Buy Small, Think Big
Bill Price is becoming a major player in California wine by targeting small wineries with loyal customers
What do Kosta Browne, Kistler, Gary Farrell, Buccella and Three Sticks have in common? Aside from all being California wineries, they’re all owned, either partly or solely, by Bill Price. A financial investor with experience in business consulting, Price, 55, may not have his name on a bottle or winery, but he has built an impressive portfolio of brands and vineyards over the past 20 years. And one of his wines is now Wine Spectator's Wine of the Year.
What sets him apart from most winery investors is his focus on small brands. Most investors want the returns associated with large wineries that enjoy wide distribution. But Price believes in small wineries, with loyal customers.
It took a while for Price’s passion for wine to merge with his work. He graduated from Stanford in 1978 and studied law at University of California, Berkeley. After a few years in law, Price decided he preferred business and went to work for Bain & Company, a leading consulting firm.
In 1992, he cofounded Texas Pacific Group (now known as TPG Capital), which would grow into one of the largest private-equity firms in the world, focusing on leveraged buyouts, recapitalizations and investments in distressed companies. Their first client was Continental Airlines, which they helped emerge from bankruptcy.
Wine had become a passion, and Price was intrigued when he heard reports that Nestlé was looking to sell off its wine division, Wine World Estates, which it had built after buying Beringer in 1971. The company wasn’t in distress, but wine was a more capital-intensive business than Nestlé’s food brands. “I was immediately intrigued by Beringer, because Nestlé had a reputation for investing assets, and Beringer was in terrific shape,” said Price.
In 1996, TPG purchased Wine World Estates from Nestlé for $350 million, renaming it Beringer Wine Estates. TPG took the company public and acquired Chateau St. Jean, Stags’ Leap Winery and St. Clement before selling to Foster’s for a reported $1.5 billion in 2000. “It was a defining moment in several ways,” said Price. “It gave me background into the three-tier system and the time frame of vineyard development. It introduced me to a network of people I still work with now. And it freed up an opportunity to buy Durell.”
Durell Vineyard was Price’s first personal investment in wine. In 1997, he acquired the 200-acre property that extends from the southern end of Sonoma Valley to Carneros. He now has 111 acres planted and sells grapes to more than 20 brands. In 2002, Price founded his own boutique label—Three Sticks, which makes Chardonnay and Pinot Noir from Durell. (“Three Sticks” was a teenage nickname given to him by surfing friends who teased him about being named William S. Price III.) It was as owner of Durell that Price also met the founders of Kistler Vineyards, the iconic producer of Sonoma Chardonnay and Pinot Noir. Price is now a partner in Kistler, having first invested in the brand in 2008.
In 2007, Price sold his interest in TPG. A year later, he partnered with Walt Klenz and Pete Scott, two former Beringer and Foster's executives, to found Vincraft, a Sonoma-based investment firm. TPG backed the startup with a $100 million fund, and Vincraft made a splash less than a year later with its first acquisition—Pinot Noir producer Kosta Browne.
The price was reportedly $40 million, a number that made headlines because the popular brand doesn’t own any vineyards. But Price said that the return of capital is higher with an “asset-light model.” Vineyards cost money. Founders Dan Kosta and Michael Browne buy from top sources, and most important, they have a loyal customer base, with thousands of people waiting to get on the mailing list. Wine Spectator recognized Kosta Browne's 2009 Sonoma Coast Pinot Noir as the 2011 Wine of the Year.
Earlier this year, Vincraft purchased Gary Farrell, known for Pinot Noirs and Chardonnays from Sonoma, and Price said the firm is considering other investments, looking for a Napa Cabernet brand in particular. There are plenty of deals to be found for those interested in buying a California winery. A weak economy, increasingly constricted distribution channels and stiff global competition are pushing owners to sell. Many longtime owners are approaching retirement age.
What sets Price apart in his buying strategy is a clear focus on brands with direct sales to customers, avoiding the three-tier system of winery to wholesaler to retailer. Other winery investors focus on volume—hundreds of thousands of cases to sell gives a brand leverage with distributors. But Price is more interested in a brand with a clear point of view, a talented winemaker and loyal customers. “It takes seven years from planting grapes to having wine to sell. It’s hard to predict where the market will be. If you have customers, you don’t have to predict,” he said.
Asked what his strengths are, Price said he sees his role as “strategic agitator.” He pushes wineries to find out more about customers and start a dialogue with them. “My aspiration is not to rest on making the best Chardonnay or Pinot Noir. It’s to have the best customer loyalty.”
