It seem that there has been an increasing number of small, high quality producers selling out to the corporate conglomerates as of late. These brands are then classified in a "portfolio" of wines within a large stable that the suits boast about.

In recent years, Screaming Eagle, Etude and Merus among others have succumbed to the fat check.

I am not sure these producers carry the same allure once they become owned by some corporate.

it all depends if they keep the present wine makers, managers, etc. I think that Stags leap has lost their edge. I was not at all impressed with them when I visited last April...

quote:

Originally posted by cab chris:
It seem that there has been an increasing number of small, high quality producers selling out to the corporate conglomerates as of late. These brands are then classified in a "portfolio" of wines within a large stable that the suits boast about.

In recent years, Screaming Eagle, Etude and Merus among others have succumbed to the fat check.

I am not sure these producers carry the same allure once they become owned by some corporate.

Fat check in their pockets. Owners look for stock and dividend value. Quaility is at the wayside. This goes for about any product!!

The only way that a large beverage co can justify the acquisition prices are to significantly increase volume of said boutique winery. All fine and good and these guys are typically much better at alot of the business aspects. That said, if you can't find similar quality grapes, you can't make similar quality wine. Is it likely that there are similar quality grapes out there to be easily sourced and just ratchet up volume easy peasy? No. The investment and care that would be required to secure a substantially greater volume of similar quality grapes is immense and could easily take a backseat to increasing volume, sacrificing quality, and relying on brand marketing to fob off lower quality at the same or higher prices. That said, you could achieve the same quality or increased quality by investing in grapes where such investment is cheaper - like, say, Argentina or Chile. But then you'd have to explain to consumers, why their boutique label contains grapes from Argentina. So, short answer, it is very hard to pay the owners a premium and keep the small, boutique level of quality up.

quote:

Do boutique wineries lose luster when they sell out

Yes. And then they are replaced in the hearts and minds of consumers by new start-ups, and the cycle continues. There was a lot more buzz about this year's release of Scarecrow than there was for this year's release of Screaming Eagle. And if it matters, the return on investment for Scarecrow was much higher, percentage-wise.

They lose quality. Read the Robert Mondavi story. Share holders (or should I say brokers) and wine making do not make good partners. Way too much pressure to have year after year of financial growth in an industry guaranteed to have off years.

??

Of the three wineries you mention, only Etude is part of a publicly-traded company?

Curious: how does Merus make your list?

quote:

Originally posted by mike p:
Curious: how does Merus make your list?

Because they sold out to the Foley Wine Group.

Might as well throw in Montelena as far as selling out.

Yeah, that Montelena sellout news was the biggest wine industry news in 30 years IIRC.

Moo

The two that immediately come to my mind are Mondavi and Ravenswood. Can anybody really say these wines are still the powerhouses they were before the corporate takeover?
They both diversified and diluted the brand names until there was no quality left.

The only examples I can think of that seem to be working well are a few producers under the Kendall Jackson umbrella - Cardinale, Lokoya, La Jota and Atalon. I'm not sure if all of these meet the definition of "boutique wineries". I had the opportunity to spend some time with Chris Carpenter the winemaker for Lokoya, Cardinale and La Jota last summer and I think he's making some really great wine for these labels.

chris-

I guess I'm still not seeing what you're talking about. There are really two black and white possibilities when a brand sells (I'll omit "out" because I don't think it always applies), with many shades of grey in between:

1. The large company that bought it wants to use the brand to stuff some more of its grapes into a bottle that sells for more $$ based on the brand's goodwill. This will dilute the said goodwill significantly, while perhaps improving the bottom line temporarily for the corporation due to higher revenues for the same grapes. Eventually, the brand will begin to falter and become Safeway-shelf fodder.

2. A small, under-staffed and under-capitalized wine brand will reach even higher peaks because the larger entity injects cash, equipment, business acumen and so on while leaving them to practice their craft. This can only lead to improvements, even when it is thought that none could be had.

Forgive me if I don't buy the "corporations are bad" BS when it's spoon-fed. In some cases, wine brands will be driven into the ground. In others, they will soar due to relief of many duties outside of making wine on the proprietor. In the wine business, I think that publicly-held companies acquring brands will lean towards #1, while private acquisitions will lean more often towards #2. By the way, most wine brands are LLC's or C-corp's with a variety of shareholders anyways, so the lines between what's a corporation and what's not are somewhat blurry. You'd be surprised in many cases how little a % of shares in a particular winery the person with whom you associate that winery actually owns. Sweat equity is still playing catchup with monetary equity.

With respect to said proprietors, I don't begrudge them one bit. You realize that they likely started the business with but a dime in their pocket, and tirelessly tend vines and wines for years and years in addition to marketing and selling their product. Most I know who own their own brands work at least 6 days a week, 10-12 hours per day...more during the growing season. If they want to cash in on their hard work, especially if they feel the integrity of what they built will be maintained, then by golly, more power to them.

Do you guys disagree with this? As with all things wine, there is no simple "acquisitions are bad" rule. In many cases, they are quite positive.

By the way, while I'm thinking about it....another terrible wine fallacy: "Increasing production dilutes quality"

Geometric increases (ie 1K -> 10K; 10K -> 100K), yes.

Smaller increases (ie 1K -> 3K; 10K -> 15K), no. Provided the grape sources are there and available, and this is not simply increasing yields 1.5 - 2x, but finding comparable sources at equal yields.

Is looking after 400 barrels really that much different than looking after 600? Swami says "no".

Discuss.

quote:

Originally posted by winerugger:
...
2. A small, under-staffed and under-capitalized wine brand will reach even higher peaks because the larger entity injects cash, equipment, business acumen and so on while leaving them to practice their craft. This can only lead to improvements, even when it is thought that none could be had...

Do you guys disagree with this? As with all things wine, there is no simple "acquisitions are bad" rule. In many cases, they are quite positive.

I think you make good points in principle, but as I try to think of even one example of a 'brand' that significantly improved after being sold, I'm having difficulty coming up with anything I'd stand by. I agree with mneeley490, Ravenswood's (and I feel similarly about Williams-Selyem) fall from grace is undeniable. Etude: same thing in my book, though I don't sense that they were ever at the top of the roost as Ravenswood and W-S were in Zin and Pinot, respectively. I wouldn't mind hearing an example of improvement for us to consider.

quote:

Originally posted by davem858:
The only examples I can think of that seem to be working well are a few producers under the Kendall Jackson umbrella - Cardinale, Lokoya, La Jota and Atalon. I'm not sure if all of these meet the definition of "boutique wineries". I had the opportunity to spend some time with Chris Carpenter the winemaker for Lokoya, Cardinale and La Jota last summer and I think he's making some really great wine for these labels.

As far as I know, La Jota is not part of the Jackson Family Wine group. I think you meant the Verite wines which is, and offers the La Joie wine.

I do not know who makes the Verite wines but I tried a couple at a recent tasting and for the price I would not buy them.

tanglenet-

How about Kosta Browne?

Started in the 1997 but really flourished after a cash and business injection circa 2001.

BTW, W-S akin to Ravenswood? Really? I think Bob's making some killer wines there?

I don't know the financials of Kosta Browne. If they received some investment money or took on partners, they are spending it wisely, as their facilities are in a rented in an old warehouse where other small wineries are located (Wesmar for instance). I don't see them selling out.

To be honest, even though it's interesting as wine geeks to know who owns the wineries and the back story, it's still about the juice. Right now I'm drinking a St. Clement Howell Mountain Cab. I know that they are part of Foster's group who owns a boatload of wineries. But hey, it's good juice!

tanglenet-

As intoned initially, I do not see it as selling "out", nor was I implying that.

Selling shares in your business to scare up funds so that you can:
- buy better fruit
- buy better barrels
- put together an efficient, purpose-built winery to suit your exact needs
- hire talented employees a la Shane Finley
- hit the road and PR circuits hard to build your brand

is exactly what I meant by:

quote:

2. A small, under-staffed and under-capitalized wine brand will reach even higher peaks because the larger entity injects cash, equipment, business acumen and so on while leaving them to practice their craft. This can only lead to improvements, even when it is thought that none could be had.

I do not know the exact particulars of KB's shareholdings, nor would I put them here if I did. In essence, though, the difference between this particular structure and what Merus has done with the Foley group is pretty small. One major difference was the publicity of it, probably owing to the fact that KB was way under the radar in 2001.

quote:

Originally posted by tanglenet:
As far as I know, La Jota is not part of the Jackson Family Wine group. I think you meant the Verite wines which is, and offers the La Joie wine.

Artisans & Estates Vineyards (a division of Kendall Jackson) bought La Jota in November 2005 (see here). I was a little surprised by this because when I was in Napa in May 2005 La Jota was owned by Markham. Chris Carpenter is now the winemaker for La Jota.

The same group also purchased Freemark Abbey.

Thanks for the clarification on La Jota. I was not aware of this.

In regards to Merus, it was my understanding (from a post on another board) that the sale was due to divorce.

quote:

Originally posted by mpls wine guy:
I do not know who makes the Verite wines but I tried a couple at a recent tasting and for the price I would not buy them.

Which ones and what vintage? I have never seen anybody say Verite was not worth the price of admission.

Also, where the hell did that statement come from? Verite has not sold to anyone, unless I missed it.

Let's see, now. Jean Phillips takes a generation to build a brand (Screaming Eagle), then in the fall of her working years gets married to someone who becomes extremely ill, and she decides to sell her business to two individuals for a profit so that she can try and care for her family. Yeah, that sounds like selling out to me. So much for the American dream, huh?