Name: Mark B. Smithers

Title: CFO and SVP of Finance

Company: Trinchero Family Estates (aka Sutter Home Winery, Inc.)

Company address: P.O. Box 248 St Helena, California 94574

Phone:707-963 3104

Website: www.tfewines.com

Number of company employees: 800

Professional background: CPA KPMG Peat Marwick 8 years, CFO Joseph Phelps Vineyards 6 years, CFO Trinchero Family Estates 16 years

Education: BS Business with concentrations in Accounting and Finance, San Francisco State University

Age: 54

What do you see as the essential role of a financial leader in the current environment?

In any environment, the CFO is a valuable member of the executive team working closely with the President or CEO (as the case may be) developing strategies for growth that will strengthen the winery in the consumer market as well as increase its appeal to the distributor network. The CFO is in a unique position to analyze and synthesize issues related to financing, cost efficiency, capital requirements and global economics providing the president or CEO with an understanding of the risks associated with portfolio expansion, facility and production  expansion, and partnerships that may develop through various opportunities or requirements. As a number two executive supporting (and not competing with) the president or CEO, he will be instrumental in ensure that the company’s directions are cared out as communicated to the team.

What are the biggest changes you've seen in your industry?

Obviously there have been significant consolidation and ownership transfers at the distributor level. Competition from Europe and Australia has lessened of recent due to their strengthening exchanges rate.  The most significant change is on the consumer end whereby consumers traded down from higher priced wines to lower priced wines all while consumption increased. I believe this consumer move is a paradigm shift that will remain for years to come.  Over the last decade many large / volume wineries began employing the same winemaking techniques as high priced smaller volume wineries.  While consumers were somewhat “forced” to give up high priced wines, they found the quality of wines below $15 have improved dramatically; there is no need for them to spend $25 or $30 a bottle when they can generally receive the same quality at $10 or $15.

Tell us about the particular challenges and opportunities your organization has met in the recent past?

We have enjoyed significant growth over the last decade and this has presented numerous challenges. This is a capital intensive industry requiring significant investment in winemaking and production facilities and equipment.  Supporting our growth required increasing supplies of grapes and bulk wine to satisfy demand while planted acreage has not increased. Finding quality vineyards for our own grape production as well as adding to our grower network has pushed land and grape prices up, generally.  We have been forced to import significant supplies of bulk Muscat as the California supply is not nearly enough to meet recent demand for this product. Finding quality personnel to meet the expanding needs of all departments has been challenging even in an environment of high unemployment; the best players are hesitant to move.  All of this while ensuring that we do not over extend ourselves financially and retain a certain amount of available capital for opportunities.

What advice would you give to young emerging financial leaders?

Have a passion for understanding the domestic and global economy. Depending on your industry you may be more or less affected beyond the U.S. borders, however the influence will grow. For example, in the wine industry, large and small players are affected by foreign exchange rates whether importing corks and barrels or competing against bottled wine imports. Those exporting product are affected as well.  Capital supply and interest rate risks affect us all and are impacted by world events not just our domestic economy. Movements in the economy affect your input costs, staffing availability, demand for your product, etc.; don’t think that it doesn’t.

Find an industry and a company you love. If you really like your job and the products they produce or the services they provide, it will be so much more rewarding and enjoyable. Approach your job as if you owned the company.  Thinking this way places you in a position to have a more strategic role, look beyond finance and accounting, understand the drivers of successful operations in every area of your business, and make smart spending decisions.

What's the best advice for weathering today's economic environment?

Maintain a balance sheet with significant “dry powder” to take advantage of opportunities. Consider alternative ways to grow your business through joint ventures and supplier / marketing relationships. Don’t operate in fear of what Washington may or may not do; it’s really a lot of white noise and only in very few instances will they have a direct impact on you and your business. Well run forward thinking business can overcome the negatives.

How do you think your business will change in the next five years?

It will become more complicated, more competitive, and more challenging.  Further distributor consolidation will place pressure on prices and pressure us to continually add new brands, creative line extensions, and expand our offerings beyond domestic wines. As world economies rebalance and exchange rates normalize import competition from Europe, Australia, and South America will increase.  Input cost increases with little ability to increase prices will constrain margins and require us to continually increase efficiency and find packaging alternatives. With state and federal budget woes continuing, they will look to all modes of tax increases with significant pressure placed on increasing excise taxes.

What is a decision you wish you hadn't made? What did you learn from it?

It was a personnel decision. I later received advice from an older and wiser colleague to always validate your positive intuition and most likely never go against negative intuition unless it’s completely vetted and you can assess your risk.

What is your most memorable business experience?

Being part of the team that successfully challenged another international accounting firm on behalf of the shareholders of a defunct computer company. We were a small group of eight working 16 hour days, seven days a week for three months analyzing the audit work of others, preparing deposition questions for attorneys (who had little understanding of what our questions meant), and rewriting questions in the evening post-deposition. We literally had a war room stockpiled with food, beverages, cigars, etc. while breakfast, lunch, and dinner were usually delivered.  We had little time to waste as we analyzed and reanalyzed preparing the attorneys deposing witnesses each day. Our accounting and auditing knowledge was continually challenged and we needed to be at the top of our game.

What is your greatest business success?

Participating as a member of the executive team that has charted the course and successfully led to the tremendous growth of Trinchero Family Estates / Sutter Home Winery over the last decade from the lows of 2001.

What was your toughest business decision?

Applying and interviewing for my position at Trinchero Family Estates / Sutter Home Winery.  I was employed by another winery, the relationship had deteriorated, and I needed a change.

Most admired businessperson outside the company: Mohamed El-Erian, Pimco CEO.  He is a brilliant economist.

Current reading: Rereading: The Four Agreements by don Miguel Ruiz.

Most want to meet: Bill Clinton.

Stress relievers: Tahoe, exercise, and wine (in that order).

Favorite activities outside work: Time with friends, traveling to new place, bike riding with my wife, going to the city.