Those Disappearing Family Wineries
The concept of the family business creates a nostalgic feeling in the minds of many of us, even though those businesses frequently struggle to survive and are sometimes toxic for the family members involved. Over the past few decades, in almost every segment of the economy, large corporations have absorbed small enterprises or made it difficult for them to exist. The California wine industry is no exception.
Throughout the Golden State, there has been a familiar and recurring pattern. An artisan winery is founded by a pioneering couple and grows into an admired icon. Years pass, and when the couple reaches retirement age, they have a problem: either they have no children, or their kids aren’t interested in making wine. Along comes a multinational beverage corporation with a huge financial offer, and the couple decides to take it.
There’s no implied criticism here. If someone waved a check for $20 or $30 million under my nose, I’d grab it. In many cases, the couple gets to stay on property as paid advisors. And it’s a sale, after all, not the Walmart or Amazon scenario of overshadowing smaller operations that can’t compete.
A full list of the California family wineries that have been sold to large corporations would be exhausting to read. Some examples: Jackson Family Wines began by purchasing Matanzas Creek in 2000, followed by La Jota (2005), Freemark Abbey, Arrowood, Byron, and Murphy-Goode (2006), Siduri and Novy Family Wines (2015), Copain, Field Stone, and Oregon’s Penner-Ash and Willakenzie (2016), and Brewer-Clifton (2017). Foley Family Wine & Spirits bought Chalone, Firestone, Banshee, Kuleto Estate, Merus, Silverado Vineyards, Chalk Hill, Chateau St Jean, Ferrari-Carano, Lancaster, Roth, Sebastiani and Kenwood.
Some of the acquisitions involved serious money. When Constellation Brands purchased Robert Mondavi’s luxury labels in 2004, the price tag was slightly more than $1 billion. In 2021, Constellation sold 30 “value-priced” brands to E. & J. Gallo for a reported $810 million, bringing the total number of Gallo properties to well over 100.
You may ask: Isn’t this the way of the world, and what’s the harm? In many instances, production skyrocketed after the sale and quality declined. To prove that theory, I’d have to examine them on a case-by-case basis but will refrain from naming names, since I still have a shred of common sense left. Even so, we all know of wineries that were once small-batch beauties and are now indistinguishable from the sea of quaff on the supermarket shelf.
My friend Lisa Mattson published some interesting data in 2019 on family-owned winery trends. Of the 180 wineries in Napa and Sonoma in 1978, 150 were still in business six years ago. 62 were owned by the founding family, 28 were sold to another family, 26 were closed, and 65 were corporate owned. The use of “family” in this context doesn’t include operations such as Jackson and Foley, both of which own over two dozen properties. One of the survivors is Mattson’s employer, Jordan Vineyard & Winery in Alexander Valley, which was established by Tom and Sally Jordan in 1972. Their son John runs the operation today and continues to produce high-quality wine.
The situation is different in many European countries, where the role of the distributor is not as dominant as it is here. In France, wineries have the option of selling directly to retailers and restaurants, thus avoiding an extra layer of middleman profit. Many small producers are farming vineyards that have been in their families for generations, avoiding the cost of land as a factor in pricing. An acre of vineyard in Napa can range from $200,000 to as high as $1 million, mandating a price tag on the final product which makes it difficult for the winery to survive. Financing a winery (or even paying for a custom crush facility) can almost be as expensive as buying land.
The good news is that a new generation of dynamic, small-batch wineries is popping up in California. Some are family operations, while others are collaborations among childhood friends or projects founded by lone mavericks, beginning with Arnot-Roberts in 2001 and continuing today with Lawrence Wine Estates, Pax, Memento Mori, Rhys Vineyards, Tessier, Railsback Freres, Vice Versa and many others. We’ll be examining some of these in future posts.
