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Wild Horse Winery Joins Fortune Brands' Label Stable

August 05, 2003|Jerry Hirsch | Times Staff Writer

Wild Horse Winery has been corralled.

The Central Coast maker of $15 to $20 vintages has been acquired by conglomerate Fortune Brands Inc., which owns the Geyser Peak and Canyon Road labels, the companies said Monday.

They didn't reveal the terms of the deal, which closed Friday, though a source said the sale price was $35 million.

Wild Horse is the most recent mid-size independent California winery to sell to a corporate giant. Last fall, E.&J. Gallo Winery, the second-largest U.S. wine company, purchased the family-owned Louis M. Martini and Mirassou Vineyards wineries.

"We are seeing a polarization of the wine industry into large producers and small producers -- with the middle disappearing," said Vic Motto, an industry consultant with MKF Group.

For Wild Horse, it made business sense to be absorbed by a bigger player, said Ken Volk, founder and president of the 21-year-old winery, which has 48 acres of vineyards.

Although Wild Horse has been profitable with about $14 million in annual sales, Volk, 45, said he wasn't prepared to take on more debt to supply the capital needs of the business "in a market where it was difficult to maintain volume and pricing."

Like Martini and Mirassou, Wild Horse produces 130,000 to 150,000 cases annually, too many to put it in the limited-production "boutique" category but nowhere near enough to go up against the million-case sellers, Motto said.

But wine producers in general have had tough times lately. A worldwide grape glut has sent prices tumbling as a wave of inexpensive imports from Italy and Australia has landed on U.S. store shelves.

Complicating matters for some wineries is the industry's byzantine three-tier distribution system, which requires wine companies to go through wholesalers to sell to restaurants and stores (though some states allow consumers to buy directly from a winery).

Under a federal law that has its roots in Prohibition, a winery can't sell directly to a retailer, and, with all the competition, "to get the salesman to focus on your product is hard," said Robert Nicholson of International Wine Associates, the investment bank that represented Wild Horse in the sale.

Wild Horse will be added to Fortune Brands' Peak Wines International subsidiary, which includes the Geyser Peak and Canyon Road brands and has its own sales and marketing force that targets wholesalers.

Together, the three wine brands will produce about 750,000 cases annually.

The location of Wild Horse on California's Central Coast made it attractive to Peak Wines, allowing it to round out its list of California varietals, said Stephen Brauer, chief executive of the Geyserville-based Fortune Brands unit.

He said Wild Horse's reputation for $15 to $20 Pinot Noirs, Merlots and Chardonnays complemented Geyser Peak's Cabernet Sauvignon, Sauvignon Blanc and Shiraz offerings, giving the company a more complete line for distributors to market.

Brauer said Wild Horse has "tremendous growth potential" now that it's backed by the resources of a much larger company.

For his part, Volk said the sale to Fortune was "good timing for my family." It provides a way for Volk and the other investors in the business, which include his siblings and 84-year-old mother, to cash out on their gains.

Volk will continue to run the winery for Peak Wines.

"The wine business has certainly become more difficult," he said, adding that now "I have the ability to be competitive."

Shares of Lincolnshire, Ill.-based Fortune Brands -- which makes such diverse products as Titleist golf balls, Jim Beam whiskey and Moen kitchen faucets -- dropped 20 cents to $55.60 on the New York Stock Exchange.

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