California Wine Consolidation Ramps Up To Close Out 2023

Consolidation is nothing new for the wine industry, but the pace of change has accelerated in recent years as interest rates have risen, costs of labor and supplies have jumped, and demand for wine has softened. Those and myriad other factors are contributing to a new wave of acquisitions that is changing the California wine landscape.

In late August, SND exclusively reported Gallo’s purchase of Napa Valley’s Rombauer Vineyards, a move that came just two months after the company acquired Central Coast producer Hahn Family Wines, as well as canned wine and spritzer producer Bev. Those are just three of multiple acquisitions Gallo has made in the past five years. Gallo remains the top wine marketer in the U.S. with annual volume of approximately 90 million cases, according to Impact Databank, more than twice that of its closest competitor, The Wine Group.

The industry saw two other big deals in the latter months of this year, as Treasury Wine Estates acquired Paso Robles-based Daou Vineyards for up to $1 billion in late October and Duckhorn snapped up Sonoma-Cutrer from Brown-Forman for $400 million last month. Treasury closed the deal for Daou—which has U.S. volume of approximately 600,000 cases centered in the $20-$40 band—on December 15. Duckhorn’s play for Sonoma-Cutrer—which has volume of 540,000 cases retailing from $20-$50 a bottle—is expected to close next spring.

Like Rombauer, Sonoma-Cutrer is prized for its prowess in upscale Chardonnay. In the case of Daou, Treasury Wine Estates Americas president Ben Dollard told SND that the winery was attractive for its growth potential amid rising interest in Paso Robles Cabernet Sauvignon.

While the aforementioned brands are clearly on the upswing, offering ample upside to their acquirers, consolidation is also being fueled by the financial squeeze stressing smaller players amid tougher market conditions. “We are in challenging times that put many wineries into a stress-test environment,” says Peter Mondavi, Jr., co-proprietor of Napa’s Charles Krug Winery, summing up the feelings of many in the industry.

“Some brands are selling because financially, with margins tightening in the industry, they just don’t have anywhere to go,” adds Steve Lohr, president and CEO of J. Lohr Vineyards & Wines. “They’re really thankful to [be acquired by] a bigger company with more access to funds. Of course sometimes the brand’s identity can change and the vineyard sourcing may not necessarily stay, but in many cases it absolutely gives a brand a second life.”

Dave Derby, senior vice president and chief commercial officer for Trinchero Family Estates, anticipates more wineries will change hands due to the current environment. “I think a softening demand for total wine overall means the pie is not growing as fast, and so consolidation will continue,” he says. “In an environment where sustainable growth depends increasingly on securing market share, competition among those top producers will continue to be healthy.”

Tagged : Daou, duckhorn, E&J Gallo, Rombauer, Sonoma-Cutrer, Treasury Wine Estates

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