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Exclusive: Bill Foley Sees More Acquisitions Ahead

June 4, 2012

In recent years, Bill Foley of Foley Family Wines has been one the most aggressive acquirers in the California wine business. A longtime financial industry executive—he’s currently chairman of Jacksonville, Florida-based Fidelity National Financial—Foley began his wine empire with the acquisition of Santa Barbara’s Lincourt Vineyards in 1996. Over the past five years, new additions to the Foley portfolio have come at a rapid pace—including Santa Barbara’s Firestone Vineyards and boutique Cabernet producer Merus in 2007, Napa’s Kuleto Estate in 2009 and Sonoma’s Sebastiani Winery and Chalk Hill Winery in 2009 and 2010, respectively. Foley has also expanded outside California, buying Washington’s Three Rivers Winery in 2008 and New Zealand Wine Fund in 2009. In recent weeks Foley has struck again, agreeing to purchase Napa’s Sawyer Cellars—from which he’ll launch a new upscale Foley Johnson label (Johnson is his wife’s maiden name)—and New Zealand Wine Company. Foley Family Wines expects to produce and sell 700,000 cases in the U.S. this year, and 650,000 cases in New Zealand (about 80,000 of which will be imported to the U.S.). Shanken News Daily recently caught up with Foley, who says more acquisitions are already in the works.

SND: What’s next on the acquisition front?

Foley: I’m trying to fill out appellations where we’re not present. I’m working on a couple things over in Dry Creek, and something in Russian River, where we have a vineyard but no winery. I’m working on something of pretty good size up in Lake County, which would be a little less expensive a product. And I’m looking in Oregon. If I fill those out, I’ve pretty much got what I need in terms of base coverage. Then I’d just be opportunistic. I bet I’ll have three or four things wound up in the next couple months.

SND: What are your plans for the former Sawyer Cellars, the Napa winery you’ve recently purchased?

Foley: I’m going to build a new production facility there with a $3-$4 million investment and turn the existing building into event space and a tasting room. We’re going to create the Foley Johnson brand from that site, focusing on the high end.

SND: What will Foley Johnson look like?

Foley: We’ll have two tiers. The top tier will have a thumbprint on the bottle and be labeled “Handmade.” Those wines will only be sold in the tasting room, ranging from around $55 to $150 a bottle, and they’ll include 250 cases of the site’s best estate Cabernet and an estate blend. Handmade will also include 100 cases of the top wines coming out of Merus, 100 cases of the best Chalk Hill Chardonnay, 100 cases of Pinot from Foley Estates and Lincourt in Santa Barbara, 100 cases of Zin from Kuleto and 100 cases of Alexander Valley Cab from Sebastiani. The second tier, made from the balance of production at the estate, will be sold at the tasting room and also into distribution, retailing at around $50.

SND: How will New Zealand Wine Company augment your business in that country?

Foley: It will roughly double our New Zealand volume to about 650,000 cases and enable us to bring another good brand into the U.S.—Grove Mill ($11.99 a bottle), which is now distributed by Palm Bay and does around 25,000 cases. We’ll bring that brand over to our sales force. Most importantly, from a business standpoint, the acquisition gives us flexibility to shift fruit back and forth from our existing operation in the Awatere Valley to the new one in the Wairau Valley, depending on which brands are doing well. We have about 250 acres of vineyards and a 300,000-case production facility at both sites.

SND: Which among your New Zealand brands are priorities in the U.S.?

Foley: We started importing Clifford Bay ($9.99) about two and a half years ago. This year we’ll sell about 75,000 cases. It’s in some by-the-glass programs, but it’s really a retail chain-driven brand. It just knocked another Sauvignon Blanc out of Costco in the Southeast, which was a significant success for us. We’ve also brought in Vavasour, a higher-priced Sauvignon Blanc and Pinot Noir brand. We’ll sell about 5,000 cases of Vavasour this year versus 500 last year. The Kiwi dollar has gotten weaker versus the U.S. dollar lately, and that’s been helping margins in the New Zealand unit.

SND: Which brands are driving the California business, and which face challenges?

Foley: I’ve acquired a lot of distressed brands over the past few years. Some are harder to resuscitate than others. Chalk Hill is doing great. Sebastiani’s doing really well, as is Lincourt. Firestone has been a bit of a struggle. I put a new winemaker in there and changed the character of the red wines. The first vintage of the new style, 2009, is just being released. Now we have to go out and rejuvenate the Firestone brand. Merus is doing great. Kuleto is small-production, doing fine but not fantastic, so we’re moving some fruit from there into other programs. Overall we’re doing well, with sales up about 35% last year.

SND: Is the tight California grape supply affecting your brands?

Foley: The last harvest was tough. We’ve got a pretty serious grape shortage in California. Vineyard owners are demanding quite a bit more per ton of fruit, and there’s resistance from distributors on raising prices. A year ago we paid $1,800 a ton for Alexander Valley Cab, and now we’re paying $2,400. We did about 90,000 cases of Sonoma County Cab ($15) at Sebastiani last year. For 2012 we’ll do 60,000 cases. We can’t make the numbers work otherwise. This way we can firm up pricing and afford to take a little loss in distribution. And that’s a pretty typical scenario.

SND: But as a large vineyard owner, are you somewhat insulated?

Foley: Yes. Over the past three years I’ve bought a lot of vineyards, so we’re not as susceptible as some. Foley, Lincourt, Firestone, Chalk Hill and Foley Johnson are all estate fruit. Sebastiani is 50% estate fruit. On the other hand, I spent a lot of money trying to produce my own fruit and still had a terrible vintage last year and didn’t get enough. On our main vineyard at Chalk Hill, we generally do about 16,000 cases of Chardonnay. In the 2011 vintage we got 6,500 cases. So we have no choice but to firm prices and get full value.


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