As large beverage corporations acquire Paso Robles wineries, the impact on local vineyards, staff, and winemaking practices remains a topic of both anticipation and debate
For the vineyard owner, the prospect of a large-scale buyout may seem like an ideal way to step back from the sine wave of growing, harvesting, winemaking and sales. The hard work, care and love needed to make fertile ground prosper and grapevines thrive can be a daunting but enchanting prospect – and for those who dare to undertake the endeavor, oftentimes it is sink or swim.
Getting through the first five years takes guts, attention to detail and a determination to see the fruits of one’s labour become both bottled harmony and a financial positive. If those initial years show an inkling of success, the return on investment can continue to grow, and the business of winemaking is off to a good start.
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Over time, as the business grows and momentum builds, a name brand gains recognition not only with the consumer, but also with bigger fish in the industry. That can lead to a winery becoming a target purchase for an industry giant.
On its surface, the turning point for both winery and prospective buyer has its roots in company fit and profitability. It’s a potential on both sides. Does the buyer understand the market niche? Is the seller ready and are they comfortable with the possible outcome? Can the brand keep building and will the people who made it remain in their current positions?
Denner Vineyards in Paso Robles.
With these notions in mind, I set about finding some of the more recent Paso Robles winery purchases by beverage conglomerates, and requested time with anyone at the wineries who would sit and talk with me about the changes that took place after the purchase closed. Before my visit, I reserved a tasting in each of three locations. Only one returned my email request for an interview or conversation, and I thought that gave me a preview of what to expect.
What follows is an account of the consumer experience. You will not find an endorsement for a particular winery or wine, and it may not reflect what happens to the wineries in the long term, but it can tell you a little about how the insiders who work there are treated, any change in philosophy, and perhaps what the expectations are.
Daou sells to Treasury Wine Estates
This was a highly publicized sale that drew lots of attention. At $1 billion US dollars, the two owners, brothers Georges and Daniel Daou sold the winery, estate, and the tasting room and hospitality site. The men, graduates of the University of California, San Diego, took a hefty payout with residual following some goals set in an agreement with Treasury.
At the time of the sale, the Pacific Coast Business Times reported that Treasury Wine Estates (an Australian company) had a “…market value of $5.56 billion” making the Daou purchase a significant chunk of their assets.
I had seen Daou wines in supermarkets and on the shelves in various wine shops. I also shopped at big box retailers where Daou of equal and higher value to those bought elsewhere. When I sent an email inquiry for a chance to speak with someone during my visit, I received a template reply that didn’t answer my question. I was already disappointed.
Daou Vineyards offers a very broad range of styles and price points.
Tasting day arrived and the vineyards – which are spectacular – surround an Italianate stone and glass building with an arched magnificent entry. The greeters were polite and energetic, smiling, and convivial. We were immediately offered wine (100% sémillon), estate grown. We were shown to our table and seated with a 200-degree view of the valley below, covered in vines. I hoped the wines were as good as the view and the service.
As it turns out I was not disappointed. I had over 90 minutes with our hosts who answered all my questions without hesitation. I visited in July at which point the purchase was only 6 months old. Few, if any, personnel have left the organization to date, and the Daou brothers had committed to their employees that they were not abandoning ship. Nor were they turning a blind eye to the day-to-day running of the estate.
The Daou flagship brands that are not for sale in the grocery stores and large retail chains can still only be purchased on the property. Although the tasting flight was five wines, I was given nine in total, and of those, two were from the Patrimony line and two were Reserve and estate. It was not what I expected. I was pleasantly surprised by the whole experience. The wines at the upper end of the price range are definitely New World and are very expressive of the terroir in Paso Robles. Well crafted – the winemaker understands the grapes in vinification.
At the end of the day, the magic mix of financial support, brand loyalty, staff commitment, wine quality and price drive the consumer to make a purchase.
Daou offers a very broad range of styles and price points that are designed at the entry level to have the consumer try their products. If they enjoy them and want to increase in price point there is even more on offer, which is a Treasury goal. Increasing the luxury end of the market with the prestigious brands they own. That is, Penfolds, and now, Daou.
It was lunch time, and I purchased a charcuterie board which was not only beautiful, but replete with breads, cheeses, condiments, olives, and jams. Pleasing to the eye and the palate. The contents of the board were designed to enhance the wine selection. As time passes and tastes change wine offerings and price points will, too. With Treasury as a tail wind, it remains to be seen whether the Daou family can maintain the level of influence they currently have – which seems to keep the staff and consumers quite happy.
This was and remains a family affair. The brothers pay homage to the sister and parents they lost in a very short space of time. The wines themselves and the labels contain family history and dedication. The family has imbued their loyalty in their wines and in the treatment of their staff. I asked what else the family engages in now that there is $1 billion to manage. One of the most significant is the purchase of vineyard hectares in Tuscany by Daniel Daou, whose daughter wants to develop Italian varietals. That’s a long-term investment taking some years before there could be a payoff. But, the Daou family has done this before, and they know what it takes.
Denner sells to Gallo
To be fair, the experience at Daou preceded my visit to Denner and it may have had a biasing effect. Denner received my email request for a conversation after I made an online reservation, and they replied stating that someone in the winery would be available to speak with me. On our arrival we waited a short time as the staff were also arriving at work. We were the first at the winery that morning. Seated outdoors on a modern veranda, the views of the local hillsides were pastoral. There was no manager available to speak, but I was promised that someone would call me after my visit.
Denner, Paso Robles.
My host knew the wine composition but was uncertain of changes at the winery since Gallo’s purchase in 2022. The purchase represented the winery and vineyards along with the tasting room. Being fairly new at the winery, I felt it was unfair to pepper my host with take-over bid questions. I also thought I would get the opportunity to speak with a manager later on, so instead I sat back and enjoyed a wine flight. Although it was nearing lunchtime, I was told there was no food available for purchase. I was given lots of marketing materials and a good description of the winemaking process.
I understood that the winemaker at Denner had not changed since the purchase. Many of the wines display a penchant for tannat, some Rhône varietals, and grapes that do well in the heat of Paso Robles. The blends are unique in style and the price bands are quite tight in range. Gallo’s purchase may reflect a move to a higher end product in their suite of offerings.
I left the tasting and my contact information with the host who assured me someone would connect with me to answer my questions. That was back in July this year, and I am still waiting.
My Favorite Neighbor [MFN] sells to Constellation Brands
The email reply to my inquiry for a conversation on my visit to MFN was very enthusiastic. My tasting was late in the afternoon and the last one of the day. Paso gets quite hot in the afternoon and this day was a scorcher. Nevertheless, I was greeted with exuberance and gratitude.
The MFN tasting room and winery are much smaller in size and production volume than the previous estates mentioned here. The grounds sit immediately adjacent to the Booker Vineyard with whom they have a direct relationship. Eric Jensen who founded Booker Vineyard in 2001, later began MFN as a tribute to a mentor of his, Stephan Asseo of L’Aventure Winery. Turns out, he was also Jensen’s neighbor.
The wine flight gave me a chance to ask about the relationship between Booker and MFN, and what impact the purchase by Constellation Brands has had. When the purchase was made in 2021, Constellation took a majority stake in Booker and a minority stake in MFN. Jensen is still quite involved in the production and operation of the wineries and is very much a hands-on vintner.
The tasting room at My Favorite Neighbor.
Constellation is a corporation that owns Meiomi, The Prisoner, Kim Crawford, Mount Veeder and Vint by Robert Mondavi. I understood that their way of doing business receives some pushback from the staff at ground level. Recommendations by staff have been, more recently, taken seriously because there is some distance between the corporate office and the vineyard. The community aspect of MFN, therefore, is represented by the staff themselves.
The Booker property is more opulent and has a spectacular library and a cave, like one you might find in Bordeaux, that can be used to host private events. The outdoor seating has a picturesque aspect and is modern and calming.
The more casual atmosphere at MFN belies the high quality of the wines. Seated amongst olive trees and umbrellas, you can see the heart of the winery operation and watch the staff work hard to prepare the wines for each flight. Because Jensen still has a hand in operations, this does not feel like a conglomerate to the visitor. Staff turnover is very low. Wine quality is high.
What comes next depends on how well the business model for MFN works with wines in a narrow and lower price range than those of Booker. These wines are more niche and higher quality than some of the other Constellation Brand wines and it is a market that has plenty of competition. Staff seem committed to making it work – perhaps as long as Jensen is around?
Final analysis
At the end of the day, the magic mix of financial support, brand loyalty, staff commitment, wine quality and price drive the consumer to make a purchase. Corporations invest in estates and vineyards, ostensibly to grow value and profitability. If the concept behind the purchase moves significantly away from the processes that made the winery profitable in the first place, it becomes a losing proposition. The buyer knows this.
The stories I heard in talking to staff for this article were mostly positive. I did hear some less than complimentary tales that led staff to flee one particular establishment – and I can say unequivocally, this is a small community, and news moves quickly amongst its ranks. Reputation is critical and once it starts to break down, it’s tough to keep standards up.
– Gillian Marks, PhD. is a contributing editor with VineRoutes
