geyserville, Sonoma County, since it was acquired from Fortune Brands' Beam Wine Estates along with Clos du Bois
, Constellation's real target.
The brands bought by Healdsburg-based Ascentia also include Atlas Peak
in Napa Valley; Buena Vista Carneros
, Gary Farrell Winery
and XYZin in Sonoma County; Columbia Winery
and Covey Run
in Washington; and Ste. Chapelle
Historic Buena Vista Winery
Ascentia Wine Estates was created by Jim DeBonis, the former COO of Beam Wine Estates, who helped manage and position the brands after Beam acquired them from Allied Domecq.
Investors include William and Peter Deutsch, proprietors of wine importer W.J. Deutsch & Sons Ltd., and GESD Capital Partners, a San Francisco-based private equity investor.
GESD is investing through its Golden State Investment Fund, focused primarily on California-based food and beverage investments. GESD's other portfolio companies include André Boudin Bakeries, Go Roma Italian Kitchens and Milton's Fine Foods. Co-founder and senior managing partner Lou Giraudo is also chairman of Pabst Brewing Company.
Deutsch is the marketing powerhouse that introduced Yellow Tail and made it America's biggest import wine. Before this deal, the only U.S. wine label it represented was another premium Sonoma brand, venerable Kunde Estate
in Sonoma Valley.
Deutsch will be the new wine company's exclusive sales and marketing agent, as well as part owner. Peter Ekman, former CEO of Wine.com
, is Ascentia Wine Estates' chief marketing and sales officer.
The new company starts off with well-positioned wines, differentiated geographically as well as by market segment. "These brands fit together exceptionally well to create a strong presence in the ultra-premium and luxury market segments," commented father and son Bill and Peter Deutsch.
The strengths include two hot varietal segments, Pinot Noir and Riesling. Deutsch says it will now represent 15 to 20% of total U.S. Riesling production through Columbia, Covey Run and Ste. Chapelle. A company statement said, "Buena Vista and Gary Farrell offer a delectable half-dozen 90-plus rated Pinots to choose from."
Sauvignon Blanc is also growing in appeal to some consumers, and Geyser Peak is a leading provider, while Atlas Peak and Geyser Peak are well positioned in Cabernet.
CEO DeBonis sees "pretty strong growth" for Geyser Peak, Columbia and Covey Run, with "measured" growth for Buena Vista. He doesn't plan to significantly grow the Gary Farrell super-luxury portfolio. A complex history
In 2001, Constellation bought Covey Run and Columbia from Corus Brands.
The Trione family of Santa Rosa sold Geyser Peak to Fortune (which owned Clos du Bois) in 1998 for $101 million. These eventually became Fortune's Beam Wine Estates. Constellation Brands was primarily interested in Beam's Clos Du Bois, a major player in the mid-price Chardonnay market, competing with Kendall-Jackson.
In 2001, Allied Domecq bought Buena Vista in Carneros, the oldest winery in Northern California, for $86 million from German owners, as well as the Atlas Peak brand (not the property). In 2004, Domecq acquired Russian River-based Gary Farrell Vineyards and Winery for an estimated $16 million. Fortune later acquired these, and eventually sold them to Constellation.
Constellation grouped the wineries for easier sale, integrating Clos Du Bois into its San Francisco-based Vintas wine division. It also shifted the Wild Horse Winery
in Paso Robles to the luxury Icon Estates division in St. Helena, with Robert Mondavi Winery
The other three Sonoma County wineries were kept together as a separate division within Vintas under DeBoni, who had formerly managed the Beam wine portfolio.A diverse portfolio
The wineries that comprise A scentia Wine Estate's acquisition include:
Geyser Peak Winery, with 100 acres of estate vineyards in the Alexander Valley. Though Australian-born winemaker Darryl Groom has left, fellow winemaker Mick Schroeter is well regarded in the industry, too.
Atlas Peak winemaker Darren Procsal crafts four distinct Cabernets from renowned mountain appellations in the Napa Valley AVA: Atlas Peak, Mount Veeder, Spring Mountain and Howell Mountain. The large Atlas Peak Vineyard that formerly provided the fruit and the winery site reverts to owner Piero Antinori of Italy in the fall, but the Atlas Peak brand can continue with other sources of grapes, said CEO DeBonis. He had been involved in the realignment to focus on mountain Cabernet instead of the previous Atlas Peak Vineyard grapes, once heavy on Sangiovese.
Buena Vista Carneros focuses on cool-climate Pinot Noir, Chardonnay, Merlot and Syrah under the direction of winemaker Jeff Stewart. The property contains 500 acres of prime vineyards. Under DeBonis at Beam, the winery had slashed production 80%, abandoning an inexpensive line of wines sourced from Bronco; and Lake County Sauvignon Blanc, to concentrate on high-end Pinot Noir and Chardonnay.
Gary Farrell Winery in the Russian River Valley is a prime source of luxury Pinot Noir and Chardonnay. Founding winemaker Gary Farrell left, but winemaker Susan Reed maintains his tradition. DeBonis also added the winery to the Domecq portfolio.
XYZin is a Zinfandel-only line produced at Geyser Peak, selling wines from vines as old as 100 years and more. Ondine Chattan is the winemaker.
Columbia Winery in Woodinville was a pioneer Washington winery. The winemaker is Kerry Norton. All three Northwestern wineries are strong in Riesling.
Covey Run is one of the top suppliers of high-value quality wines. The winemaker is Kate Michaud. Like the Deutsches, DeBonis is very high on Riesling. "We tried to launch Clos du Bois into Riesling, and did it successfully, but there's just not much Riesling being grown in California," he lamented.
Ste. Chapelle overlooks the famed Snake River Valley in the region of Southwestern Idaho known as Sunny Slope. The valley's high altitude vineyards, which enjoy long daylight hours, supply Ste. Chapelle winemaker Chuck Devlin.Constellation's view
Constellation president and CEO Rob Sands said that the sale will eliminate overlap and raise cash to pay down debt. "Sale of these assets will aid in streamlining Constellation's U.S. wine portfolio by eliminating brand duplication and excess production capacity," he said. "We feel our customers and consumers are well served by our extensive California wine portfolio, and by the Hogue Cellars
brand produced at its Prosser, Wash., winery."
The company expects to record a $23 million pretax loss with the sale, largely from writing off goodwill.
International Wine Associates of Healdsburg advised Constellation Brands in the sale, while Ascentia was represented by Perry Deluca of Key Banc Capital Markets.