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Bill Hambrecht Banks on Wine

A world-renowned financier shifts his focus from Silicon Valley to Sonoma

Daniel Sogg
Posted: January 15, 2003

Elbows propped on a conference table, Bill Hambrecht leans forward like someone about to share a confidence. "I'm a big believer in brand," he offers.

A valid point, no doubt, but hardly a shocking admission from the co-founder of Hambrecht & Quist. The groundbreaking investment banking firm that Hambrecht began in 1968 helped make brands such as Apple Computer and Adobe Systems fixtures of American high-tech—and famous around the world. During Hambrecht's tenure at the helm, H&Q became synonymous with Silicon Valley and a preeminent name in the banking industry.

Now the 67-year-old financier hopes consumers will associate his name with wine as well as securities. In 1998, he formed Hambrecht Vineyards and Wineries (HVW), hoping to tap the potential of his more than 1,000 acres of Sonoma and Mendocino properties.

"At least on paper, we saw resources that were worth a lot of money," he recalls. "I finally decided if it was really worth that, then it ought to be the basis of a good business. And if we couldn't figure that out, I would have sold the resources to someone who could."

At about 6 feet 3 inches tall, with craggy features and a no-nonsense style, Hambrecht might come across as imposing. But his relaxed, easy smile is effortless in both boardroom and vineyard, and he ultimately gives the impression of a grandfather who'd wink at teens sneaking wine at holiday dinners.

With his more than 30 years of experience marketing and selling securities, Hambrecht doesn't sugarcoat the challenge of promoting a diverse Hambrecht Vineyards and Wineries portfolio that includes three new labels. Up until three years ago, HVW sold more than half of the grapes from its seven vineyards in Dry Creek, Alexander Valley, Russian River and Anderson Valley. Now it bottles 96 percent of the crop from its 426 fruit-bearing acres; another 100 acres are planted. HVW's 2002 vintage should yield about 120,000 cases, bottled under five labels: Belvedere, Bradford Mountain, Carneros Creek, Floodgate Vineyard and Jest Red. (HVW also owns a minority stake in Gary Farrell Wines in Russian River.)

The vineyards contain 13 types of grapes, including all five Bordeaux red varieties, Zinfandel, Chardonnay and Gewürztraminer, so Hambrecht needed a production team with appropriately diverse experience. In 2000, HVW hired winemaker Bob Bertheau, formerly of Gallo of Sonoma, and director of viticulture Arthur O' Connor, who worked with dozens of varieties at Bonny Doon in Santa Cruz.

The majority of the HVW wines are made and stored at the Belvedere winery, built in 1982 in Russian River. Carneros Creek has its own facility, which handles an annual output of 30,000 cases. Bradford Mountain in Dry Creek, which currently makes about 4,000 cases of Zinfandel and a Cabernet blend, has a small, 5-year-old winery.

The most popular of the HVW brands is Belvedere, which is best-known for its excellent Sonoma County and Russian River Chardonnay bottlings. Modest pricing seems to be the rule at HVW, with nearly all the wines retailing for between $10 and $36 a bottle.

In 1998, HVW purchased a majority share of Carneros Creek, which focuses on Carneros Pinot Noir. The wines have disappointed of late, lacking ripeness. Rampant cork taint plagued its 1998 and 1999 vintages; Carneros Creek attributes it to Altec, a cork composite stopper blamed for taint problems at a variety of wineries. But HVW's seven-figure investment at Carneros Creek should help the brand deliver better wines, now that its crop yields are down and the winery has new equipment.

The new brands include Bradford Mountain, Floodgate, which makes Pinot Noir and Gewürztraminer from Mendocino's Anderson Valley, and Jest Red, a non-vintage kitchen-sink blend (seven grape varieties in the current release) that sells for about $10 a bottle.

Despite the marketing challenges, Hambrecht enjoys the wine industry and seems to consider it more congenial than the harder-edged world of investment banking. "Wine is long-term, and because everyone shares a lot of the problems it's not so competitive," he says. "It's just a nicer business than some."

Nevertheless, for Hambrecht, the allure of wine country extends beyond business. In 1969, four years after moving to California from New York, Hambrecht and his wife, Sally, started living on the site that would become Belvedere Winery.

"Almost from the first day Sally and I went to Healdsburg, we thought it was one of the most beautiful places in the world, and we wanted to spend at least part of our lives up there," he says. H&Q responsibilities eventually moved them to San Francisco, but Hambrecht began to explore the business side of wine after becoming friends with Chalone cofounder Phil Woodward. In 1979, Hambrecht made a private investment in the winery and was a driving force behind Chalone's (at that time) relatively novel decision to become a public company in 1984.

Around the same period, Hambrecht jumped into production. In 1982, he purchased a 45-acre vineyard in Dry Creek and also cofounded Belvedere Winery with Peter Friedman, a friend he'd met at a Marin County tennis club. Hambrecht properties have supplied grapes to a variety of prominent North Coast vintners, such as Turley, Ferrari-Carano and Farrell. For 11 years (until 1994), he also owned the Lytton Springs Vineyard in Dry Creek, source of the often outstanding Zinfandel bottling from Ridge.

Also in 1982, the Hambrechts built a weekend home alongside their then just-purchased Dry Creek Vineyard. Perched 1,000 feet up Bradford Mountain, the property offers a splendid view west across rolling ridges carpeted with dense groves of oak and cypress. Olive, black walnut and pear trees dot the site, which boasts a bright burst of color from Sally's rose garden.

Upon their arrival the land was a hodgepodge, containing fruit trees, marijuana plants and an old vineyard, Hambrecht says. Parts of the surrounding vineyard were so dilapidated that wine production seemed like a pipe dream. But closer inspection of the adjacent Grist Vineyard revealed a plot of Zinfandel dating from 1895 that produces intense wines with racy structure and delicious earthiness. Their first Bradford Mountain bottlings were from 1998, and that year's excellent Dry Creek Block One (89 points, $35) demonstrated that old-vine concentration can trump even difficult vintage conditions.

A knack for seizing opportunity was at play (so too a love of biking) in Hambrecht's acquisition in 1991 of the Rockaway property in Alexander Valley. He noticed the unplanted, 500-acre hillside site along a favored bike route, bought it out of bankruptcy, and planted a total of 126 acres, mostly of Bordeaux varieties and Syrah.

There are only 600 cases of the 2000 Rockaway Syrah, but its formidable richness and concentration bode well for future offerings. HVW winemaker Bertheau anticipates eventually making a total each year of about 1,000 cases of Syrah and Cabernet.

Initially, Hambrecht planned to launch a separate brand from the Rockaway vineyard, but decided against it in the prevailing economy. The current vintage will be sold as a single-vineyard bottling under the Belvedere label. Nearly all of the remaining grapes from the site go into the Belvedere Healdsburg Ranches bottling.

Hambrecht makes no bones about his prime motivation: the fascination of business, rather than wine production per se. He has never been an especially impassioned collector; when Hambrecht relocated to a smaller San Francisco apartment after his children moved out, most of the older bottles in his cellar were given to friends and family.

"I have the mind of a merchant," he says. "I love the wine and everything, but I like being involved because it's an intriguing business."

As Hambrecht's investment in Sonoma County vineyards grew, so did H&Q's connection with the wine industry. High tech remained the core business, but after the Chalone IPO, H&Q became the investment bank for several major wineries, underwriting public offerings for industry leaders such as Robert Mondavi and Canandaigua. Hambrecht left H&Q in 1997, but earned $135 million when it was purchased 21 months later by Chase Manhattan Bank (for $1.35 billion). In 1999, his new investment banking firm, WR Hambrecht + Co., took Ravenswood public.

Given his background, it's not surprising that Hambrecht advocates public ownership of wine companies. "Look at what it did for Ravenswood," he says. "By raising capital, they transformed a hand-to-mouth operation to a property worth $150 million."

But Hambrecht also acknowledges that the need to maximize profit doesn't always harmonize with quality. "It would be very hard to [consistently make great wine] if you're under earnings per share pressure every quarter," he concedes.

And even though he has witnessed (and participated in) the consolidation that's reshaping American high-tech, Hambrecht questions whether that trend offers comparable benefits for the wine industry. "I don't think there's a lot of economies of scale," he observes. "There's clearly leverage in distribution, but otherwise I don't see a whole lot of advantages."

Hambrecht doesn't hide his exasperation with the distribution side of the industry. His sensibilities as a businessman and a consumer are clearly violated by the 21st Amendment restrictions that give many wholesalers a stranglehold on sales. "It's an anomaly based on the old Prohibition mentality, and I don't think it makes sense in today's world," he says.

As stereotypes go, Hambrecht doesn't fit the image of an investment banking mogul, the type that would expense a couple of bottles of Pétrus over lunch. Rather than choosing a plush, top-floor office in a San Francisco Financial District skyscraper, Hambrecht and his staff work out of a converted two-story warehouse once used by a now defunct dot-com. Like other WR Hambrecht employees, the boss goes tieless, at ease in a cubicle alongside the other worker-bees.

He started WR Hambrecht hoping to change the way IPOs are distributed by underwriters, who typically dole out discounted shares to institutional investors. Hambrecht's firm is trying to promote a system that gives both individuals and institutions the chance to bid on shares, thereby setting a fair market price.

The plan, when he began HVW and WR Hambrecht in 1998, was to soon "retire" into the wine operation. That hasn't happened and doesn't look to in the near future because the banking business hasn't flourished, slowed by the economy and resistance from the investment community.

Hambrecht might never make a complete transition to vintner, but even the banker in him admits that this second career offers satisfactions that can't be tallied in a ledger. Touring Grist Vineyard, Hambrecht leaves the talking to the winemaker. But he's clearly in his element, at ease in a yellow Belvedere baseball cap, treading among the rows of Zinfandel planted in the chalky red soil.

"We probably could have made decisions that would have been more sound commercially," he says, "but these old vineyards seemed like they'd be a lot of fun."


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