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After the Sale: The Future of Sonoma County's Ravenswood

Tim Fish
Posted: May 31, 2001

Devotion is a difficult thing to buy, but that was one of the goals when wine, beer and spirits giant Constellation Brands paid $148 million in April for Ravenswood, the Sonoma County winery that built a cult around Zinfandel.

"Our customers are devoted, frighteningly devoted sometimes. I've had people walk up to me in bars and pull up their shirts to show me their Ravenswood tattoos," said Joel Peterson, Ravenswood's founder and winemaker. "Of all the companies we talked to, Constellation was the most adamant about maintaining -- what did they call it? -- 'the cult and the culture of Ravenswood.' That was an important factor in the decision."

At first glance, Constellation and Ravenswood -- whose slogan is "No Wimpy Wines" -- seem like an odd fit. Constellation, formerly known as Canandaigua Brands, is best-known for jug wines such as Almaden, Arbor Mist and Paul Masson. However, the publicly traded company has been trying to improve its image recently, buying more prestigious brands such as Sonoma County's Simi Winery, Napa Valley¿based Franciscan Estates and Washington's Columbia and Covey Run labels.

Besides, cult would be nowhere without a positive cash flow, and Ravenswood's culture leaves plenty of room for the bottom line. While collectors see Ravenswood primarily as the house of heavy-hitting, small-lot, single-vineyard Zinfandels such as Cooke, Old Hill and Dickerson, the reality is different. Production has expanded nearly threefold since the winery went public on the Nasdaq market in 1999. Peterson expects to make as many as 600,000 cases this year, more than half of that the middle-weight Vintner's Blend Zinfandel, Merlot and Chardonnay, which cost $10 to $12 a bottle.

That Vintner's Blend cash cow was a key reason Constellation was interested in the winery. And for his part, Peterson, like a movie director who makes blockbusters and art films, is a pragmatist. The winery will continue to make hotly collected Zinfandels, but Peterson will keep expanding the Vintner's Blend program, as well as increase production of his county-appellation Zins from Sonoma, Napa, Amador and Lodi.

Such expansion often comes at a price in the wine industry, as it's difficult to maintain quality while increasing production. There is cause for concern: some of Ravenswood's recent Zinfandels, including some of its vineyard-designated bottlings, have not rated as highly as previous releases in Wine Spectator tastings.

Peterson argues that quality has never suffered and says that one of his motivations for selling was the pursuit of quality. "I don't think growth has been a negative at all," Peterson said. "Growth has given us more money to make the wines better. I think our upper-end wines are as good or better than they've ever been. We've certainly kept up with the competition."

One couldn't blame Peterson if he simply wanted to cash in on his success after 25 years at Ravenswood. There were certainly plenty of lean years before now. Peterson founded the winery in 1976, but he didn't take a full-time salary until 1987. A microbiologist by trade, he worked weekends at Sonoma Valley Hospital for many years, only leaving the job a few months ago. "For a long time, it was a matter of supporting my family," Peterson said of that job. "Later, it was a matter of enjoying the work and the people I was working with."

But even though Peterson's shares in Ravenswood were worth about $39 million in the deal with Constellation, the 54-year-old isn't ready to retire as winemaker yet. "People call and say, 'Gee, you answered the phone. I thought you'd be in Tahiti,'" Peterson said.

With his cowboy hat and beard, Peterson may seem every bit the laid-back California winemaker, but don't be fooled. His attention to the bottom line motivated Ravenswood's initial public offering two years ago. Despite selling the winery, Peterson believes the IPO was a success. It raised money for the winery to expand, while increasing its body of investors and allowing many of Ravenswood's aging original investors to cash out.

The stock, Peterson conceded, never reached the level that he expected. Opening at $10.50, the stock was trading around $12 in January, and its value was a motivating factor earlier this year when Ravenswood let it be known that it would consider a sale or merger. Ravenswood began talks in March with Constellation and a number of other undisclosed companies.

Constellation offered stockholders $29.50 a share. "[The stock] was selling for about half its value," explained Agustin Francisco Huneeus, president of Franciscan Estates, the division of Constellation that oversees Ravenswood. "I've lusted after Ravenswood for three years. I talked to them before they went public," Huneeus said. "Franciscan is really interested in developing the Zinfandel category. I have a strong belief that Zinfandel is going to be a big player."

Huneeus plans to expand Ravenswood's vineyard holdings and put Constellation's distribution muscle toward expanding Ravenswood's availability nationally.

Despite all the change at Ravenswood, Peterson believes consumers shouldn't read too much into recent sales of smaller wineries to winery conglomerates. "There's clearly room for small, quality-oriented wineries," Peterson said. "We grew not because we would have died if we didn't. We grew because we wanted to and thought it was the best thing for us."

Ravenswood regulars will have to wait a few years to see how true that is.

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Check our recent ratings of Ravenswood wines.

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