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james laube's wine flights

A Savvy Investor Buys into Napa's Buccella Cabernet

Photo by: Greg Gorman

Posted: Mar 23, 2009 3:29pm ET

Bill Price is a popular guy these days. He’s a shrewd businessman who knows wine and has access to capital. While he sees turbulent times ahead for wine, he also likes the opportunities of today’s wine market.

The highly regarded private equity investor has acquired a minority interest in Napa Valley’s Buccella winery to go along with a similar minority position with Kistler Vineyards in Sonoma. He owns Sonoma’s famous Durell Vineyard and has his own small Pinot Noir label, Three Sticks.

Price’s investments in Buccella and Kistler, though, pale by comparison with his past wine dealings. As one of the principals of Texas Pacific Group, a leading private global investment firm, he put together TPG’s winning bid in 1995 for Nestlé’s Wine World, owner of Beringer Vineyards, Chateau St. Jean and Chateau Souverain. While terms were not disclosed, the sale was estimated in the $350 million range, with some $60 million from TPG, according to Price.

Five years later, TPG and the other investors in Wine World sold it to Foster’s, the Australian drinks firm, for $1.5 billion. Price said TPG made 10 times what it invested with the sale.

Price decided to keep his hand in wine and bought Durell Vineyard, a highly regarded grower of Chardonnay and Pinot Noir, and then his part in Kistler, which specializes in those two varietals.

“I retired from TPG, so I’m out of the big equity market,” Price told me today. But he has been eyeing a high-end Napa Valley venture, and found it in Buccella, which specializes in Cabernet, selling for $135 a bottle, and lesser amounts of Merlot. Buccella’s owners, Bill and Alicia Deem, needed a partner to expand their business from about 2,000 cases now to 10,000 cases as growth permits. It’s an ambitious plan, but one Price thinks is viable.

Making high-end red wine is capital intensive. “It takes such a long time between investing in grapes and selling the wines, that most wineries need capital,” he said. “Obviously in this [economic] environment it’s getting more difficult to sell wines and raise capital.” Buccella buys grapes from a dozen vineyards and believes in blending those sites rather than focusing on a single-vineyard model. Celia Welch (formerly Masyczek) is the winery’s consultant.

“We’re seeing a lot of changes [in the market] and adjustments in credit [lines],” he said. “Almost every asset class has gone down in value.” As wineries have their assets, namely wineries and vineyards, reappraised, often at lower prices, it makes it more difficult to find lenders, said Price. The result is a downward spiral in winery values.

The proprietors of many family-owned wineries started in the 1970s and 1980s are nearing retirement age, Price said, and without heirs to take over their businesses, they will likely need to bring on partners or sell their business. “It’s a generational thing,” he said. “There are a large number of wineries for sale, and there are more sellers than buyers.” He said he is approached about once a week to look into investing in a winery.

While business such as hotels and restaurants feel the recession almost immediately, “The wine business tends to be on a little later cycle,” Price said, “and the wine industry is starting to feel the consumer pulling back.”

But he sees opportunities in winery-direct sales, which bypasses the traditional distribution system that connects with retailers. “Wholesalers are becoming less important to small, high-end wines,” he said. In the coming months, “I think you’ll see who really has brand value [and] which customers will stick with brands.”

Companies that are heavily leveraged and aren’t selling wine will be particularly vulnerable, he said. There are far more wineries for sale than buyers.

Dennis D Bishop
Shelby Twp., MI, USA —  March 23, 2009 9:03pm ET
I am glad to say I have a double vertical of Buccella - from their first vintage - 2002 to 2005. Of the 12 cabs purchased I have only consumed three an 02, 03, and 8 days ago an 04. I also bought a 3 pack box of the 05 Merlot and downed one last fall. I really like their big bold, chewy dark cab! I just hope that the changing of the guard both in ownership and wine maker does not hurt their very high quality product! Yes, the wine is expensive, but there really is nothing that I can find that I like better. dennyb
Brian Peters
Broomfield, CO —  March 23, 2009 10:47pm ET
I'm a huge fan of the Buccella wines...have been on the mailing list for several years. I hope they don't strecth themselves too thin trying to go from 2,000 cases to 10,000 cases...that's a lot of volume.
Apj Powers
Dallas, TX —  March 24, 2009 1:05pm ET
Interesting stuff. Please keep these business notes coming. I'm always curious about this side of wine. It seems I'm approached every week w/ a new label or winery and I always wonder how the mkt can support them all. What is their business plan? This was before the financial crisis. Now what???
Brian Peters
Broomfield, CO —  March 25, 2009 3:35pm ET
Just got notification they are shipping the 2006 in 2 weeks...looking forward to trying a bottle. Have tried the 04 and 05...still have a few bottles in reserve of each.
John Wilen
Texas —  March 25, 2009 9:48pm ET
I've known Bill Price for 25 years. I can't think of a more customer-oriented, business savvy guy. Buccella is lucky to have him.
Mark Owens
Cincinnati, Oh. —  March 30, 2009 4:20pm ET
I love Buccella Cabernet. It has become one of my favorites. I hope they are able to keep what got them where they are. I have been a fan since the '03 vintage. I don't know how the investor will affect things but I believe that Celia will be a positive change from Mark Herold. All the best,Mark Owens
John Wilen
Texas —  March 31, 2009 11:53am ET
JL,I re-read your blog on Buccella and the case production targets you quoted seemed awfully high to me. Buccella is such a small operation that I couldn't believe they were contemplating the kind of growth implied in your interview. In fact I wouldn't be surprised if it made some customers needlessly anxious. Well the good news is I spoke with the owners and something must have been lost in translation. They assured me that the goal is to grow at a moderate pace, and that even doubling the current case production (under 2,000 cases annually) over the next 5 years will be a stretch. They have no intention to outstrip their capabilities or put this successful franchise at risk. Sounds wise to me....
Robert Busch
Charlotte, NC —  April 6, 2009 8:32pm ET
Glad to see the last comment from John. I have been a loyal buyer since 2002 and was a little concerned to read the expansion comments. Will be curious to see which direction Celia takes the style of the wine. Buccella is one wine I am sticking with as I weed out some of the other high ends.

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