Grapes of Wealth : Brown-Forman to Buy Fetzer Vineyards

SAN FRANCISCO —  Brown-Forman Corp., the producer of Jack Daniel’s Tennessee Whiskey, said Friday that it has agreed to buy Fetzer Vineyards, a fast-growing Mendocino County maker of premium wines that is now run by nine of the founder’s 11 children.

Although both sides declined to disclose the value of the deal, several sources in the wine industry speculated that it was more than $100 million, one of the largest winery sales in U.S. and California history.

In the late 1980s, Heublein, another spirits maker, bought Almaden for about $200 million. Heublein, a division of Grand Metropolitan of Britain, later paid about $150 million for Christian Brothers, a historic Napa Valley winery.

With the recession and health concerns cutting into wine sales, some observers speculated that other family-owned wineries might find it tempting to turn the marketing headaches over to a company with deeper pockets.

Under terms of the definitive agreement, Brown-Forman Corp.--a diversified Louisville company that in addition to the famous whiskey markets well-known brands such as Lenox china, Dansk housewares, Gorham silver and Hartmann luggage--would buy the Hopland winery, its prestigious Valley Oaks food and wine center and 900 acres of land, including 350 acres of vineyards.

Kathleen Fetzer, widow of founder Bernard, and their 11 children would retain the remaining vineyards and eight ranches, encompassing about 3,100 acres. The Fetzers would continue to supply grapes to the winery. Fetzer Vineyards last year shipped 1.9 million cases of wines under the Fetzer and Bel Arbors labels, which sell at retail for $5 to $10.

Several wine industry consultants and writers expressed surprise that the highly successful Fetzer family, which has built one of the six largest premium California wineries, would sell.

“It looks like the Fetzers would just as soon be farmers and turn the marketing over to someone with more muscle,” said James Laube, senior editor of the Wine Spectator, a trade publication in San Francisco.

Several industry observers said it was widely known that Brown-Forman, which markets Korbel Champagne, had the desire and the resources to expand into the premium California wine industry. Last December, the company bought Jekel Vineyards in Monterey County.

“Fetzer’s very well positioned in the market,” said Jean-Michel Valette, a principal with Hambrecht & Quist, a San Francisco investment banking firm. “This is not a case of a company in distress selling out. Rather, it’s a company being rewarded for outstanding performance.”

James Fetzer, 40, the winery’s president, said the family feared that the industry’s fierce competition would eventually have led to rifts. Moreover, he said, Brown-Forman has the resources necessary to take the winery to “the next level.” Fetzer speculated that the winery could double its production to 4 million cases within five years.

“We worked together (to build this business),” said Fetzer, who first worked in the industry at age 7. “The last thing we wanted to have happen was the business pull the family apart.”

Fetzer said some family members plan to stay on at the winery for six months to ease the transition. At that time, he added, he will be replaced by Paul Dolan, Fetzer’s winemaker.

Fetzer said he and other family members plan to concentrate on developing land and building their vineyard business. The Fetzers, whose best-known wine is Sundial Chardonnay, have become known for their interest in organic farming. They have more than 540 acres of certified organic grapes and plan to convert 100 acres a year to organic methods.

“We love land,” he said. “It’s kind of a disease.”