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james laube's wine flights

Changing Times: More Wineries Gear Up to Sell

Photo by: Greg Gorman

Posted: May 7, 2008 3:06pm ET

The sale last year of Stag’s Leap Wine Cellars put the spotlight on the fate or fortunes of family-owned wineries.

In coming years more of these wineries, which typically annually sell 3,000 to 50,000 cases of wine, will decide whether to sell or transition to heirs.

In the case of Stag’s Leap, the sale didn’t surprise me. Warren Winiarski, the winery’s founder, and his family had explored the options of his succession and they decided the winery would be in better hands with a new owner, and I think they made a wise choice in negotiating a deal with Ste. Michelle and Tuscan vintner Piero Antinori. I expect many other wineries have been weighing the same options, although there aren’t enough Ste. Michelle’s out there to bail out everyone.

Dennis Groth, whose family owns Groth Vineyards, also in Napa Valley, is keen on keeping his business family-owned and sent me a study about winery ownership transitions, aimed at small, family-owned wineries. The report was compiled by Silicon Valley Bank, which I’m also sure works with winery clients to ensure smooth passages.

The study was sent to nearly 3,000 small wineries in California, Washington and Oregon, of which 247 responded. Among some of the findings:

Most want to keep their businesses in the family, but half expected a change in control within 10 years, and 25 percent expect to change hands within the next five years. That means more than 1,000 wineries could change ownership in that time frame.

But the study found that few are adequately planning for transition, which the bank says takes five to 10 years to properly execute, and are not aware of potential sale hazards, such as inheritance taxes.

Moreover, most of the winery owners are apparently ill-prepared for any transition, which is why so many suddenly run into troubles that result in the business being forced to sell. Not surprisingly, communications skills among owners and would-be heirs is poor. Those of us on the receiving end of many winery communiqués understand this quite well.

Even if wineries do plan ahead, that hardly ensures a smooth transition.

I expected that this scenario was developing, since most wineries were founded after 1975 and are mature if not ripe for change. Few wineries make it to the second, much less third generations. Moreover, the passion that fueled most vintners’ careers hardly means that the next generation has that same dream or determination. Turning the business over to sons and daughters whose interests lie elsewhere makes less sense than selling.

Today I’m meeting with Carissa Chappellet, who has been working on her family’s estate planning and what hurdles they face trying to keep the business in the family and the family happy as well.

Monticello Vineyards
Napa, California —  May 8, 2008 6:07am ET
Having known a few families personally that have gone through this, it is a bummer when a family winery that had hoped to make it to the next generation is not able to make the transition. Our dad started growing grapes in Napa in the early 70s and we built our winery in 1981. My brothers, Stephen and Kevin, and I couldn't be more proud to be running our family winery as the second generation - and the third generation is already being primed by doing summertime work around the winery when schools out, just like we did when we were kids. We consider our staff extended family as well, and are proud to report that we have multiple members of our retail, cellar, and vineyard staff that have been with us for over 20 years - one recently retired after almost 30 years with our company. We're not a big winery, but there's enough room for the three of us Corley brothers to work together without knocking elbows all the time, so to speak. My brothers and I each have our own distinct responsibilities and skills as it relates to our winery - Kevin is the GM/Winegrower, Stephen is Director of Sales & Marketing, and I control the Winemaking. For our family and wine business, long-term planning has always taken priority over short-term tactics - hopefully a mindset that will help us accomplish our goal of making it to the third generation.Cheers, Chris Corley
Harvey Posert Jr
napa valley —  May 8, 2008 12:32pm ET
This odd business, into which wealthy people are attracted as they are to horseracing and restaurants, may be better off.
Hugh L Sutherland Jr-m
miramar beach, fl —  May 8, 2008 1:51pm ET
I can see why many family owned wineries do sell. As mentioned, many times the children will have other interests despite the parent's wishes. There also is and inheritance tax problem that shows up. Why look at your profits when you can sell and enjoy them. Unfortunately, when a large corporation takes over, the wines quality falls as more wine is usually made for the profits. It seems that if a winery takes over a winery, the quality stays the same. Hopefully, this will be true for Stag's Leap. In my opinion, Ravenswood has suffered. It remains to be seen with Beringer and possibly Screaming Eagle. Many of the wineries that we appreciate will be sold in the future. I only hope that the sellers are as concerned about who will maintain the quality of their wines as to how much money they are offered
Sandy Fitzgerald
Centennial, CO —  May 8, 2008 5:26pm ET
I could fill this page with examples of why passing along businesses and/or property, inter generational,in the US is extremely difficult. That's not my point here though. For Hugh,In the US we don't like to use the term but there exists properties that are grand cru/premier cru in their terrior. My greatest concern is that the conglomerates gain control of most of those properties. I don't care how many wineries the Big 7 conglomerates take over in the Monterey Valley next to Gallo properties. But I am very concerned about the % they own on the Rutherford Bench or the Red Hills of Dundee. I just really don't see a happy solution to the situation for we wine lovers.

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