2 Sonoma wineries back in founder’s hands
In 2013, Phil Hurst took his two Sonoma County wineries public and quickly realized it was a mistake. Eleven years later, he bought them back.
Hurst, who once again owns Dry Creek Valley wineries Truett Hurst and VML, is the third California vintner in six months to reclaim a wine business he founded and sold. The deal follows last week’s news that James Hall, cofounder of famed Sonoma producer Patz & Hall, repurchased the winery from wine giant Ste. Michelle Wine Estates. In December, noted Anderson Valley winemaker Douglas Stewart reacquired his acclaimed brand Breggo from Fel Wines, which was owned by Napa’s Cliff Lede Vineyards.
Is the timing of these similar transactions sheer coincidence, or indicative of a pendulum swing away from the wine industry’s contentious consolidation trend?
“We’ve seen consolidation in the wine industry for the last six to seven years. It’s a cycle,” said Hurst. “Usually (companies) shed off some assets, and it’s a wonderful opportunity for some of us founders. I think this is an emerging trend, and we’re going to see much more of it.”
Hurst founded his charming Dry Creek Valley winery Truett Hurst, in 2008 with biodynamic farming pioneer Paul Dolan. A few years later, Hurst started VML, which stands for Vinum Magica Laetitia and means Wine Magic Joy in Latin. The brands were growing fast and needed cash, so in 2013, he launched an initial public offering and successfully raised $16 million. Yet while the wines were “thriving,” according to Hurst, the business side was struggling. (Historically, Wall Street has been a kiss of death for wineries.)
Hurst, who had not been involved in his wineries since 2018, leaped at the opportunity to reclaim them when shareholders decided to sell. “I was dreaming about (buying them back) six months after I took them public,” said Hurst. “I realized it was not smart.”
He’s partnered with longtime friend Ken Wilson, who owns 11 wineries under his company Wilson Artisan Wineries, including Sonoma County’s Soda Rock and Rockpile Vineyards. Truett Hurst and VML will remain separate from Wilson Artisan Wineries and operate out of a new tasting room at the gateway to downtown Healdsburg.
It’s common to see wine conglomerates occasionally offload brands, but those deals are usually between two corporations. In 2021, for instance, Gallo acquired 30 bargain wineries from Constellation Brands for $810 million. That same year, Treasury Wine Estates sold four of its low-cost brands to the Wine Group.
The headwinds that the wine industry is currently facing, like declining consumption and increased anti-alcohol messaging from trusted health sources, could lead to more fire sales.
But it’s a daunting task for an individual to outbid the industry’s giants. Stewart, who reopened Breggo at the former home of Phillips Hill Winery in Anderson Valley, is hesitant to declare a shift in wine acquisition patterns. He believes the opportunity to buy his brand back was different from the others: “circumstantial” and extraneous to the wine industry’s struggles. He also said no other vintners have contacted him since the sale inquiring how they might do the same.
Hurst concedes it’s highly unlikely that bigname entities — those sold for hundreds of millions of dollars — will ever return to the families that founded them. However, founders of small wine companies with few assets, he said, have a legitimate shot at reunification. Truett Hurst, VML and Breggo each produce less than 10,000 cases, while Patz & Hall is still relatively small at 30,000. None of the recent deals involved a winery, tasting room or vineyard, which would typically drive the purchase price up significantly.
“We’re seeing a downturn in the wine industry,” said Hurst. “Could it be because these corporate entities don’t have the personality? Us founders know how to sell wine.”