Duckhorn Wine Company Buys Kosta Browne

Napa-based firm takes control of famed Sonoma Pinot Noir producer, uniting two Wine Spectator Wine of the Year winners
Duckhorn Wine Company Buys Kosta Browne
Napa's Duckhorn is expanding its portfolio of Pinot Noirs with a big name. (Courtesy Duckhorn)
Jul 17, 2018

Napa's Duckhorn Wine Company announced this morning that it is purchasing Sonoma Pinot Noir powerhouse Kosta Browne Winery. Duckhorn will replace Kosta Browne's current stakeholders, the investment fund J.W. Childs, as the sole owner. The deal includes Kosta Browne's winery and tasting room in Sebastopol, as well as 80 acres of owned vineyards and leases on 90 additional acres, as well as all inventory. Scott Becker, Kosta Browne's CEO and president, and winemaker Nico Cueva will remain at the company. The sale price was not disclosed.

"Kosta Browne has written a chapter of great Pinot over the last 20 years," Alex Ryan, Duckhorn CEO and president, told Wine Spectator. "There are a lot of wineries for sale right now, and if we were looking purely for assets that would be one thing, but Kosta Browne has authenticity and you can't match that."

Kosta Browne started in 1998 with one barrel of Pinot Noir, made by friends and founding partners Michael Browne and Dan Kosta, later joined by Chris Costello. Since then, the winery has become one of the most famous Pinot Noir brands in California. Its 2009 Sonoma Coast Pinot Noir was named Wine Spectator's 2011 Wine of the Year.

Growth has brought changes, however. When the original financial backers were looking to cash out, the Sonoma-based investment firm Vincraft purchased the winery in 2009. J.W. Childs, a Boston-based private equity firm, took over in 2015.

In 2017, all three founders officially stepped away from the winery to pursue personal projects. Referring to today's news, Browne told Wine Spectator in a statement, "I am proud to have been a part of Kosta Browne for so many years, and I'm grateful that it is being passed on to such a wonderful group who understands a brand like this and can take it to the next level in good fashion; rare indeed."

A cult winery's next chapter

The deal unites two Wine Spectator Wine of the Year winners—2017's top honors went to Duckhorn's Merlot Napa Valley Three Palms Vineyard 2014. Duckhorn Wine Company, whose portfolio of brands includes Duckhorn, Decoy, Paraduxx, Goldeneye, Migration, Canvasback and Calera—producing a total of 900,000 cases per year—is owned by a private-equity firm, TSG Consumer Partners. Executives at both firms say they see exchanges of ownership and leadership as being natural, especially in the private-equity realm.

But this is Kosta Browne's fourth set of investors in 20 years of business, and CEO and president Scott Becker says the challenge is to keep the vision of its founders alive through each transition. With Duckhorn taking the reins, Becker trusts their understanding of the long-view perspective required in wine. "Our vision remains the same, but our ambitions are bigger," said Becker.

He says that when J.W. Childs took over and it was clear Kosta Browne's founders would soon leave, company leaders asked: Where are we going? The leadership team worked side-by-side with the founders and investors to define a vision of how to position Kosta Browne as a global benchmark for California Pinot Noir and Chardonnay.

That's meant updating their winery and continuing a transition from relying solely on purchased fruit to owning land. Over the past four years, Kosta Browne purchased Cerise Vineyards' 60 acres in Anderson Valley, expanded its Pinot Noir bottlings to include wines from Santa Barbara, added more Chardonnay to its growing wine portfolio and invested several million dollars into the cellar and winery in Sebastopol.

Courtesy Kosta Browne
Winemaker Nico Cueva will remain with Kosta Browne under its new owners.

Under Duckhorn, the team hopes to expand its consumer base. Becker notes that Kosta Browne is at risk of becoming a victim of its own success. The wines are hard to find. Their mailing list has 30,000 members, and that group takes 85 percent of the annual production of 30,000 cases. That potentially shuts out new customers.

While their allocation-list model will remain in place, they want to expose the wines to a broader market, making them more widely available in restaurants and wine shops. Duckhorn has a strong national and international presence in the marketplace. "All great international brands have a legitimate wholesale component in key markets," said Ryan. "They [Kosta Browne] knew that was a step they had to take whether Duckhorn came along or not, and we can share knowledge and connections while still giving them their independence and keeping their culture of doing business intact."

Kosta Browne's new hospitality center, slated to open Aug. 9, will receive mailing-list members and, eventually, the general public. Becker hopes it will be a big first step to better connect with Kosta Browne fans. "The wines might still be scarce, but we want our hospitality to be warm," said Becker.

Since TSG Consumer Partners acquired Duckhorn in 2016, the company has expanded its Pinot Noir portfolio beyond the Goldeneye and Migration brands, started in the mid-1990s and early 2000s, respectively, with the addition of Central Coast's Calera in 2017 and now Kosta Browne. "We now have a fascinating selection of luxury-tier Pinot Noir, which should generate a lot of excitement," said Ryan.

Looking to the future, neither side revealed any big plans, but Becker believes success comes down to sticking with the game plan, and that includes aggressively seeking vineyard-buying opportunities that fit their vision for California Pinot Noir and Chardonnay.

"We believe in taking risks," said Becker. "There are 100 different ways to make a 1 percent improvement, and at the end of the day, our customer demands us to make better wines, and investment gives us a better shot to be among the best."


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