New Owners for California Pinot Noir Star Kosta Browne

Main players remain, new partners cash out original investors for estimated $40 million

James Laube
Posted: September 11, 2009

Owners of Kosta Browne, the popular Sonoma winery that has made dozens of outstanding Pinot Noirs in the past five years, have sold a controlling interest to Vincraft for close to $40 million.

“We’re stoked, we’re really excited,” said winemaker Michael Browne, who started making wine with Dan Kosta in 1997, before launching their namesake label.

Browne, 41, said he, Kosta, 37, and Chris Costello, 34, who have been running the business, had been looking to replace some of the original investors, who are now in their 60s and 70s. Those investors wanted to cash out, prompting the Kosta Browne team to find a new partner.

They believe they found the right fit with Vincraft, a Sonoma-based investment firm that is putting together a portfolio of California wineries. “We met with many groups,” Browne said. “We wanted to find the right partner, the right fit, someone who would respect our vision and our culture.”

Walt Klenz, Bill Price and Pete Scott founded Vincraft earlier this year. Klenz and Scott are former top executives with the Beringer and Fosters wine group, and Price owns Durell Vineyard in Sonoma, along with the Three Sticks brand and a part interest in Kistler. TPG, the former Texas Pacific Group, is also an investor. That’s the same private equity firm that bought Beringer Wine Estates in 1995 for an estimated $350 million and then sold it to Foster’s for $1.5 billion in 2000.

“It’s been a long gestation period,” said Klenz of negotiations with Kosta Browne. “It’s a great kickoff acquisition for us.”

Kosta and Browne originally pooled their tip money while working in the restaurant business to start their winery, with their first major release coming in 2000. But their real breakthrough came with the 2003 vintage, with all six of its Pinots earning outstanding to classic reviews from Wine Spectator. The winery has had 49 Pinots reviewed, with 18 scoring in the classic range (95-100 points on Wine Spectator’s 100 point scale) and 25 with outstanding reviews, or 90-94 points.

Kosta Browne’s emergence as one of California’s top Pinot Noir producers has coincided with this varietal's recent ascent in quality. It has also helped define a new modern style of Pinot that features ripe, opulent flavors, impeccable balance, finesse and grace. Most of the wines come from Sonoma County and most carry vineyard designations. In 2007 the winery made 10 different wines and 11,000 cases; the wines sell for $58 to $72 a bottle.

Browne and Klenz said they didn’t plan any major changes. Kosta, Browne and Costello have been overseeing the business, which purchases all of its grapes and makes wine in a rented warehouse in Sebastopol. “One of the reasons we’ve been successful is we have low overhead,” said Browne. The vineyards they buy grapes from have both written and handshake agreements.

Klenz said Vincraft liked the owners, the wines and the business model. “We didn’t want to go in and change anything,” Klenz said. “We had to have a plan that we both agreed on. We have a fundamental philosophy for the wine, the brand, what varietals we make, etc. We have an agreement that sets the bounds of how we run the business.”

This is the first of several acquisitions planned by Vincraft. Klenz said hopes to expand the portfolio with a couple of Napa Cabernet producers, another Sonoma winery or two and one from the Central Coast.