A-B Partners with Winery Investor
Recent buying sprees of U.S. wineries and increased consumption among consumers has resulted in a wave of investment funds specializing in the wine business. And just in the nick of time as family-owned wineries are preparing to hand the business off to the next generation. Coincidence?
Here enters Bacchus Capital Management, a winery investment firm based in San Francisco, that formed last year by Seagram heir Sam Bronfman II and partners Peter Kaufman and Henry Owsley of the Gordian Group.
Gordian is known for its efforts to guide companies through restructuring and back to health, including Spiegel, Smithfield Foods, and, more recently, Summit Global Logistics, according to an article in The New York Sun.
One of their first ventures has been to launch a fund that will provide mezzanine capital and, to a lesser degree, private equity funding to wineries "maxed out at their banks," says Kaufman. Bacchus is prepared to lend at four to eight times earnings before income taxes, depreciation, and amortization, compared to banks who typically will only lend up to three times EBITDA. Most acquisitions in the field fetch prices as high as 12 to 18 times EBITDA.
In addition, Bacchus plans to have around 8-10 portfolio wine companies in the initial phase of the fund.
It has been well documented that most family-owned wineries are facing the challenge of how to pass the business onto the next generation without losing control. Silicon Valley Bank’s survey last month said 51% of family-owned wineries are anticipating a change in ownership by 2017. So, expect a lot more companies like Bacchus in the next couple of years.
Kaufman and Owsley can help wineries pass their business to the next generation, while Bonfman and recently hired colleague Mike Jaegar are proficient at running wineries and promoting brands. Recall that Jaegar is a former Constellation and Vincor USA senior exec, who became Bacchus president and coo in April.
ANHEUSER-BUSCH LIMITED PARTNER. Bacchus has also signed Anheuser-Busch as a significant limited partner. A-B is contributing money, a full-time employee (senior exec Keith Wesselschmidt) and use of its distribution system. Distribution is key since most wineries (96%) sell less than 100,000 cases a year and often have a difficult time gaining distribution through wholesalers.
"The key to success is distribution. There are only about 10 national distributors that matter, and a lot of wineries can't get distribution. Sam Bronfman is extremely conversant with these organizations and can be incredibly helpful. Worst case, some can game the system and make an end-run around the distributors, going through Anheuser," said Kaufman in the article.
According to The Sun, Kaufman says he’s not sure how Bacchus’s arrangement with AB might be affected by an anticipated bid from InBev.
TTB REJECTS NAPA AVA
The Alcohol and Tobacco Tax and Trade Bureau (TTB) have rejected a request to designate east Napa as the Tulocay viticultural area, according to the Napa Valley Register. Feds say the name does not have enough general recognition or support among local vintners. In fact, the TTB noted that several vintners in the area preferred the name Coombsville or Coombsville District, and that the name Tulocay is in little use.
“Tulocay doesn’t sound as redneck as the name Coombsville,” said Aaron Pott, a winery consultant and former winemaker at Quintessa. “Someone will have to resubmit an (AVA) application now, and if Coombsville goes through, people will know we’re redneck.”
The Napa Valley Vintners also favored the Tulocay designation. But of the 20 comments it received on the proposal for a Tulocay AVA, only eight favored a Tulocay name while 12 favored Coombsville or the Coombsville District.
According to the article, it is likely that vintners and growers in the area will formally seek a Coombsville designation.
The battle over the Calistoga AVA continues as vintners attempt to overthrow a proposal by the TTB to grandfather Calistoga Cellars and Calistoga Estates, which do not source their grapes within the proposed Calistoga designation.
DIAGEO TO BUILD RUM DISTILLERY ON ST. CROIX
Diageo says it will build a high capacity distillery on the island of St. Croix in the U.S. Virgin Islands. It will begin producing bulk rum in 2011, and will supply all of the bulk rum used to make Captain Morgan for the U.S. beginning 2012. It will have an estimated distilling capacity of up to 20 million gallons per year.
The distillery will be built through a public-private partnership with the U.S. Virgin Islands government. The estimated cost was not disclosed.
The company currently sources its rum for Captain Morgan products from a vendor in Puerto Rico.
WILD FIRES IN NORTHERN CALIFORNIA
Wildfires continue to rage in Northern California this week, with more than 800 fires burning from Big Sur to Humboldt County. Officials refuse to release the amount of acreage the fire could grow to, saying the potential would only “alarm the public,” according to the Press Democrat. The “wild fire” started northeast of Napa on Saturday and was 60% contained by yesterday. Health officials warn people to stay indoors, particularly at night, as smoke clouds the skies.
Hundreds of evacuated residents in Mendocino, Napa, Solano and Lake Counties do not yet know when they can return. About 125 homes are threatened and under mandatory and voluntary evacuation orders.
STANDARD & POOR’S RAISES OUTLOOK ON B-F
Standard & Poor's Ratings Services said it raised its outlook on Brown-Forman to stable from negative on sustained operating performance in fiscal 2008 and improved credit-protection measures. S&P affirmed the ratings on the company, including the 'A' long-term and 'A-1' short-term corporate credit ratings.
The 'A' rating reflects Brown-Forman's strong position in the spirits and wine industry in the U.S., stable cash flow and moderate financial policies.
The outlook is stable, reflecting restored credit-protection measures and successful deleveraging of the balance sheet following the company's $876 million debt-financed acquisition of Casa Herradura in January 2007.
OLD WHISKEY RIVER BOURBON UP 48% FROM ’07
Drinks Americas Holdings reports that sales of its Old Whiskey River Bourbon business are growing 48% ahead of last year. Drinks Americas has shipped more than $500,000 in bourbon sales through April 30, 2008, an increase of more than $120,000 over 2007. Shipments through the first quarter of the new fiscal year are continuing to show growth, tracking ahead 60% versus last year, with $55,000 in sales having shipped in May and early June, the company said.
The company says it plans to continue driving growth “by bringing together the American tradition of whiskey, music and barbeque through Old Whiskey River Bourbon Barbeque sponsorships.”
WSD BRIEFS:
THE U.S. TO LIKELY APPEAL WTO DECISION. The United States is likely to appeal against an unfavorable decision by the World Trade Organization (WTO) panel on India’s additional import tax on foreign wine and spirits. The EU may also re-visit a similar case. India levies 150% basic customs duty on imported liquor, which is compliant with WTO norms. Last summer India outlawed additional duties on imported liquor that were as high as 550%.
BELVEDERE WAS SUSPENDED FROM TRADING at its own request on the French stock exchange last Friday, which will remain in effect until after a shareholder meeting this Friday (June 27). The suspension occurred after Belvedere’s share value dropped 30% due to its credit rating being downgraded from B to B- by Standard and Poor’s. The poor rating was prompted by Belvedere violating its own rules and re-purchasing shares in 2007.
ISRAELI SCIENTISTS HAVE DEVELOPED A “HEALTHIER” WHITE WINE that has all the benefits and more of red wine. The white wine has a boosted level of plant chemicals and
polyphenols which are believed to fight heart disease. The researchers developed an incubation technique that increases white wine polyphenols six-fold, while preserving the taste, color and aroma.
COSENTINO WINERY HAS NAMED Shane Soldinger the new general manager. He began working at Cosentino Winery in June of 2000 and eventually became director of winery growth and development.
DISTRIBUTOR MARANI BRANDS has hired spirits industry vet Paul Fuegner to lead the company’s marketing efforts. Prior to joining the company, Fuegner was a VP of SKYY Spirits, in charge of its marketing department where he was responsible for raising the profile of SKYY Vodka, according to the company.
RUSSIAN STANDARD HAS APPOINTED Dmitry Shirshov to the newly created position of VP, marketing and sales. Shirshov comes to Russian Standard from U.K. brewer Scottish & Newcastle
Until tomorrow, Megan
“If I had to live my life again, I'd make the same mistakes, only sooner.”
Tallulah Bankhead
--------- Sell Day Calendar ----------
Today's Sell Day: 17
Sell days this month: 21
Sell days this month last year: 21
This month ends on a: Mon.
This month last year ended on a: Fri.
YTD sell days Over/Under: 0
WINE & SPIRITS DAILY
Subscribe or check back issues at: www.winespiritsdaily.com
Send news and comments in confidence to: megan@winespiritsdaily.com
© 2008 Wine & Spirits Daily, all rights reserved. May quote with attribution.
Here enters Bacchus Capital Management, a winery investment firm based in San Francisco, that formed last year by Seagram heir Sam Bronfman II and partners Peter Kaufman and Henry Owsley of the Gordian Group.
Gordian is known for its efforts to guide companies through restructuring and back to health, including Spiegel, Smithfield Foods, and, more recently, Summit Global Logistics, according to an article in The New York Sun.
One of their first ventures has been to launch a fund that will provide mezzanine capital and, to a lesser degree, private equity funding to wineries "maxed out at their banks," says Kaufman. Bacchus is prepared to lend at four to eight times earnings before income taxes, depreciation, and amortization, compared to banks who typically will only lend up to three times EBITDA. Most acquisitions in the field fetch prices as high as 12 to 18 times EBITDA.
In addition, Bacchus plans to have around 8-10 portfolio wine companies in the initial phase of the fund.
It has been well documented that most family-owned wineries are facing the challenge of how to pass the business onto the next generation without losing control. Silicon Valley Bank’s survey last month said 51% of family-owned wineries are anticipating a change in ownership by 2017. So, expect a lot more companies like Bacchus in the next couple of years.
Kaufman and Owsley can help wineries pass their business to the next generation, while Bonfman and recently hired colleague Mike Jaegar are proficient at running wineries and promoting brands. Recall that Jaegar is a former Constellation and Vincor USA senior exec, who became Bacchus president and coo in April.
ANHEUSER-BUSCH LIMITED PARTNER. Bacchus has also signed Anheuser-Busch as a significant limited partner. A-B is contributing money, a full-time employee (senior exec Keith Wesselschmidt) and use of its distribution system. Distribution is key since most wineries (96%) sell less than 100,000 cases a year and often have a difficult time gaining distribution through wholesalers.
"The key to success is distribution. There are only about 10 national distributors that matter, and a lot of wineries can't get distribution. Sam Bronfman is extremely conversant with these organizations and can be incredibly helpful. Worst case, some can game the system and make an end-run around the distributors, going through Anheuser," said Kaufman in the article.
According to The Sun, Kaufman says he’s not sure how Bacchus’s arrangement with AB might be affected by an anticipated bid from InBev.
TTB REJECTS NAPA AVA
The Alcohol and Tobacco Tax and Trade Bureau (TTB) have rejected a request to designate east Napa as the Tulocay viticultural area, according to the Napa Valley Register. Feds say the name does not have enough general recognition or support among local vintners. In fact, the TTB noted that several vintners in the area preferred the name Coombsville or Coombsville District, and that the name Tulocay is in little use.
“Tulocay doesn’t sound as redneck as the name Coombsville,” said Aaron Pott, a winery consultant and former winemaker at Quintessa. “Someone will have to resubmit an (AVA) application now, and if Coombsville goes through, people will know we’re redneck.”
The Napa Valley Vintners also favored the Tulocay designation. But of the 20 comments it received on the proposal for a Tulocay AVA, only eight favored a Tulocay name while 12 favored Coombsville or the Coombsville District.
According to the article, it is likely that vintners and growers in the area will formally seek a Coombsville designation.
The battle over the Calistoga AVA continues as vintners attempt to overthrow a proposal by the TTB to grandfather Calistoga Cellars and Calistoga Estates, which do not source their grapes within the proposed Calistoga designation.
DIAGEO TO BUILD RUM DISTILLERY ON ST. CROIX
Diageo says it will build a high capacity distillery on the island of St. Croix in the U.S. Virgin Islands. It will begin producing bulk rum in 2011, and will supply all of the bulk rum used to make Captain Morgan for the U.S. beginning 2012. It will have an estimated distilling capacity of up to 20 million gallons per year.
The distillery will be built through a public-private partnership with the U.S. Virgin Islands government. The estimated cost was not disclosed.
The company currently sources its rum for Captain Morgan products from a vendor in Puerto Rico.
WILD FIRES IN NORTHERN CALIFORNIA
Wildfires continue to rage in Northern California this week, with more than 800 fires burning from Big Sur to Humboldt County. Officials refuse to release the amount of acreage the fire could grow to, saying the potential would only “alarm the public,” according to the Press Democrat. The “wild fire” started northeast of Napa on Saturday and was 60% contained by yesterday. Health officials warn people to stay indoors, particularly at night, as smoke clouds the skies.
Hundreds of evacuated residents in Mendocino, Napa, Solano and Lake Counties do not yet know when they can return. About 125 homes are threatened and under mandatory and voluntary evacuation orders.
STANDARD & POOR’S RAISES OUTLOOK ON B-F
Standard & Poor's Ratings Services said it raised its outlook on Brown-Forman to stable from negative on sustained operating performance in fiscal 2008 and improved credit-protection measures. S&P affirmed the ratings on the company, including the 'A' long-term and 'A-1' short-term corporate credit ratings.
The 'A' rating reflects Brown-Forman's strong position in the spirits and wine industry in the U.S., stable cash flow and moderate financial policies.
The outlook is stable, reflecting restored credit-protection measures and successful deleveraging of the balance sheet following the company's $876 million debt-financed acquisition of Casa Herradura in January 2007.
OLD WHISKEY RIVER BOURBON UP 48% FROM ’07
Drinks Americas Holdings reports that sales of its Old Whiskey River Bourbon business are growing 48% ahead of last year. Drinks Americas has shipped more than $500,000 in bourbon sales through April 30, 2008, an increase of more than $120,000 over 2007. Shipments through the first quarter of the new fiscal year are continuing to show growth, tracking ahead 60% versus last year, with $55,000 in sales having shipped in May and early June, the company said.
The company says it plans to continue driving growth “by bringing together the American tradition of whiskey, music and barbeque through Old Whiskey River Bourbon Barbeque sponsorships.”
WSD BRIEFS:
THE U.S. TO LIKELY APPEAL WTO DECISION. The United States is likely to appeal against an unfavorable decision by the World Trade Organization (WTO) panel on India’s additional import tax on foreign wine and spirits. The EU may also re-visit a similar case. India levies 150% basic customs duty on imported liquor, which is compliant with WTO norms. Last summer India outlawed additional duties on imported liquor that were as high as 550%.
BELVEDERE WAS SUSPENDED FROM TRADING at its own request on the French stock exchange last Friday, which will remain in effect until after a shareholder meeting this Friday (June 27). The suspension occurred after Belvedere’s share value dropped 30% due to its credit rating being downgraded from B to B- by Standard and Poor’s. The poor rating was prompted by Belvedere violating its own rules and re-purchasing shares in 2007.
ISRAELI SCIENTISTS HAVE DEVELOPED A “HEALTHIER” WHITE WINE that has all the benefits and more of red wine. The white wine has a boosted level of plant chemicals and
polyphenols which are believed to fight heart disease. The researchers developed an incubation technique that increases white wine polyphenols six-fold, while preserving the taste, color and aroma.
COSENTINO WINERY HAS NAMED Shane Soldinger the new general manager. He began working at Cosentino Winery in June of 2000 and eventually became director of winery growth and development.
DISTRIBUTOR MARANI BRANDS has hired spirits industry vet Paul Fuegner to lead the company’s marketing efforts. Prior to joining the company, Fuegner was a VP of SKYY Spirits, in charge of its marketing department where he was responsible for raising the profile of SKYY Vodka, according to the company.
RUSSIAN STANDARD HAS APPOINTED Dmitry Shirshov to the newly created position of VP, marketing and sales. Shirshov comes to Russian Standard from U.K. brewer Scottish & Newcastle
Until tomorrow, Megan
“If I had to live my life again, I'd make the same mistakes, only sooner.”
Tallulah Bankhead
--------- Sell Day Calendar ----------
Today's Sell Day: 17
Sell days this month: 21
Sell days this month last year: 21
This month ends on a: Mon.
This month last year ended on a: Fri.
YTD sell days Over/Under: 0
WINE & SPIRITS DAILY
Subscribe or check back issues at: www.winespiritsdaily.com
Send news and comments in confidence to: megan@winespiritsdaily.com
© 2008 Wine & Spirits Daily, all rights reserved. May quote with attribution.
posted at 1:15 PM
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