What Killed Ascentia?

Sonoma wine company shuts down after selling its remaining five brands—including Columbia and Geyser Peak—to Gallo and Accolade Wines
Jun 12, 2012

Ascentia Wine Estates, a Healdsburg, Calif.-based wine company formed by a group of industry veterans less than four years ago, is exiting the wine business. The company, which owned five brands in California and Washington state, including Geyser Peak in Sonoma and Napa’s Atlas Peak, has sold its assets in a series of deals to two of the world’s largest wine players. The sales effectively end Ascentia’s short but turbulent run as a wine company.

Australia-based Accolade Wines, a global wine company with a portfolio of Australian and South African brands, purchased Ascentia’s California portfolio. The sale includes three wineries—Geyser Peak, Atlas Peak and Zinfandel specialist XYZin, along with its California assets and inventory. As part of the deal, Accolade will lease Geyser Peak’s winery and vineyards in Alexander Valley.

In a separate deal that closed June 4, wine giant E. & J. Gallo acquired Ascentia’s Washington brands, Covey Run and Columbia Winery, as well as two facilities in Woodinville and Sunnyside. Details of both sales were not disclosed.

The sale marks Gallo’s first foray into the Washington wine industry. Roger Nabedian, senior vice president and general manager of Gallo’s premium wine division, told Wine Spectator that the company had been interested in the brands for some time. “When we became aware that Ascentia may be willing to sell, we contacted them immediately,” he said.

According to Nabedian, Gallo will change the winemaking team at both brands. “We want to try to keep whatever relationships we can and keep the foundation of the brand consistent, but we want to bring our own philosophy of winemaking to the winery,” he said. The new team will consist of winemakers from both Washington and California.

For Accolade, which was formed when private equity firm CHAMP purchased Constellation’s former Europe and Australia wine division last year, the deal allows it to expand into the U.S. The wineries provide the company with labels in both Sonoma and Napa. Tim Matz, Accolade’s North America managing director, said the company liked Geyser Peak because of the winery’s history and heritage in the California wine industry and its wide distribution.

Accolade is also considering expanding sales of the wines into its U.K., Europe and Asia markets. But it does not plan to make any changes to the current winemaking staff at this time. “We are very impressed with the winemaking team,” said Matz.

The deals come after weeks of rumors that financially troubled Ascentia was planning to shut its doors. Last year the company sold two of its well-known Sonoma producers, Gary Farrell and Buena Vista, to thin out its portfolio of wineries. Then in May it sold Ste. Chappelle Winery, Idaho’s largest producer, to Precept Brands, a privately held wine company in Washington.

The company faced heavy debt that it acquired during its formation in 2008, when it purchased eight wineries in the Pacific Northwest and California from Constellation for $209 million. Jim DeBonis, an industry veteran, created the start-up with backing from several investors including San Francisco-based private equity firm GESD Capital Partners. At first Ascentia looked to be well-positioned in the market. Combined, its California and Washington brands produced more than 1 million cases a year.

But business turned sour quickly for the young company. Shortly after it acquired the brands, the country fell into a recession. Sales of high-end wines plummeted as wine drinkers reached for less-expensive brands. Wineries started to see their cellars back up with unsold wine. Ascentia struggled to stay afloat.

In 2010, one of Ascentia’s lead investors, Deutsch Family Wine & Spirits, sued the company, alleging that it couldn’t pay the debt it borrowed to purchase the brands from Constellation. The lawsuit was later dropped, but Ascentia’s troubles continued. In an attempt to reorganize, the company replaced DeBonis as CEO. But less than eight months later, it rehired him when his replacement didn’t work out.

Industry analysts attribute Ascentia’s dissolution to poor timing. The company purchased the Constellation brands at a time when the wine market looked like it could only go up. When the economy crashed, it was left with several struggling brands and wasn't able to turn them around. “They bought at an unfortunate time and just couldn’t overcome the marketplace,” said Rob McMillan, executive vice president of Silicon Valley Bank’s wine division.

But Ascentia looks like an exception—not a sign that the wine industry is retreating. The recession has not brought many such failures, and the wine market is now showing signs of growth as wine drinkers are reaching for more expensive wines.

Winery Purchases and Sales United States California Washington News

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