Amid pandemic, Santa Rosa vintner Pat Roney rounding up millions for buyouts
Pat Roney always sees opportunities during challenging economic times.
The 64-year-old wine industry veteran took over Napa Valley’s Girard Winery in 2000, as the country grappled with the dotcom bubble. He showed his operational prowess there by boosting that boutique winery from a minuscule 100 wine cases of annual production to 40,000 in five years.
In his second act, Roney teamed with the late vintner Leslie Rudd to form Vintage Wine Estates in 2007. It later made a crucial deal to acquire Windsor Vineyards from The Foster's Group, which gave the young company a large telemarketing sales network to expand into direct-to-consumer wine sales. The Great Recession, however, emerged a year later and slowed his expansion strategy.
Now, almost a year into the coronavirus pandemic, Roney is making his biggest and boldest bet yet as chief executive officer of Vintage Wine Estates. He’s taking the Santa Rosa wine company public in May, so it can sell shares and initially fetch more than $1 billion from investors to spend on potential acquisitions. That buying spree will include buying the majority of Kunde Family Winery in Kenwood, an operation in which Vintage Wine already is a minority owner, and where Roney was president in the early 1990s.
The low-key Roney — who once served as CEO of specialty grocery chain Dean & DeLuca — is not as well known in the American wine industry as mighty titans of the past, such as Robert Mondavi and Jess Jackson, or entrepreneurs who recently have found success producing a cult pinot noir or cabernet sauvignon.
Yet his methodical approach, including doing more than 20 deals over the last 10 years, has generated 20% annual revenue growth through recent years, even if the buys were not as splashy as some of his rivals. In baseball parlance, Vintage Wine Estates is the wine version of Oakland A’s Moneyball era.
In the process, Roney has garnered significant respect throughout the sector. Tim Wallace, former CEO at Benizger Winery in Glen Ellen and a now lecturer at Sonoma State University’s Wine Business Institute, echoed many in the wine industry saying he knows Roney “to be a great guy.” And that credibility and likeability becomes useful now that Vintage Wine Estates embarks on the first significant initial public offering of stock in the wine sector in 20 years. Roney will attempt to persuade Wall Street he can deliver on even more growth to investors with his company valued at $690 million prior to trading.
“I think he is going to be very successful,” said Robert Nicholson, president of International Wine Associates, a boutique mergers-and-acquisition advisory firm in Healdsburg.
Nicholson noted that Roney acquiring Windsor Vineyards first put Vintage Wine Estates on a growth trajectory and he hasn’t looked back.
“Windsor Vineyards was a big, big platform for Pat to be able to build,” Nicholson said.
Indeed, the Windsor purchase was key since it allowed Roney to ramp up his profitable direct consumer wine business, which later included the 2017 acquisition of Cameron Hughes, a top e-commerce brand. Wineries make more profit through this sales route because they don’t have to pay distributors.
Vintage Wine Estates recently opened a distribution center in Cincinnati, Ohio, so the company can guarantee two-day delivery to more than 90% of the country. The company sells wines primarily in the $10 to $20 a bottle range.
“When you start getting two-day delivery into New York and everywhere (else) your order recycle increases. So it's a strong focus of growth for us,” Roney said.
The goal always was to take Vintage Wine Estates public, but the path to tapping investors’ capital took a little longer than Roney expected.
“If anything maybe we could have accelerated even larger acquisitions during the initial recession in 2008 and 2009. We would probably be on the path a little bit faster,” Roney said. “We were fiscally conservative and wanted to make sure we could prove out all our models. On balance, we are very happy with our path of progress.”
Direct consumer sales now account for 29% of the roughly $200 million in overall revenue that Vintage Wine Estates generated in its 2020 fiscal year. That includes sales on its digital platforms, wine clubs and even on the QVC television network.
Besides its direct-to-wine drinkers business, Vintage also derives 38% of its revenue from its wholesale business of wines sold in traditional retail stores and restaurants. That business is getting harder, with the top three wine wholesalers controlling 61% of the market and typically won’t consider clients unless they can provide a large array of product. That shuts out smaller wine producers who are then forced to rely on direct sales to consumers.