Another week, another merger in the wine world, though merger seems a rather polite way of putting it. The wine business has become a blood sport. Just months after Napa’s historic Stag’s Leap Wine Cellars was sold to a consortium of Washington’s Chateau Ste. Michelle and Italy’s Antinori, the Illinois-based Fortune Brands sold its wine business (including Clos du Bois, Geyser Peak, Gary Farrell, Buena Vista, and Wild Horse) recently to Constellation. Those same wine properties changed hands only two years ago, when Fortune bought them from Allied Domecq and Pernod Ricard. And Constellation has been busy grabbing brands, acquiring Robert Mondavi and Australia’s leading wine producer, BRL Hardy, a few years ago.
Unless you wear a suit and call one of these offices home, the real question is how does this bode for what you drink with your meal? Not well. A few weeks ago, I was at dinner with the venerable wine writer Dan Berger, who told me, “The ownership of wine brands by publicly held companies just doesn’t work. They want a report every quarter, when what they should be getting is a report every quarter century.”
In other words, you can’t expect to suck profits out of a winery, at least not by Wall Street’s schedule of instant gratification. The impact of unknowns in wine is too great. It’s vulnerable to the whims of weather, pests, and—the big wild card—wine critics (see Clos Du Val’s damning 70 points from Wine Spectator [registration required]). When Wall Street pumps wine brands for profit, just as in any industry, cutting corners or downsizing is the likely route. Corporations raise grape yields, change grape sources, centralize processing, and force out dissenters. I know too many winemakers who have left their wineries within years of being purchased. Applying the strategies of other industries to wine doesn’t work very well. Why do you think Fortune Brands is getting out? It didn’t have the stomach for wine and is going back to the more predictable turf of spirits.
The brass ring that Constellation is reaching for is the distribution business. As Berger points out in a recent article, brands may be bought and sold for offensive or defensive purposes, purely because of the real estate they command at the retail level. This means the business on the Constellation level is not really about wine at all. I have no statistical evidence of this, but every time these brands—even the little artisanal ones like Gary Farrell—are bought and sold, they lose more of what soul they have left. It’s palpable, though not always easy to define.
But there is a silver lining for those who care about wines made by people, not in marketing departments and boardrooms. Because all this consolidation has made it much tougher on the small brands—the ones producing case volume in the low hundreds or thousands—they’ve found other distribution channels. They either can’t get the attention of the big distributors or don’t want it. And in Northern California, at least, this has meant the appearance of the specialty retailer. In recent years, three of these microstores, Acme Fine Wines, Back Room Wines, and the Wine Garage, have popped up right in the very heart of it all—Napa Valley—selling small-production wines overlooked by the big boys. As the dinosaurs continue to duke it out, these kinds of wine shops and wine labels will flourish. And that’s where you’ll find me shopping.