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Musings on Diageo’s rumored sale of its wineries



I hope Diageo is doing all right financially, but to judge from all these rumors that the London-based company is going to sell its iconic wine brands, maybe they really are experiencing some difficulty.

Their California brands from Napa Valley or County include Sterling, Beaulieu, Acacia and Provenance. The first two will be familiar to anyone who knows the history of Napa Valley. Beaulieu, founded in 1900, defines the classic old-line, pre-Prohibition winery; Sterling, which began in 1967, was one of the boutique wineries that made Napa famous in the modern era. Meanwhile, Acacia, dating to 1979, helped launch Carneros to the forefront of Pinot Noir. Provenance, whose inaugural vintage was 1999, is far younger, but has had a good run—I always did like their Cabernets.

So what’s up with Diageo? To begin with, the company’s stock price had a pretty good run-up to the Great Recession, but then plunged like everyone else. In 2009, it hit its nadir, then peaked again in 2013, only to experience a steady slide since then—leading the Motley Fool to recommend Diageo as a good buy.

That same article, suggesting Diageo is going through a “phase of lackluster performance,” attributed the drinks giant’s problems to “tough trading conditions in emerging markets, subdued consumer demand in some developed markets” and bad exchange rates.

Concerning that “subdued consumer demand in some developed markets,” I would suggest that the problems at Sterling, Beaulieu et al. stem from the consumer (and sommelier) perception that those are tired brands. Indeed, you could teach a college seminar on the ups and downs of an American winery by using the example of Beaulieu alone.

That Beaulieu was one of the great wineries of Napa Valley, and California, for many decades is indisputable. The winery helped to invent Napa Valley; it pioneered in Cabernet Sauvignon from the Rutherford Bench, and in hiring Andre Tchelistcheff, in 1938, Beaulieu gave California is greatest and most influential winemaker ever. “The Maestro” was mentor to multiple generations of winemakers before passing into the Great Vineyard in the Sky, in 1994.

Even had Beaulieu maintained quality in the 1980s and 1990s it probably would have slipped in the public’s estimation, due solely to the natural lifespan of most wineries. But quality did vary, and the winery seemed to lose focus. I always admired, and gave high scores to, the Georges de Latour Private Reserve Cabernet Sauvignon, and their Bordeaux blend, Tapestry, also was quite good. But the Pinot Noirs and Chardonnays were inconsistent, and whenever Beaulieu tinkered with Rhone-style varieties, as they frequently did, they seemed in over their heads.

As for Sterling, which was such an exciting winery in the 1970s, the glitter wore thin, as the winery hit a patch of averageness. The Cabernet, particularly the Reserve, could still be quite good; but really, there was little to differentiate it from dozens of others, a dilemma given the fickleness of the American wine consumer, who’s always looking for the next new thing. Despite a considerable marketing budget from Diageo, both wineries also were debilitated by the release of large-production, inexpensive lines, in Sterling’s case the Vintner’s Collection, in Beaulieu’s the Coastal Estates, both of which tended to confuse gatekeepers and consumers as to what either winery actually was. In this, Beaulieu and Sterling erred in the same way as did Robert Mondavi Winery, which tried—and failed—to be all things to all people.

Beaulieu remains a good winery and Sterling can be restored to glory; it’s never too late. If Diageo does sell either or both, I hope it’s to a new owner who will love them for what they have been and for what they can once again be.

  1. Bob Henry says:

    That was “then” . . .

    “Who Owns Napa? You Just Might Be Surprised”


    “Peter Newton, Creator of Calistoga’s Sterling Winery”


    Acacia Winery (excerpt from “North American Pinot Noir” by John Winthrop Haeger)


    “Vineyard Embarks on a Mission to Take Its Flagship Cabernet to New Heights”


    And this is “now” . . .


  2. Bob Henry says:

    Like they say in the Robert Altman movie “The Player”:

    “The rumors are always true.”

  3. I have a lot to say about this but will confine it to the following. Corporations inherently have difficulty with the ownership of wineries. With their focus on return on assets, owning vineyards is less attractive than buying grapes as a commodity. If they do own vineyards, the vintage variation in yields (20% is not uncommon) can be a raw wound in the annual report. In contrast we see European wine families acquire land in California, with their eyes on the long term–they want to hold the land assets, and pass them on to the next generation.

    The mention of Vintner’s Collection amuses me. That was a label created in the early 90’s when I wanted to explore small lots-Italian and Rhone varieties, old wine Zinfandel, rose of Cab Franc…without having to run them by a corporate marketing department. They were sold in quantities of a few hundred cases or less to the Club and in the retail shop. This label has morphed into something quite different…

  4. However, Diageo sold BV and Sterling’s vineyards and wineries in a lease-back deal, though a new owner could likely retrieve them.

    Bur the brands could end up unconnected with the historic land – as happened to Atlas Peak.

    Acacia and Provenance (and Hewitt Vineyard), the latter with a big presence on Highway 29, seem the ripest cherries for picking.

    Ditto Chalone, though it’s not in Napa Valley.

    And the setting of Sterling could become a major tourist draw again with some promotion.

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