The next Jess Jackson? Foley speaks
Bill Foley, of Foley Family Wines, has been raising eyebrows in California, where he’s on a tear. He now owns Kuleto, Firestone, Sebastiani, Merus, Altus, Goodnight and Three Rivers in Washington, most of which he’s bought in the last year, expanding upon his base wineries in Santa Barbara, Foley Estate and Lincourt. Earlier this month he bought New Zealand Wine Trust, a 280,000-case company. Now, yesterday came the latest announcement: a strategic partnership with Wattle Creek (Alexander Valley) and with Boomerang Vodka, which is from Australia. I spoke by phone with Foley, who was at a golf course in the Rockies with about 40 of his distributors and sales managers.
SH: Why buy Wattle Creek?
BF: Chris Williams [the owner], I’ve gotten to know over the years. He’s well-connected in the restaurant trade, with Outback Steakhouse [Ed: Williams is friends with Outback’s chairman], and also with Boomerang vodka, so he has terrific connections in Australia. Wattle Creek is Alexander Valley Cabernet, and some Pinot Blanc in Mendocino, so it fills an appellation target I had, that northern part of Alexander Valley. Plus he [Williams] has a tasting room in Ghirardelli Square, and and a terrific wine club, and he signs up a lot of people. So we want to learn from his direct-to-consumer focus.
Why? Are you expanding your DTC program?
We have some plans to open remote tasting rooms, starting with Fashion island in Newport Beach. Lots of traffic, walk-by, high-end stores, evening traffic with movie theatres, and Chris will help us with that.
The press release says you’re entering into a “strategic partnership” with Wattle Creek, not buying it. Do you have plans to eventually buy it?
We’ll just do his management and wholesale sales for now. We haven’t come to an arrangement to purchasing it, although Chris has indicated he wants to take an interest in Foley.
Is Boomerang your first alcoholic venture beyond wine?
Well, I’ll only own about 20% of Boomerang. But we’ll sell it, and it gives us a different appeal to our distributor network, having spirits. It’s about being relevant and important to your distributors, and vodka will help us. I don’t drink a lot of vodka, but I’m told Boomerang is good vodka, well-priced.
Any plans for beer, maybe micro-brews?
I hate beer!
You said you don’t care for vodka, but you’re a businessman.
Well [laughs], vodka will make us a lot of money!
What is your long-range plan? More wineries?
I have nothing significant in the pipeline. I’ve got to put the New Zealand thing in bed.
How do you see the state of the American wine industry today in this recession?
If you have value brands, strong wines at the right price points, there’s no problem selling, providing you have good distributors and enough sales force.
Is this a good time to be buying wineries?
Well, there are good opportunities right now. Distribution is difficult for these smaller wineries.
Why are you the only only one who seems to be buying lately, except for Boisset/Raymond. We’re not hearing anything from Gallo, Diageo, Constellation and the other big companies.
I haven’t gotten over-leveraged, so I can redirect assets from my public companies and buy fixed winery assets, which is what I’m up to. I’m moving way from the public domain and I want to be private. It’s much more fun and I love the wine business. New Zealand was an opportunistic purchase; they lacked U.S. distribution, so, again, I can use my sales and distribution people across the country to sell their wine. It’s a perfect fit.
You say you’re doing well, but anecdotally, every wine company is hurting, except maybe at the bottom end, which you’re not. How do you reconcile those two things?
Well, I mentioned sales and distribution, and you need high quality wine for the price point. At every tier, we’’re trying to provide the best we can. So we’re doing okay. It’s not easy, but we’re having a terrific response from our distribution network in terms of selling the New Zealand wines. We don’t have a lot of debt on any of these assets we’re acquiring. I try to stay no more than 33% debt to total value, so if it’s a $10 million asset, I don’t want more than $3.3 million in debt. We’re paying our bills and making a little money.
What’s your production rank among U.S. wine companies? Last time I checked you were #24.
I don’t know. With New Zealand Wine Trust we’ll be around 750,000 case production [total of all Foley brands in the U.S.]. So we’ll be 300,000 cases bigger than when they did the last measure. [Ed: According to Wine Business.com's Feb., 2008, survey, Foley would be between #19, Rodney Strong, and #20, The Hess Collection.]