Friday, August 26, 2005

Reader Question: Why Are Winery Sales Kept Quiet?

The following question came from Steve L.:

"Can you explain why its so clandestine when a winery's owner sells his business? I see transactions between telecom and oil companies discussed in the paper long before they close and yet only Mondavi and Chalone were publicly discussed before they sold, rumors of other wineries being an exception I guess. Why is that?"

Good question Steve. I wondered the same thing years ago when one of the first wineries I worked for was sold out from underneath me (well, not really, but it seemed that way). When I worked with my next employer I ended up helping him to sell his business, and I came to understood why....

It has to do with distributors and, to a lesser extent, retailers. When distributors get wind that a winery is for sale, they typically assume that the new owners will change to another distributor within the state and they will lose the business. Whether that ultimately happens or not, the problem that is created is that a rumor of sale can damage a brand in the marketplace as distributors ignore it, it doesn't get through to consumers. Consequently, sales suffer and the value of the winery declines (this exact thing happened to the Sebastiani family when they sold their Central Valley wine businesses). This is why winery owners try not to let anyone know that they are for sale until it happens - a difficult tightrope to walk as you have to make the sale known to possible buyers, but very carefully.

In the case of Mondavi and Chalone, since they were public companies, their buyouts were played out in the public eye. Mondavi's happened so quickly that there was little time for damage.

I would guess that knowledge of which wineries are for sale (just like with houses) would create a better market with more information for both buyer and seller, but given the power of distributors, I don't see that happening.


Anonymous Anonymous said...

Here's a relavent article:
Wineries are never for sale

August 29, 2005 7:57 PM  

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