Petaluma wine and spirits company scales back to focus on brands

A Petaluma wine and spirits company is nearing completion of a multiyear shift in its business from largely production of brands for others to focusing on its own portfolio. That includes the recent sale of some labels, planned sale of a Napa Valley winery and a significant expansion of Sonoma County distilling capacity.

Purple Brands, formerly Purple Wine + Spirits, on Friday finalized a deal to sell a “significant portion” of its exclusive retail wine brands to Plata Wine Partners in Napa for an undisclosed price. By early next month the company is set to wind down crush, production and bottling at 205 Jim Oswalt Way, a winery in American Canyon. And in November just after harvest wrapped wine storage and production at its Graton facility west of Sebastopol.

These recent moves cap off the downsizing of the company since 2018. After the sale of the Mark West pinot noir brand to Constellation Brands in 2012 for $163 million, founder Derek Benham started paring back an organization set up to produce a 650,000-cases-a-year wine brand, with seven North Bay facilities and 180 employees producing 4 million to 5 million cases annually, two-thirds of which was for other vintners or on contract for retailers.

Benham and his brother Courtney purchased the Graton property in 1992 as the home base for their Codera Wine Company venture, which created the Blackstone wine now owned by Constellation Brands. Derek Benham used his proceeds from that $144 million brand sale to launch Purple on his own in 2001 and acquired the facility. He later purchased the former DeLoach Winery on Olivet Road near Santa Rosa.

“It’s taken a long time to unwind that,” said President Aaron Webb. “We made a decision to evolve the company and operational footprint to focus less on custom work and exclusive brands.”

Going forward, wine crush, production and bottling will be handled by third parties, and production for wine and spirits will total about 400,000 cases.

In late 2020, a Purple affiliate sold the 9119 Graton Road facility, leasing back some space for remaining wine and distillery operations.

A year later, another Purple affiliate sold the former Olivet Road winery to Napa-based custom vintner Refuge Wine for $8.5 million. That deal involved a three-year contract for crushing grapes there for Purple wines.

Purple is in the final stages of lining up a bottling contract to replace what was done at the American Canyon winery, which was put on the market for sale in December.

Webb said the wind down of the Napa Valley facility, set to happen by Feb. 2, has been challenging, because the maintenance and operations workers of about 50 in American Canyon were a “great team,” extremely effective and worked well with each other. A number of them already have found new jobs, he said.

“It’s hard to be profitable (producing brands on contract), because you have to be operating at peak capacity,” Webb said. A challenge for wineries that are offering their excess crush, storage or bottling capacity on contract, he said, is that there have been several businesses dedicated to those services that have opened in the North Coast in the past decade.

For the wine brands that Purple will be continuing to focus on — Raeburn and Scattered Peaks — having a vertically integrated operation from vineyard to bottle isn’t as essential, Webb said.

“If you’re into estate bottling at higher price points, having a dedicated facility might be more necessary but isn’t as much so for our brands,” Webb said.

Raeburn, with production nearing a quarter-million cases annually, retails for $20 a bottle for chardonnay and $25 for cabernet sauvignon and pinot noir. Scattered Peaks cab retails for $45.

But for the Redwood Empire whiskey brand — another focus for Purple going forward — having an in-house distillery is key, especially for the two bottled-in-bond labels, Grizzly Beast bourbon and Rocket Top rye, each $80, according to Webb. Bottled in bond is the regulatory rough equivalent for spirits to estate bottling for wine, with all the spirits made at the same distillery at 100 proof and in the same distilling season.

Redwood Empire standard whiskeys start at $40 a bottle, going up to $150 a bottle for limited-release selections. The limited releases such as Foggy Burl, a 5-year-old single malt, and high-rye bourbon Devil’s Tower are on allocation at $100 a bottle. The last release sold out from Purple’s stock in three days and wholesalers’ inventory in a similar time frame, with some shops in Florida reporting customers lined up to buy the releases.

“It happens for a lot of (limited-time-offer spirits), and (marketing programs for) newer whiskeys are built this way,” Webb said. “We’re seeing it also for more established brands of tequila. That’s when we started to recognize the success the brand Redwood Empire was having.”

Purple has purchased whiskey base product from partners in Kentucky from the beginning of its spirits focus several years ago, but it’s time to ramp up local production capacity, Webb said.

“We’re far beyond capacity of our distillation footprint in Graton,” he said.

The currently installed continuous micro-column apparatus by Headframe Stills of Butte, Montana, can produce 1,000 barrels of whiskey annually, Webb said. Each 53-gallon barrel can produce around 250 750-milliliter bottles of whiskey, depending on the product, or 40 to 45 six-packs of bottles. About 100,000 six-packs of Redwood Empire whiskey were sold last year.

The growth plan is to get to 150,000 six-packs annually over the next five years, so Purple has ordered a still capable of increasing total output at the distillery to 6,000 to 7,000 barrels a year with one shift. Made by Kentucky-based Vendome Copper & Brass Works and set to arrive by mid-year, the new still would take total production up to 300,000 barrels annually.

The company also is looking for a larger North Bay facility for future distillery expansion.

“This is all part of the same story for Derek, to make a high-quality product with an interesting story and packaging and branding,” Webb said.

Jeff Quackenbush covers wine, construction and real estate. Reach him at jquackenbush@busjrnl.com or 707-521-4256.

Corrections, Jan. 17, 2024, 10:45 a.m.: Wine storage and production, not bottling, halted at the Graton facility in November. The name of Headframe Stills was misspelled.