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North Bay Business Journal

Monday, December 27, 2010, 12:00 pm

Brown-Forman considers options for Fetzer, other Hopland assets

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    Fetzer Vineyards bottles

    (courtesy of CF Napa)

    Brown-Froman Corp. said it is considering business options for the sale of its Hopland-based wine assets, which mainly include the Fetzer Vineyards brand and related facilities.

    Brown-Forman on Wednesday said its “strategic review” was focusing on the Fetzer brand, winery, bottling facility and vineyards plus other Hopland-based brands, including

    But that review doesn’t include the Russian River Valley brand Sonoma-Cutrer or the sales-and-marketing relationship with Guerneville-based Korbel Champagne Cellars, according to Brown-Forman. Healdsburg-based International Wine Associates advised the company in its strategic review.

    “We are still amidst the review process,” said Brown-Forman Chief Executive Officer Paul Varga in a statement. “But given the recent media stories, we felt it was important to communicate with our employees and external stakeholders to set the record straight.”

    A Dec. 20 report in the Wall Street Journal said the Louisville, Ky.-based alcoholic beverage giant was selling all or part of its wine holdings.

    The wine business has been a challenging play for beverage businesses with lower costs of goods sold, according to Sean Maher, a St. Helena-based wine mergers and acquisitions expert involved with a number of significant deals this year, including Diageo’s $269 million sale-leaseback of North Coast vineyards and winery facilities.

    “Spirits people always have struggled with wine assets, because it takes  so much to get $1 in sales,” he said.

    Brown-Forman started its wine group in 1991 after the acquisition of Jekel in Monterey County. A year later the company acquired Fetzer Vineyards and Sonoma-Cutrer Vineyards in 1999-2000. Today the company has eight wine brands.

    At the end of April of this year, Brown-Forman reported that depletions for the Fetzer Vineyards brand decreased 5 percent from fiscal 2009 to 2.16 million cases. Meanwhile, depletions of super-premium price tier Sonoma-Cutrer Vineyards and certified-organic Bonterra Vineyards were among super-premium-price wine and spirits brands increased 2 percent.

    Other drinks companies are divesting of some wine assets. Australia-based Foster’s Group has been seeking to “demerge” its wine group, now called Treasury Wine Estates. The Wall Street Journal also reported that Constellation Brands is courting a buyer for brands outside the U.S.

    Brown-Forman has a longstanding sales and marketing agreement with Korbel Champagne Cellars of Russian River Valley. Any move to sell wine operations is not expected to affect that relationship, according to a Korbel spokeswoman.

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    Comments

    2 Comments

    1. December 21, 2010, 2:07 pm

      by Andrew D

      Brown Forman has been the sales and marketing agent for Korbel California Champagnes since 1965 but owns no stake. Will Korbel continue to go to market through B-F or left to make new arrangements?


    2. December 22, 2010, 2:39 pm

      by Jeff Quackenbush, Business Journal Staff Reporter

      Korbel on Wednesday said the sales and marketing deal is not expected to be affected by action Brown-Forman is taking.


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