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Ruminations on the Sebastiani and Raymond sales


Wineries get bought and sold all the time, but when there’s a recession, especially one as bad as this, we take special notice. When a veteran goes down it’s taken as a harbinger of evil times. And when two go down, fears arise that the sky is falling.

A few things are in order. First, nobody knows if these two sales would have gone forward even in a good economy. I suspect they would have, because such things are many months if not years in the making, which means the initial plans probably preceded the current slowdown. The two wineries, Sebastiani and Raymond, have much in common. Both have been around for a long time (1889 and 1971, respectively, although the Raymonds’ roots in Napa Valley go back to the 1870s). Both were associated with large families (Sebastiani was privately held, while Raymond passed into the ownership of Kirin Brewery, of Japan, in 1988, but Kirin kept a light hand, and most people assumed the Raymonds still owned the company). And both did a less than stellar job of adapting to the changing conditions of the 1990s and 2000s, although, as I’ll point out, this wasn’t entirely their fault.

The 1990s were an extraordinarily turbulent time in the California wine industry. The initial excitement of the boutique winery era had settled, and it was time for wineries to provide a burgeoning, Baby Boomer-based wine culture with adventurous and enticing wines. This, Sebastiani and Raymond failed to do, or were, at least, perceived as having failed. And in wine, perception is reality.

Wine has always been about fashion, and the American consumer in modern times has shown a fickleness that drives marketing managers crazy. It’s the new kid on the block syndrome: consumers (and, often, writers) gravitate to the new wineries and new regions, which means the older ones tend to get left behind. Whatever you may say about Robert Mondavi Winery’s management practices, they, too, fell victim to precisely the perception that they no longer were relevant.

There are many older family-owned wineries in California whose long-term survival makes me wonder. It would be wrong to name any of them, but if you have a directory of California wineries, go through it. Any winery founded before the 1980s could be the next shoe to drop, even some well-known Napa properties. Not only does the public get bored with them, but sometimes the owners just can’t figure out the right mix of product, promotion and price. As for resting on their laurels, to those of my age, these famous boutique names remain synonyms of quality. But people under 35 or so may never have even heard of these great estates founded in the 1960s and 1970s. Out of sight, out of mind — maybe out of business?

You also have to factor in who bought these two properties. After all, a sale requires a willing buyer as well as a willing seller. Bill Foley (Sebastiani) and the Boisset family (Raymond) evidently have the money, or are able to get loans even in these times when banks are stingy, which means that even as some people’s fortunes decline, others are on the rise. Foley’s been on a buying spree for years, while Boisset has been a little more cautious, but both have been clear about their intentions: to build up as great a portfolio as they can, within the limits set on them by money, time, staff, strategy and the like.

California wineries are always in a state of ferment, recession or not. I imagine we’ll be shocked, over the next year or two, as additional wineries are scooped up or simply shut their doors. The recession may hasten the end for some, but it’s not the cause. California has too many wineries anyway; in capitalistic terms, there’s an over-supply of product. Adam Smith’s “invisible hand” will take care of that.

  1. You could add Stag’s Leap Wine Cellars to the list. Maybe Duckhorn, too.

    And, c’mon Steve, name names! Who else do you think is in danger?

  2. Now, NapaJ, you don’t really expect me to name names?!? Besides I have no inside info so it wouldn’t be fair.

  3. WineCompass says:

    Steve -some good reflections on the ever present fickleness of the business – however that said your insights into what keeps the successful older brands relevant would be interesting.

  4. WineCompass, I might blog on this one of these days. Thanks.

  5. There is a huge generational shift in the California wine biz (not just in wine writing!).

    So, what happens when the kids have no interest in wine but see lots of $$$ in wave after wave of vines? And what’s a parent to do? You sell, hope you outlive the capital gains/inheritance crapshoot, know you have a well-stocked cellar for life and the kids and grand kids are all sorted.

    Add the fact the biz is tough, American wines barely make a dent in the global export mix, and no matter how hard you work, you can’t get a print writer to do a story about your wines (…but you haven’t revised your marketing plan or bought an ad since …maybe never. Good insight, Steve.). Et voila, your sell your winery for a lot more than you paid or put in over the years. It’s what happens and what should happen, particularly if you are an acolyte of Ayn Rand.

    Is there a “3G” French factor in California? Besides protectionism, the grape names, and the 1976 tasting? First, inheritance law in France – where all the kids and more distant relatives get shares when dad dies and then they fight for an entire generation about who should run the place, and should it be sold. Finally, somebody in the next generation says “…whoa! I’ve made enough money, now I am going to buy everybody’s shares” and the cycle starts over again.

    It is that third generation in Napa that is only coming onto the scene. I would bet that a Sebastiani will try to buy back the name and estate in another five years – and not necessarily Don’s kids. Who knows, maybe the Mondavi grandkids – or cousins – are plotting to get the family name back from Constellation. Is the third generation Napa’s next wave? But will it be like the Europeans?

    Italy’s Castello di Brolio bought back the brand in ’93 after it passed through a generation of companies caused by a ’60s Chianti crunch and a wilting market. Francesco Ricasoli, a professional photographer, came home, bought it back, and has worked tirelessly since. Ricasoli had an incentive: Brolio Castle has been in the family since the 1300s or earlier and his uncle wrote the Chianti DOC law.

    Jean-Michel Cazes, the Mondavi of Bordeaux, didn’t get into the wine biz until he was at least in his late 30s and was “called back” from his high end job at IBM, to run Lynch-Bages – his grandfather bought it, dad ran it (but was also mayor). Prince Robert de Luxembourg was “called back” to Haut-Brion when his mother was ready to retire; she took it over from a cousin, post WWII, who had maintained things after the Dillons bought it in 1934.

    And Boisset…Jean-Charles took over from dad and expanded the domaine range, expanded beyond France. But he is a businessman; he is not a farmer by any means. He’s third generation. Would he sell?

    I grew up with the Napa wineries so I share Steve’s soft spot as things change. But it isn’t a Napa phenomenon. It is reported that Chateau Latour (an inheritance history similar to many in France and a 1993 purchase similar to many in Napa) is for sale.

  6. Morton Leslie says:

    In a market where advertising doesn’t work and you depend on a third party endorsement from the wine media you have to constantly re-invent yourself to attract any interest. There is a constant search by the wine media for the latest story and the last wineries anyone woud write about would be Raymond or Sebastiani….unless they would create something completely new to write about. Making a value product or a good Chardonnay isn’t enough.

    So we have cooking schools at the winery, wine and food pairing seminars, fund raisers for PETA, superficial “green” practices, biodynamic converts, racy or funny labels, crystal power, anything to keep a story alive. And some wineries just give up with the B.S. and think they can survive if they just make good wine. That never lasts long. Who really cares about that?

  7. Who cares about wine quality?

    I do.

    Sebastiani has been making plenty of very good, value priced reds across the board. They have been a story for me. And the winery has always been one of my favorite stops in Sonoma.

    As for Raymond, I think a sale has been long overdue. Feel free to interpret that any way you care to.

    To me, these are two very different places with very different narratives.

  8. Im under 35, heck, I’m under 25, and you’re right. It’s impossible for me to know these estates because they had never even been brought to my attention until this post. You have to exist in people’s minds if you want to continue exist at all.

  9. Dylan, my point. How does, say, Sebastiani fade from view where Lafite remains? Is it simply longevity? What explains that?

  10. I believe awareness plays a major role in that. As I said, if we don’t know you exist then you don’t exist. I’ve heard everyone and their wine-drinking grandmother mention Lafite to me, Sebastiani, you’re the first. It’s the same thing that happens to film stars who fall out of the limelight. If you’re gone for too long, the public moves on without you. In this way, I don’t think it’s a coincidence the actors who star leading roles in three to four films a year have greater longevity.

  11. I just find the whole situation very sad as family owned wineries bite the dust. The idea of partnership is a bunch of BS. Do you see any Deloaches at Deloach Vineyards? If the Raymond Family thinks they are going to be around to continue the family tradition they are in for a surprise. A lot of it is marketing as sometimes family owned wineries just rely on their name to create sales.I think that Jordan is perhaps our Lafite. Or maybe that is a generational thing. It is still family owned and doing well with little advertising.

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