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When danger signs pile up for a cult winery

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I wasn’t surprised that one of the co-owners of Screaming Eagle sold his portion to his business partner.

Although published reports made the deal between the two men sound tranquil enough, with no one pointing fingers, it brings up the always-controversial issue of when a winery brand is showing signs of stress.

A winery that’s in good shape generally does not change hands. Unless an owner dies, or some catastrophic event occurs, the people that own it don’t walk away. When founder Jean Phillips sold SE, in 2006, she did not attempt to hide the fact that she would have preferred to keep her “precious little winery.” But financial constraints — the necessity for vineyard redevelopment and building a proper winery — forced her to.

The partner who sold his share said he felt “no longer needed” and that the winery would continue on course. But I don’t think this deal would have gone down if everything was hunky-dory at Screaming Eagle.

SE was like a rocket launch, beginning in a spectacular burst of light, then on to a consummate liftoff and perfect orbit. But things go wrong even in perfect orbits. A bit of space debris strikes the vessel, sending it off-course. Suddenly, Mission Control has a problem.

The first signs of a troubled winery are when it replaces its original winemaker. This causes local tongues to wag at the possible compromise of quality. Napa Valley watched as the new owners did just that. There was raised eyebrows, insider whispers. It didn’t necessarily reach the people who buy SE. But it wasn’t helpful.

The next sign is when the wine’s price is autocratically raised to unsustainable levels. SE’s owners did that, too, when they boosted it from $500 to $750. That was before the Great Recession. It is highly doubtful that everyone who could afford SE a year ago can do so today.

A final sign of stress is when owners begin bailing. That’s what’s happening now.

There’s been no parallel in Napa Valley, or anywhere in California, to Screaming Eagle’s spectacular success. It’s the Google of wineries. But like a high-flying stock, what goes up must come down, eventually. As difficult as it is for a wine brand to make it to the top, it’s far harder to stay there. The wine biz today is more like show biz than a consumable industry. Maybe it always has been.

I’m sure Screaming Eagle will be around for a long time, but I personally don’t see it sustaining its price. Like wineries before it that sat at the pinnacle — Groth, Grace Family, Pahlmeyer — It’s a good wine, but not better than everyone else. Screaming Eagle has always been more about its narrative than its reality. But in this troubled world of wine, the narrative is shifting away from exclusivity and exorbitant prices and more toward pleasure and affordability, which is where the narrative should be.

danger

  1. How many people do you think enter the wine industry to make great wine, and money becomes the by-product? As for the reverse, how many people do you think enter the wine industry to make money and turn out great wine as a by-product? I’m sure there’s a middle ground, but what you’ve raised in this post is the notion that winery brands are expected, by overall perception, to be lifelong commitments. Like marriage, it’s almost deemed as a virtuous “for better or worse” concept. But, when it comes to walking the fine line of business decisions and pursuing passions, just as in US marriages, often we don’t see what we would like to prevail–a long-lasting, loving commitment ’til only death do us part.

  2. Steve,

    I have to disagree here. One partner leaving is not really a red flag, in fact it’s fairly common and usually due more to in-fighting than a diminishing market share. I know that all of my clients (7 that I’m aware of) on SE’s list took and will continue to take their allocation, and that countless more of them would LOVE to be on the list. I hear all of this doom and gloom about “unsustainable pricing” from CA’s cult wines. The simple reality is that there is still money out there. A lot of it in fact. If your production is low enough to command a high price from the small percentage who could afford it, then you have little to be concerned about, so long as the quality remains consistent. People don’t buy SE because its the be all end all of Cab. They buy it partly because of its quality, and partly because of its rarity. While I personally think it’s over priced I also know a lot of people who don’t, and are not just willing, but eager to pay for it.

    Cin Cin!

  3. Lisa Weeks says:

    I wasn’t surprised to hear about Charles’ departure from the winery. What does surprise me, and continues to do so, is the fascination borne of his leaving the partnership. No matter what statement he releases to the press, or anyone’s “assumption” about if the split was amicable or not, it doesn’t affect the taste or quality of the wine, does it? Now, should the winemaking regime change, then that is note worthy and interesting enough to merit a mention, but a business partner/backer who was not an original founder of the winery and who was merely along for the ride as a financial resource….is this really “Wine News”?

  4. Morton Leslie says:

    I basically agree with Steve, except I don’t think that Steve really buys that financial constraints and the necessity for vineyard redevelopment and building a proper winery actually forced the sale of SE. He just says that because that is the official line and going for the real story is going against a stone PR wall. He would never postulate that “it got old for the owner and there might be other things to do in life more interesting than hanging out with wine snobs.” Steve is too polite. I’m not.

    Second, SE is all about its customer. The wine itself has no intrinsic value above any other good tasting wine except that the buyer has evidence that many people are dying to have it, and only certain special people are able to buy it, and that owning the wine says something special about the customer and their status. The wines value is in what it does for the ego of the SE customer.

    Now, what happens when you tamper with that perceived ego enhancing value?…a different winemaker…customer sees evidence that the wine’s price is arbitrarily set …perhaps by a greedy owner unrelated to actual demand…owners publicly split…America (and the world) has had its fill of greedy self-indulgent people…

    What if instead of making you look special, buying the wine makes you look like a fool? I’d say that it isn’t that there is evidence there is trouble, there is trouble because there is evidence.

  5. Lisa: It’s news when it’s the most expensive wine in California.

  6. Sorry to say, but this thread continues to make us folks down here in SB Cty feel like ‘second class citizens’ . . . Yes, Mr. Banks leaving certainly affects SE and its ‘persona’ . . .

    But he was also a founding partner in Jonata, a winery that has made quite a splash down in our neck of the woods . . . and nationwide, based on ratings from various publications. He has been the persona out front of this brand, and with him now gone, the question will be who takes that rein . . . The same question that needs to be asked of SE as well.

    Jonata has carved out an interesting course thus far – an ultra premium priced winery in an area where wines generally are more value priced. It will be interesting to see what the near term holds for the label and where they go from here.

    Curious to hear your thoughts on this as well . . . .

    Cheers!

  7. Larry: I’ve never had the pleasure of tasting Jonata so I wouldn’t be able to comment. However I wouldn’t say that SBC is “value priced.” Sure, you don’t get the astronomical prices of Napa Valley, but there’s lots of stuff in the $40-$75 range — and it’s damned good. I think a lot of critics (Parker included, as you know) believe that the Central Coast (including SBC) is poised to become the most exciting wine region in California, if it isn’t already. No dis to Napa, Sonoma, etc., it’s just that SBC does everything so well and is basically just getting started.

  8. Steve,

    Have the Jonata folks never sent you samples? That’s a bit surprising, as it seems they would want to ‘get on board’ with ‘the right’ critics . . .

    I say ‘value priced’ because even the ‘top rated’ wines down here are much much cheaper than most of their ‘counterparts’ from up north . . . A huge generalization, yes, but IMHO, quite true . . .

    My main point in making my argument is that the Jonata brand was not mentioned in your blog at all, nor by any that have commented thus far. This is a huge property down here, and millions have been invested in it thus far . . .

    Just a brief observation . . .

    Cheers!

  9. Larry, guess I’m not one of the right critics! Anyhow, I’ll probably stumble upon it one of these days.

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