breaking news: canoe ridge and sagelands sold to precept

Monday, February 14, 2011

This has been a tough winter for Washington wineries. In recent weeks a half-dozen Washington wineries have closed, albeit for widely varying reasons.

Yellow Hawk had a small fan base in Walla Walla but couldn’t compete elsewhere. Nicholas Cole had been struggling to find a new business model and was finally tanked by family-related issues. Sagelands and Canoe Ridge were mismanaged by overseas ownership – but more on that in a moment. Olsen Estates simply fell victim to horrendous timing. And most recently, Whitman Cellars ran afoul of their lenders – the real story there has yet to come out.

While none of this is good news, in the grand context it is neither unexpected nor dire. Six wineries out of 700? My training was that 90% of all new businesses fail in the first five years. Against that standard, the wine industry has a stupendous track record for success.

It’s all too easy to be a doom-and-gloomer in the current economic environment. And given the time lags in the growing, making, and selling of wine, there is little doubt that a few more sitting ducks will fall before the Washington wine industry re-aligns itself. But here’s some good news.

Seattle-based Precept Wine Brands – the fastest growing, second largest overall, and largest privately-owned wine company in the Northwest, has acquired both Canoe Ridge and Sagelands wineries from Diageo. The purchase includes the 153-acre Canoe Ridge estate vineyard in the Horse Heaven Hills – different from Ste. Michelle’s Canoe Ridge vineyard, but of comparable quality.

Precept has been on a buying spree for the past four years, and their portfolio now encompasses 3600 vineyard acres, five production facilities, seven tasting rooms, and dozens of brands. The addition of these two wineries, which had languished badly under the ownership of British-based Diageo – a spirits company dabbling (mostly unsuccessfully) in wine – is great news for the Washington wine industry.

Canoe Ridge, the more important of the two, was founded in 1994 as a joint venture between a small group of Walla Walla investors and the Chalone Wine group. John Abbott, now a partner in Abeja, was the original winemaker, and during his tenure Canoe Ridge made some spectacular wines, particularly chardonnays and merlots. A seeming renaissance was underway when Christophe Paubert took over the winemaking in 2006 – 2008, but just as his first wines were reaching the market, he departed for greener pastures. Canoe Ridge returned to obscurity.

Sagelands opened its doors as Staton Hills in 1984, with an impressive vineyard and winery perched on the hills south of Yakima, just at the entrance to Yakima valley wine country. Despite its early success, it too foundered, and passed into the hands of Chalone (in 1999) and then Diageo (in 2004).

Clearly, Diageo had no clue what to do with either winery. It is rarely the case that outside corporate ownership – especially a spirits based corporation – does anything good for a regional winery. Precept’s plans for both include a commitment to investing in, and developing both brands. In both an e-mail exchange and a quick phone call with Precept CEO Andrew Browne, I learned more specifics.

PG: Will the tasting rooms re-open? If so, when?
AB: Canoe Ridge will re-open in Walla Walla in the Spring of this year. No specific timeline yet for Sagelands, but we are looking closely at that retail opportunity. Meanwhile, we will continue to sell the inventory for both brands in the Northwest and other key markets in the US.

PG: Were grapes crushed at either winery in 2010?
AB: Yes, grapes were crushed at both wineries in the 2010 vintage. Canoe Ridge will continue to operate as usual. The Sagelands facility has suffered some neglect. We are in the process of determining its needs for updating, but remain committed to the facility in both the short and long term.

PG: Who will be making these wines in 2011?
AB: Canoe Ridge wines will be made by Bill Murray, a veteran winemaker from California, who has held the position as winemaker for Precept's Sawtooth Winery in Idaho for the past two vintages. We are currently evaluating our options for Sagelands amongst our current winemaking team.

PG: How does each of these brands fit into the Precept portfolio?
AB: Canoe Ridge will stand next to Waterbrook as Precept's marquee premium Washington wineries. Both are steeped in history and known for consistently producing quality Washington wines. The Canoe Ridge Estate Horse Heaven Hills vineyard will continue to be the backbone of the Canoe Ridge wines with a strong focus on merlot and cabernet sauvignon. Sagelands strengthens Precept's position as a value leader in Washington, offering outstanding wines under $15 for everyday consumption.

PG: Looking into the future, what changes do you foresee?
AB: There are no plans currently to make any major changes to the packaging or the core lineup of wines for either brand. Similar to the evolution of Waterbrook since the 2007 acquisition, Precept is committed to investing and enhancing both of these brands, building upon the great foundation that has been created through the years.

In conclusion, Browne noted that “clearly, these are brands with a heritage. We think there’s an ability to take them to a higher level. We’re excited about the facilities, the vineyard and the brands. To look into the near future… we’ve got the wine in the bottle. Over the next 3 to 5 years we want to apply what we’ve done with past acquisitions and do it with these. We’ll debate every facet with the goal of putting a better product out there.”

PG: After more than a decade of dispiriting neglect, the view from here is that a real turnaround for both Sagelands and Canoe Ridge is about to take place. The timing could not be better.

Precept Wine Brands

7 comments:

Anonymous said...

Paul,

Interesting story. With regards to tough times in the WA wine industry are you noticing that many wineries in WA are holding their 08 releases as they continue to sell through their 07 and in some cases still 06 inventories? I have noticed that at a couple of my favorites that I have followed for years. Relating to your story I find it interesting that you perceive that these 2 wineries were mismanaged. As a WA wine fan living in Texas where it is very difficult to find many WA wines I have noticed that both of these wineries appeared in our grocery stores and wine stores quite frequently. Was it that in your opinion the wine wasnt very good? Because from a distribution standpoint at least from down here in TX it looks like they were doing a better job than most other WA wineries with bigger names.

Anonymous said...

Hay Paul,
Just wanted to say, I enjoyed your incites at WAWGG, both on Syrah and myths. My take away was on Bob Betz idea of Washington State exceptional-ism. Perhaps a good point to expand on for a blog post.

Cheers,
Sam

Todd said...

Wine is a tough business for a public company right now. Diageo has always seemed to favor its Beaulieu label while integrating the later purchases of "regional" brands Sagelands and Canoe Ridge seemed clumsy to this observer.

In a way, I'd like to see more "globalization" of Northwest winery ownership, if only as a validation of its viability and consumer appeal.

The folks at Diageo seemed to care about winemaking, grape growing, and terroir - at least with regard to Beaulieu and their former French operations (which have been sold after recently taking a massive hit during "la crise").

The Diageo portfolio was highly regarded (though certain parts were neglected)... Precept...? I wish them all the best, but the Precept approach to the market always has struck me as being more marketing oriented than product oriented. Even the name of the company is "Precept Wine Brands." I'm not sure what that says about the wine industry in the Northwest. Perhaps it will remain largely a cottage industry with hundreds of small producers (Ste Michelle excepted).

PaulG said...

Anon - Diageo has the muscle to get placements for their brands in supermarkets, wherever they are located. That does not equate to good management of the asset being placed.
Sam – Washington State exceptional-ism has been the focus of virtually everything I've written in newspapers, magazines, and multiple books, as well as this blog. I totally agree with Bob, but I think I have been saying that all along.
Todd - the problem with trying to "globalize" the Northwest is the limited production of almost all the producers. Granted, that has not kept Burgundy from being globablized, but not too many other examples can be found. As for Precept, they began as a marketing company but have now expanded aggessively into vineyard ownership and the development of wineries as well as brands. They have the size and the talent to take these new wineries to a national, if not global, market.

Anonymous said...

It is interesting to me that there is all of this Precept talk of integrity of these brands yet when they took ownership on Friday Feb 11th, they laid off the entire staff and shut the doors of Sagelands Winery. Winemaker, Frederique, had been there for 16 years. This means that the future of the wines will be entirely different. They will now make Sagelands elsewhere and under completely different circumstances. I don't agree that Diageo had let the facility fall to ruin. There had been consistent investments for quality and the recent vintages showed it. Not to mention a beautiful new tasting room floor...

Canoe was a little more lucky to only loose their Winemaker.

While I appreciate that there will be renewed marketing of these wines, I agree that Precept is not known for quality focus and I question what that means for both places. I also think that it is very sad that Sagelands beautiful facility is being disregarded and allowed to be turned into nothing more than a warehouse. I am unimpressed with Precepts business decisions which seem more interested in a quick profit than upholding a tradition.

Diageo may have let the WA marketing languish in the recent years but their commitment to quality was always present as you can see in Sterling, BV (Beaulieu), and Provenance.

PaulG said...

OK, we can certainly agree to disagree on some things. But when businesses are sold, staff layoffs are the norm. Nothing unusual there. Wineries change winemakers frequently. A new tasting room floor hardly translates to a meaningful investment in a quality winemaking facility. And if Sterling is your idea of a quality winery, I suggest you do a little more exploration of the competition.

Mackenzie said...

Ha! I worked for Staton Hills back in the day, passing out fliers in Pike Place Market... Just a lad, I wasn't interested in wine at the time. I often wondered what happened to them. Thanks for that Paul!

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