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Beverage Giant Diageo Buys Rosenblum for $105 Million

Founder Kent Rosenblum will stay on board to oversee winemaking, as acquisition is Diageo's first major foray into premium Zinfandel production

Tim Fish

Posted: Monday, January 28, 2008

Rosenblum Cellars, one of the leading producers of Zinfandel and Rhone varietals in California, is being acquired for $105 million by international drinks giant Diageo. The sale price includes the Alameda winery, which is located across the bay from San Francisco, along with the brand and existing inventory. There is no debt load on the winery, although owner Kent Rosenblum has about 200 shareholders, Diageo spokesman Tom Scott said. The winery relies on long-term contracts with growers around the state and owns no vineyards.

The two companies agreed to the sale this morning, but Diageo is a publicly held company, so the sale is subject to regulatory approval in the United States. The deal is expected to be completed in the first quarter of 2008. Rosenblum, a veterinarian who founded the winery with his wife, Kathy, in 1978, will remain on board to oversee winemaking and continue to promote the brand.

Rosenblum, 63, said it wasn't easy giving up the winery he has nurtured for 30 years, but the timing was right. "It wasn't a burning desire to sell," Rosenblum said, "but we have a number of shareholders who are getting up in the years and have expressed an interest in their investments. I think this is a win-win situation for everyone."

Rumors of the sale emerged in recent weeks, and Diageo has made no secret that it is interested in expanding its California portfolio. The London-based company was a player in many recent deals, reportedly bidding for Robert Mondavi Winery in 2004—for which competitor Constellation ultimately paid $1.3 billion—but instead Diageo that same year bought Chalone Wine Group for $260 million.

Rosenblum joins Diageo's Chateau & Estate Wines division, which currently includes Acacia, Beaulieu, Chalone, Provenance and Sterling. It was Rosenblum's focus on Zinfandel that apparently caught Diageo's eye, as none of the company's current brands has a strong Zin business, the company said. "Rosenblum Cellars is a highly regarded, critically acclaimed brand in the dynamic premium Zinfandel segment," said Ray Chadwick, president of Diageo Chateau & Estate Wines, in a statement.

Rosenblum has a devoted following of California Zin lovers, who jam the winery during its semi-annual open houses. The winery produced approximately 200,000 cases last year, with about 50 separate bottlings. It produced 22 different Zinfandels alone, many of them vineyard-designated wines. The winery also produces Syrah, Petite Sirah, Chardonnay, Viognier and more. Top wines such as the Syrah Sonoma County Kick Ranch Reserve and Zinfandel Paso Robles Richard Sauret Vineyards routinely receive outstanding scores from Wine Spectator, with the Zinfandel Rockpile Rockpile Road Vineyard 2003 placing at number three in the 2005 Top 100.

Rosenblum, who signed a five-year contract with Diageo, sees himself at the winery in the long term. "I think we'll just have to wait and see how happy everyone is as things go along. Always said I want to make wine until I'm 90, so I have a few years."

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