A string of recent wine brand and property sales in the West Coast — including high-price North Coast deals — are bringing out a host of sellers, but they’ll find buyers are ever more choosy, according to experts at a wine business conference in Santa Rosa on Thursday, April 28.
An active buyer of West Coast wine properties in recent years said generational transitions — older vintners wanting to retire but not having children interested in stepping up — and consolidation at the distribution level between vintners and retailers continues to drive acquisition deals.
It’s more important than ever to get bigger as a wine company to get distributors to carry its wines, said Pat Roney, managing partner of Santa Rosa-based Vintage Wine Estates, part of a panel of wine merger-and-acquisition experts at North Bay Business Journal’s 16th annual Wine Industry Conference.
“Today I have approximately 14 acquisition opportunities on my desk to look at,” he said. “We will continue to make acquisitions. At only 1.5 million cases in the distribution market, we think we’re pretty not-so-important to distributors.”
Roney pointed to recent word that Southern Glazer’s Wine & Spirits, which is becoming North America’s largest such distributor via the planned merger this quarter of Miami-based Southern Wine & Spirits and Dallas-based Glazer’s, could trim the number of represented wines by a significant percentage.
About 425 professionals in and associated with the wine business packed into the main ballroom at Hyatt Vineyard Creek Hotel & Spa for the morning conference.
Consolidation among distributors makes brands more important, so vintners should work on building “brand equity” to gain wholesale-market clout and any resulting M&A deal value, said panelist Roy Cecchetti, who sold his wine portfolio to Larkspur-based O’Neill Vintners & Distillers in early 2014 and now is president of national brands.
The current surge in wine M&A activity is driven by the health of the U.S. fine-wine market, rather than the distressed-business sales that dominated in 2008–2010, said panelist Robert Nicholson, president of International Wine Associates. His Healdsburg-based firm represents sellers in California and, increasingly, Oregon and Washington.
“The real market is back, in terms of values,” he said. “Larger and middle-tier companies are making acquisitions to improve their positions with their wholesalers to avoid losing the leverage they have.”
These deals also allow the buyers to quickly add new product categories, such as Russian River Valley pinot noir or Central Coast chardonnay, Nicholson said. Marquee examples of this are Constellation Brands’ acquisition of the Rutherford-based Meiomi pinot noir brand in August for $315 million and The Prisoner Wine Co., a Napa-based brand portfolio, in April of this year for $285 million.
And international companies actively are looking to enter the big U.S. wine market via brand acquisition, he said.
It is a very active North Coast wine M&A market now, but what’s different are the size of the players and the quality of the deals, according to panelist Carol Collison, partner in St. Helena-based Global Wine Partners.
“Last year, when we saw KJ, Gallo, The Wine Group and this year with Ste. Michelle making acquisitions, none of those have been actively buying brands for six or seven years,” she said. “They have been active in the real estate business, but that’s different from mergers and acquisitions.”
Modesto-based E&J Gallo last year bought the Asti winery and Souverain brand, 258 acres of Pope Valley vineyards and J Vineyards & Winery. Santa Rosa-based Jackson Family Wines purchased Siduri Wines in Santa Rosa last year and Penner-Ash in Oregon this year. Livermore-based The Wine Group picked up Benziger and Imagery in Sonoma Valley last summer. Washington-based Ste. Michelle Wine Estates acquired Patz & Hall in Sonoma earlier this year.