Acquired tastes: A wine dealmaker talks strategy (Corporate Dealmaker)

Acquired tastes: A wine dealmaker talks strategy

[ Share ] [ E-mail ] [ Leave a Comment ]

When Constellation Brands Inc. put up a handful of U.S. wine assets this past spring, a new private equity-backed buyer stepped forward to scoop them up. Enter Ascentia Wine Estates LLC, based in Healdsburg, Calif., which agreed to pay $209 million in cash and up to an additional $25 million provided it meets certain goals. The portfolio consists of eight premium brands: California's Geyser Peak, Buena Vista, Gary Farrell, Atlas Peak and XYZin; Washington state's Columbia Winery and Covey Run; and Idaho's Ste. Chapelle. Ascentia is the brainchild of Jim DeBonis, the former chief operating officer of Beam Wine Estates, who partnered with San Francisco buyout shop GESD Capital Partners and the owners of wine marketer W.J. Deutsch & Sons. DeBonis, now Ascentia's CEO, shares his thoughts about the new wine venture with The Deal's Renee Cordes.

How did you form Ascentia Wine Estates and select the right partners?

Ascentia Wine Estates was formed by the desire to continue what was started with the California brands and to broaden the portfolio into the premium Northwest brands. Additionally, I believed that an entrepreneurial approach would best benefit the new mix of wineries and brands in the Ascentia Wine Estates portfolio. This belief was shared by Peter Ekman, whom I partnered with to pursue the acquisition from Constellation. We engaged KeyBanc to organize the financing and were benefited by working with V.P. Perry Deluca, whose main focus has been on the wine industry. He and his team initiated the contacts, including GESD and W.J. Deutsch & Sons Ltd., which became investors.

What was your personal motivation in purchasing the brands from Constellation, and what are Ascentia's plans for these brands?

My personal motivation was to finish what we had started on the California brands while I was with Allied Domecq, then Beam Wine Estates. Plans for the future are to bring the brands into the light with the consumer and realize the results of a hard-fought and focused journey. This means, for example, repositioning Atlas Peak as a Napa Valley mountain appellation Cabernet Sauvignon specialist; investing in and reinventing Buena Vista Carneros, specifically its Ramal Vineyard estate, as a Carneros leader; tapping into Russian River Valley expertise in Pinot Noir and Chardonnay by Gary Farrell Vineyards & Winery as well as award-winning Sauvignon Blanc & Alexander Valley Cabernet Sauvignon from Geyser Peak; and realizing the true potential of the spectacular Riesling coming from our Pacific Northwest brands: Columbia Winery, Covey Run and Ste. Chapelle.

Will Ascentia take a centralized or decentralized approach in managing these brands?

Unlike a big corporation, our local company is nimble and resourceful, by and large decentralized. There are a few areas where we will combine forces such as buying glass and barrels. We will compile financial reporting centrally, but the vast majority of the operations will be decentralized. A large part of a brand's identity is the people and the culture at the wineries. Each is unique, as are the wines. Great things can be accomplished by the shear will of people. They need to be able to make and own their decisions. That is what is lost with overcentralization.

You mentioned that the acquisition provides an "excellent platform" for launching future acquisitions. How would you characterize Ascentia's future acquisition strategy, and what is the most important criteria in determining what brands to pursue?

The platform is the talented team of people within Ascentia, the expertise and execution capabilities of partner, W.J. Deutsch & Sons who is our appointed sales and marketing agent and distributor manager, and investors that believe in the wine industry with a willingness to move on the right opportunities. There is a complex array of criteria for what may be interesting to pursue. Clearly brands with unrecognized potential in the market place and/or those that would benefit from focused efforts at the winery would be of interest.

What segments of the market offer the most promising investment opportunities?

For Ascentia it would be fine wine brands with a regional focus.

What did you mean when you said, "A winery without a sense of place is just a commodity?"

I believe winemaking is an art. The sense of place is the people at the wineries, the origin of the vineyards and the stylistic vision of the winemaking teams, which come together in the creation of a wine. As a result, each of our wines is different, expresses its terroir, and offers a unique experience for the consumer.

What is driving consolidation in the global wine industry, and how long will it last?

Consolidation is driven ultimately by competition. Other factors include publicly traded companies' requirement to grow in order to provide returns for their shareholders; cost-savings generated by eliminating the duplication of functions of the combined businesses, thus improving the bottom line profit of the consolidated companies versus being apart; the strategic use of combined resources (for example a wine company buying a vineyard company or vice versa); greater relevance -- product offerings and services; mitigating risk through diversification; the desire to continue to exist; and an increase in process. Consolidation in the wine industry will continue as long as it is driven by the factors above.

Join Corporate Dealmaker's LinkedIn forum