ewspaper reports of winery buyouts, mergers, consolidations, and initial public offerings that we have seen reported over the years have appeared mainly on the business pages. They rarely appear on the news pages, because of the journalistic theory that such news does not affect wine consumers.

This was certainly the case more than a dozen years ago when the Robert Mondavi Winery went public in what I considered pretty big news. I was the wine editor at the Los Angeles Times at the time and the editors declined to run my exclusive story on this development in the news section. My story ran (days late) in the business section.

Wine consumers may not realize it, but such business dealings in wine may actually have a dramatic impact on the wines they have come to know. Most cynics would suggest that corporations only ruin wine, but that’s not always the case. There are examples where corporate ownership has saved a wine company and improved the caliber of the wines.

But in any case, mergers almost always have huge consequences for wine lovers - even those who don’t care that a winery is no longer owned by the founders.

As a starter, look at those wine industry acquisitions that have nothing to do with wine quality since quality was never the primary name of the game in the first place. We are talking here about wine brands that don’t stir wine collectors’ hearts.

When E&J Gallo bought the Barefoot name not long ago, it acquired no vineyards, no wine making facility, and no particularly unique character in the line of wines. It was merely getting a name that it could use for yet another shelf facing.

At the time, the Barefoot wines already had strong placements in many retail outlets. So Gallo was acquiring a bit of real estate - that four inches of shelf space in wine shops or grocery stores. The same goes for such acquisitions as Heublein’s 1993 acquisition of Glen Ellen and Wine Group’s recent buyout of two Bonny Doon brands, Big House and Cardinal Zin.

Industry old-timers say this tactic is linked to the decades-old Jack Daniels Strategy of putting out multiple products that can use up precious shelf space and thus keep out competing brands.

There are other kinds of wine brands worth acquiring. One represents the unique, terroir-driven brand that offers wine of a distinctive message. Such brands include Chateau St. Jean (now with Foster's), Matanzas Creek (now with Jess Jackson’s Artisans and Estates), and Gary Farrell (now with Beam Wine Estates). Private parties once owned these three Sonoma County wineries.

George Rose, a vice president for Kendall-Jackson, has been in the wine business for decades and has seen many of the major acquisitions that have shaped the current image of the wine game in California. Included are Constellation’s billion-dollar buyout of Robert Mondavi; the Chateau Ste. Michelle/Antinori recent acquisition of Stag’s Leap Wine Cellars, Gallo’s buyout of William Hill Estate and the sale of the Davis Bynum brand to Rodney Strong owner Tom Klein.

Acquire and Conquer

A key question in all of these buyouts, as well as many others from the past, is: will the acquiring winery do the right thing for the brand image that was acquired?

It’s one thing to take over a vineyard-based operation such as Stag’s Leap, and to continue to make the same sort of wine that made the project famous at the start. It’s quite another if a new parent company comes in and uses the same fruit, but farms it in a manner inconsistent with the legacy of the former wine maker.

We at APPELLATION AMERICA would be saddened if not temporarily made insane (that is, angered to the point of short-term insanity) were such a thing to happen to a truly classic, terroir-sensitive property; if the new owners chose to make wines that ignored the very regionality that had made the winery's reputation.

Indeed, one could make a pretty good case for a loss of identity with some of the Robert Mondavi line of wines over the last two years – though a careful reading of that sad scenario could also lead to an equally good case that the Mondavi wines had already lost their soul in the late 1990s after some unfair (and, in my view, inaccurate) criticism of the former Mondavi style of wines.

There are so many case examples in this area where a winery’s quality was compromised or improved after an acquisition. A book probably could be written about this, though the subject is somewhat esoteric; I doubt it would sell more than a few copies. Let’s take a look at just a few examples:

[ ] Matanzas Creek: Bill and Sandra MacIver did brilliant work with this Bennett Valley property, notably with Chardonnay and Merlot. After its sale to Artisans and Estates (A&E), the new company appointed French-trained Francois Cordesse and the improvement in the wines has been notable. Much of the success of Matanzas Creek is due to Jess Jackson’s commitment to making each of his A&E projects regionally distinctive.

[ ] Davis Bynum: The longtime Russian River Valley producer had been on the market for some time (albeit quietly), and when the Kleins of Rodney Strong decided to buy the brand, it got none of the actual vineyard land that the Bynum family had owned. But Robert Larsen of Rodney Strong said, “We have maintained a share of the contracts that they had, and our people will assess the quality of what’s come in [this harvest] and determine if we want to maintain those contracts.” He said wine maker Gary Patzwald will assess the style of wines put out over the years by the Davis Bynum brand. He assured me that Bynum will continue to use only Russian River Valley Chardonnay and Pinot Noir for the project.

[ ] Chateau St. Jean: The founders, raisin growers from the central San Joaquin Valley, sold out to a Japanese company, which then sold the Sonoma Valley winery to Foster’s. Over the last few years, aided by a benign corporate owner, wine maker Margo Van Staaveren has made some superb wines, bringing the winery back to its glory days when Dick Arrowood helped launch the winery as a superstar in the 1970s.

[ ] Gary Farrell: With the recent departure of the founder, Beam gave the position of chief wine maker to Susan Reed, once at Simi and later at Matanzas Creek. Reed worked with Gary himself for three years and knows the style of wine he pioneered. [ED. NOTE: Of course all bets are off with the recent announcement of the sale of Beam to Constellation (see link to news announcement at top of this article).]

Nick Goldschmidt, at the head of all of Beam’s wine-making operations, was asked what challenges Reed would face in attempting to maintain the Gary Farrell style.

“Hopefully no challenges at all,” said Goldschmidt. “The fruit sourcing is the same, Susan has worked with Gary and understands the [house] style, and I just have to make sure she has all the resources to make this transition.

“For her, the upside is that she no longer has to blend any of her press wines, such as, Chardonnay or Sauvignon Blanc. If she has a few lots she doesn’t like, I’ll take them and put ’em elsewhere.”

Rose of K-J said that roughly 90 percent of all wines produced in California are made to appeal to the vast majority of wine buyers, “and they don’t really care who makes it. It’s bought on the basis of price almost solely.

“The other 10 percent are from wineries with caring wine makers and a philosophy at each location. These wines really are targeting those consumers who are the discoverers of wine. We think the Artisans and Estates wineries fall into that latter category.”

I asked Rose how consumers could tell without tasting each brand which ones are reliable. “One way is you have to pay attention to the marketing efforts for these wines. They should be real, they should be authentic, and they have to justify that the brands have a place of origin.

“If you going to charge $50 or $150 for a bottle of wine, the quality should be second to none. And having a winery is an important part of these kinds of wine. With regard to Matanzas Creek’s great success, it has been taken to a new level because of a commitment to quality by Jess and [his wife] Barbara [Banke].”

Do Mergers of Wineries Ever Benefit the Consumer?

A Sonoma County wine marketing executive was asked whether mergers benefited consumers. “There are a few things you have to look at,” he said. “First, is the company publicly traded? The key here is, do you have some CFO [chief financial officer] who’s monitoring every penny?

“Keep in mind that these [public] companies are corporations, and corporations are all about shaving costs and delivering profit to shareholders. So is the wine quality driven by some guy in a back-corner office who’s always looking at the bottom right hand corner of a spreadsheet?”

Then he added that the back-end of the equation is the commitment of the sales force to explaining the quality of the wines in a line, which is usually based on a regional statement. “Do they have an inspired sales force? Do they have people who can explain the lay of the land? Where the grapes came from? That can make a big difference” in how the consumer reacts to the wine.

That, he said, is due to the fact that “There is no brand loyalty with wine the way there is with coffee, cars, watches, or even brand-name clothing. But that’s fine, since at the higher end of the wine-buying public are people who love the process of discovery. And what really moves the needle are the high-end wines.”

One aspect of this that can be pernicious, he said, occurs when a middle-level marketing executive begins to perceive numbers (scores) as the end-all of the wine making project, and begins to dictate to wine makers how wines should be made.

A number of wine makers have told me over the years, in distinctly off-the-record comments, that they have often fought such intrusion into the wine making process, occasionally unsuccessfully.

At one time, decades ago, a winery needing a marketing executive would get one that knew about Champagne; today you get one that knows about shampoo. One wine maker calls it the Proctor & Gamble Strategy of wine marketing. One wine maker said, “Chances are he’ll be from Madison Avenue, not Davis.”

I asked the wine marketing executive about the demand for high scores on wines. “Some people buy wine by number,” he said, “but The [Wine] Spectator stopped being about wine years ago. To the readers of the Spectator, and even to their editors, wine is nothing but window dressing. It’s now a lifestyle magazine and the only people who read it are not very wine knowledgeable. They buy not what they like; they buy what someone else likes.”

He said real wine consumers buy wine because it has a regional message and a house style, and they look for established brands like Jordan, Hanzell, Stony Hill, Arrowood, Ridge, Stag’s Leap, Phelps, and Williams-Selyem.

“There’s nothing wrong with Opus One today,” he said, “but it took 25 years before they got it right.”

He said that at the start, many wine collectors bought Opus One for the wrong reason (it was a status symbol, a collectible icon), and some of those people now bypass Opus One and go after the Screaming Eagles of the world. “Now that Opus One has made the turn and is truly outstanding,” he said, “some of the heavyweight collectors are stuck with the bad stuff from the past, and they don’t have any of the good stuff” of the present.

Wine Reality vs. Wine Image

One factor that drives some large wine companies is their firm belief that economies of scale will be transparent to consumers as long as the image of the project can be maintained.

So, for instance, some larger wineries once used only French oak barrels for aging (and flavor development). Today, French oak remains a major aspect of red wine aging at the upper echelons of quality, but with French oak barrels now closing in on $900 each, many of the brands owned under mergers are using short-cut techniques to get the appropriate flavors, such as toasted staves inside tanks, or even oak chips.

And it’s true; many consumers can’t tell the difference. To them, oak is oak, regardless of how it got into the wine.

Similarly, later harvesting of red fruit can make a wine with more intensity, often at the expense of a higher alcohol and a consequently lower acid and higher pH. The result can be a wine that’s “impressive” because it is weighty, thick, and unctuous, but it is also wine that won’t age as well as most wines did back when wine making was less cynical and more seat-of-the-pants.

But the worst aspect of this for terroir-ists is that late harvesting can wreck the regional distinctiveness on which some brand images were built.

Large wine companies also do a lot more “sophisticated” market research by doing focus group surveys, and occasionally styles of some lower- and moderately priced wines are altered based on what is learned from such data. But often this is indirect communication from consumers. Much of it arrives at the parent company’s headquarters a year after the project was undertaken, and by that time, decisions on volumes and wine styles for next year’s wines have already been made.

Rose at K-J pointed out that Jackson’s A&E wineries (which include Freemark Abbey, Matanzas Creek, Cardinale, Hartford Court, Lokoya, Cambria, La Crema, Pepi, Stonestreet, Verité, Arrowood, Robert Pecota, and Byron) are mainly estate-based projects in which regional distinctiveness and quality are Jackson’s main focus.

“A&E may be a large company, but we’re not really a corporation like so many others,” said Rose. “This is still family owned.”

There are many other corporately owned properties that use mainly estate-grown fruit, and a few of these actually improved under their large ownership structures.

A classic case example, alluded to earlier, is Opus One, which struggled for the first two decades of its existence with an inconsistent level of quality based on vineyard problems as well as problems associated with Brettanomyces, a yeast spoilage. In the last few years, wine maker Michael Silacci has solved most of the problems, and Opus One today is a stellar Napa Valley red wine.

On the other side of the ledger is the sad case of Inglenook, which its former owner, British-based Heublein, milked by using the Inglenook brand name on lines of lower-priced wines, allowed the premium wines to decline in quality, and eventually killed the brand.

One benefit of some corporations is that they have the money to hire a strong guiding hand to sit at the top of the food chain and direct each house’s wines.

For example, Goldschmidt of Beam assists with the house style of Geyser Peak wines, as well as its other brands Gary Farrell, Wild Horse, Clos du Bois, Buena Vista, and Atlas Peak. In that capacity, he drives to each property almost on a weekly basis!

“My role is, I’ve got to build a trust and maintain the culture of each property,” said Goldschmidt, a New Zealander who has broad international experience. “I’m the only guy in the company who has a look at everything we make. I have to make sure the culture and the style of each winery is maintained.”

Jess Jackson’s key man in this role is Randy Ullom, a superb strategist who helps keep all items within the company’s house style. Many other large wine companies have had such oversight strategists on their staffs in the past, but now lack them. “It’s not easy to find people who can handle this specialized sort of work,” said the Sonoma County wine marketing executive.

It’s hard to generalize about corporate ownership, but it’s clear that, for better or worse, wine quality can be affected by a corporation’s acquisition of a privately owned winery.