July 2015 Issue of Wines & Vines
 
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The Wine Group Moves Upscale

 
by Paul Franson
 
 
Benziger Winery
 
The Benziger Family Winery sale included its 85-acre Biodynamic vineyard.

Glen Ellen, Calif.—When The Wine Group, the second-largest U.S. wine company, acquired Benziger Family Winery and Imagery Winery in Sonoma Valley on June 8, some members of the trade felt luxury brands were not a natural fit in The Wine Group’s portfolio.

The reason for the sale seems to be a combination of some of the Benziger siblings wanting to cash out, undisclosed health issues of founder and CEO Mike Benziger (which he says have been resolved) and increasing competition in the wine business.

Benziger said, “With the knowledge that we’re selling the winery to a privately held company that shares our values, now is the perfect time for me to pursue other passions. We are certain that The Wine Group will carry on the Benziger family’s legacy of quality.”

“We look forward to continuing to build on Benziger’s reputation as a producer of some of Sonoma County’s best wines, while providing visitors with an unrivaled experience at the beautiful and unique Sonoma properties,” said Brian Vos, CEO of The Wine Group. “As we continue to move into the super-premium category, we have been thoughtful in our search for a winery that produces exceptional wines while sharing our values of integrity, social responsibility and innovation. 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.”

    Gallo on the Move
     

     
    Shortly after E. & J. Gallo Winery bought sparkling wine producer J Vineyards in Healdsburg in March, the company acquired 642 acres of land, including 258 acres planted with vines, in Napa County’s Pope Valley from the Komes and Garvey families, who own Flora Springs Winery in St. Helena.

    Pope Valley is included in the Napa Valley American Viticultural Area, even though it is located across the Vaca Mountain chain from Napa Valley proper and sits at a higher altitude. It is warmer in the summer and cooler in the winter. The company bought Cypress Ranch and part of nearby Palisades Vineyard; both come with reliable water sources.

    The new acquisitions are next to Gallo’s 100-acre Sun Lake Vineyard. The vineyards are planted to Cabernet Sauvignon, Malbec, Merlot and Zinfandel. Gallo reportedly plans to use the grapes primarily for its William Hill and Louis M. Martini brands but doesn’t discount the possibility of other uses.

    Altogether, Gallo now has six vineyards in Napa, including the 140-acre William Hill Vineyard and Ghost Pines in Chiles Valley, also part of the Napa Valley AVA. It also owns legendary Monte Rosso Vineyard just over the border in Sonoma County. In addition, last year Gallo bought the Ledgewood Creek and Winterhawk wineries and 500 acres of land in Suisun Valley, a part of Solano County southeast of Napa County that’s in the North Coast AVA.

    It closed the wineries to focus on grapegrowing. In 2013, the top wine company bought Columbia and Covey Run wineries in Washington state.

    In 2012, Gallo bought 2,000-acre Snows Lake Vineyard in the Red Hills district of Lake County north of Napa County. At the time, 800 acres were planted, mostly in Cabernet. Lake County is also part of the North Coast AVA.

    Also in 2012, Gallo bought custom-crush winery Courtside Cellars in San Miguel, Calif., near Paso Robles and has converted it to its own use. It also bought 300 acres of vineyards in California’s Monterey County that year.

    In 2011, it acquired the 62-acre Edna Valley Vineyard near San Luis Obispo, Calif.

The deal includes the 139,000-case Benziger Family Winery, 85-acre Demeter-certified Biodynamic vineyard in Glen Ellen and vineyards owned or under long-term lease in the Sonoma Valley, Sonoma Coast, Russian River Valley, Sonoma Mountain and Pine Mountain-Cloverdale Peak AVAs. Financial terms were not disclosed, though industry estimates of the sale ranged from $70 million to more than $100 million.

The Wine Group will also acquire the Benzigers’ Imagery Winery and tasting room on Highway 12 in Glen Ellen, about 2 miles east of Benziger Family Winery. It once housed a perhaps-premature craft beer producer, Sonoma Mountain Brewery.

The winery purchase is only the latest move upscale by a top-10, high-volume wine firm.

The largest wine company, 85 million-case E. & J. Gallo Winery, bought J Vineyards in Healdsburg, Calif., earlier this year to build on its less expensive but fast-growing Barefoot bubbly in the hot sparkling wine category. It also followed earlier acquisition of Sonoma vineyard property and developing upmarket brands as well as buying William Hill and Louis M. Martini wineries in Napa Valley.

No. 3 wine conglomerate Constellation has been moving up in the wine market, too, including the purchase of Franciscan, Robert Mondavi and other brands as well as acquiring half interest in Opus One while shedding value brand Almadén to The Wine Group.

The Trinchero family created luxury Trinchero Napa Valley after adding other brands above its Sutter Home, and Delicato Family Vineyards bought Black Stallion in Napa Valley and moved its headquarters to Napa.

Likewise, Ste. Michelle Wine Estates acquired 85% of Stag’s Leap Wine Cellars in Napa Valley (Tuscany’s Antinori bought the rest).

Almost all of Benziger’s staff will stay on for the transition. Mark Burningham, who has worked with the family for almost 30 years, will take over as general manager of North Coast operations for the Wine Group.

Two of Mike Benziger’s brothers will remain with the company: Chris Benziger will become vice president for trade relations at Benziger, while Joe Benziger remains winemaker for Imagery.

Mike Benziger and president Tim Wallace are reportedly the only employees leaving the company because of the acquisition.

Though some question the commitment of the huge Wine Group to quality, CEO Brian Vos has vowed to maintain Benziger’s pioneering efforts in organic and Biodynamic grapegrowing. By all accounts it has supported Concannon Vineyards, increasing volume and promotion while maintaining quality.

Unlike in the past, when large spirits companies bought and debased top brands such as Inglenook, Paul Masson and Almadén, today’s buyers want to move upscale and try to maintain or buildboth quality and image. This is especially true as wine consumers shed the penny-pinching habits they adopted during the recession and move upscale. The fastest growing segments of the market are $8 and up, with sales for inexpensive wines stagnating or worse.

The Wine Group, which produces 60-million cases per year, owns value brands Almadén, Corbett Canyon, fast-growing Cupcake, Fisheye and Franzia. It also owns up-market Concannon Vineyards; its headquarters is at Concannon in Livermore.

The Wine Group originated within Coca-Cola Bottling of New York during the abortive attempt by consumer products companies to enter the wine business. In 1984, after a leveraged buy out, it became a privately held company owned by its executives.

It then acquired a number of wineries:

1988 Corbett Canyon Winery

2002 Glen Ellen Winery
and Concannon Vineyard

2004 Golden State Vintners and FishEye Wines

2006 Big House Wine Co.
from Bonny Doon

2008 Almadén Vineyards
from Constellation Brands

2015 Benziger Vineyards

 
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