The Big Boys (KJ & Gallo) are on a Roll

The Big Boys in Sonoma County's wine biz are Gallo and Kendall Jackson. Each owns a big piece of the county's vineyard land plus many wine labels. Some of these wines are Frei Brothers, MacMurray Ranch, Rancho Zabaco, and La Crema.

As of 2013, the most current data I've found, Gallo and KJ were virtually tied as the largest vineyard holders in the county. The top five control 20% of the county's vineyards. Article on vineyard land owners. In the last couple years since this was written both Gallo and KJ have added to their portfolios.

So far in 2015

Kendall Jackson surprised a lot of people with the purchase of Siduri Winery,  a highly-regarded Pinot Noir producer. Siduri has many contracts for excellent vineyards from central California to Oregon. They still have Siduri's wonderful winemaker, but three years from now who knows.

Gallo purchased J Vineyards, known for sparkling wines and Pinot Noir. Along with the sale came Sonoma County vineyard land. There was a large exodus of J employees.

This week Gallo closed a deal on the large, historic Asti property in northern Sonoma County. Lots  of vineyards along with the Souverain label came with the deal. The seller was Treasury Wine Estates. Article on the sale.

What they are buying

Two key elements stand out in these acquisitions: premium names and vineyards.

 As the economy improves the growth is in the premium wine market rather than the low-end brands.

A year ago there was a prediction that vineyard land in the area would get scarce meaning there wouldn't be enough fruit to "feed" all of the wineries. The folks that can afford to are buying vineyard property to protect themselves.

The little guys

Vintage Wine Estates headquartered in Sonoma County just purchased BR Cohn Winery. They also own Clos Pegase, Windsor, and Viansa, among others. BR Cohn Winery has been around for over 30 years, the owner is in his late 60s, and was still in debt.

Last month a generic-sounding outfit called The Wine Group known mostly for their grocery store wines like Almaden bought Benziger Winery. Another winery where the owner is retirement age.

What's next?

Treasury is hurting--they will sell off more if buyers can be found. Diageo, another corporate owner of local wineries, is also expected to be selling. There are a number of small, family-owned wineries like Siduri and J that will be selling. Why? Many of them got in the business in the '80s or early '90s and are ready to think about retirement. "Retirement" meaning someone comes along and says, "Here's millions of dollars so you can now stop putting in the 15 hour days." I mean, what would you do?

Some of the more diversified and successful adult beverage corporations, such as Constellation Brands, seem to be focusing more on beer and liquor right now. It wouldn't surprise me to see them use their distribution power and move into craft beer.

We're not done yet. As Samuel L. Jackson would say, "Hold on to your butts."