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Baron Ziegler was at a crossroads a few years ago.

His Healdsburg-based Banshee Wines had gained a significant following — largely among younger customers — with a premium pinot noir priced well below other competitors. And he had the hippest tasting room in the city, with a Generation X-inspired lounge complete with a record player for vinyl albums and worn leather sofas for guests to relax.

But Ziegler could not escape the economics of the wine business. He operates a “virtual winery,” purchasing his grapes on contract with Sonoma County growers and using custom crush facilities for his winemaking. In addition, wholesale consolidation makes it harder for smaller wineries, like his, to get noticed in the marketplace even though Banshee had 20 percent annual growth rates. It produced 50,000 cases in 2017.

He came to realize what many young wineries have discovered: they must get bigger to ensure their long-term survival

Ziegler faced two options: bump up the price of Banshee from $25 to $40 a bottle and reduce production, leveling off growth to make it more manageable, or, bring in a bigger winery to provide the resources that he and his partners were lacking.

Banshee had various suitors since releasing its first vintage with the 2008 harvest. But none really interested Ziegler until Hugh Reimers came along in January with his own mandate to grow Foley Family Wines of Santa Rosa, already the 20th largest wine company in the country.

The result: a quickly negotiated deal. Foley took a majority stake in Banshee and its sister company, Rickshaw, a wine company that sells other smaller California producers under its own label. The deal, however, allowed Ziegler to retain a greater voice in operations than normally seen in winery transactions. Ziegler and Foley dubbed it as a “partnership,” rather than an acquisition. Financial terms were not released when it was announced last month.

“We have seen a lot of brands get purchased and get ruined — maybe not ruined because they make more money. But the soul of the brand changes,” said Ziegler, a 39-year-old married father of three young children. “The idea is to not milk the brand for as much as it is.”

Foley’s founder and billionaire owner, Bill Foley, and Reimers, the company’s president, were on board as they realized Ziegler was integral to Banshee’s success. They believe he can help steer the winery as chief executive officer to even greater growth with Foley’s resources behind it.

“We think it’s important for Baron to be involved. He’s a big part of the brand,” said Reimers, who came to Foley last year after serving as a top executive at Jackson Family Wines in Santa Rosa. “That really sealed the deal. He could stay involved.”

The wine industry is notorious for larger vintners taking over smaller beloved producers and then churning out more growth, a life cycle that typically ends with the brand becoming a shell of its former shelf, said Rob McMillan, founder of Silicon Valley Bank’s wine division in St. Helena.

“There are plenty of ones that pretty much are driven into the ground,” McMillan said.

Local pinot noir producers have especially been in demand, riding the wave of popularity the varietal received after the 2004 movie “Sideways.” While at Jackson, Reimers was part of a team that bought Siduri Wines of Santa Rosa from Adam Lee in 2015 and then Healdsburg’s Copain Wines from Wells Guthrie a year later.

Both Guthrie and Lee are still involved with the labels they founded. Lee agreed to stick around for three years as part of the original deal with Jackson and noted in an email on Thursday that he was still having fun and “going to add on for two more years (at least).” Lee also has recently started a new wine company, Clarice Wine Co., which offers a more interactive subscription model than the typical wine club.

On a larger scale, Napa vintner Joe Wagner sold his hot Meoimi brand to Constellation Brands Inc. in 2015 for a startling $315 million. Wagner, though, did not stick around and focused instead on his Copper Cane Wine & Provisions business, spending a significant amount of his time in the Oregon pinot noir market as well as the North Coast.

Ziegler was adamant that he did not want the Meoimi model, where Constellation dropped the price below the $20 level and ramped up production to make the wine ubiquitous on retail shelves across the country. “If Constellation wanted to buy us, they would say ‘goodbye’ and change everything that we were doing,” he said.

As part of the deal, Ziegler said he got to keep his winemaking team and Banshee’s tasting room staff. “The idea is we can still have creative control on a lot of this stuff. We can still be very involved in the winemaking,” he said.

In return, Banshee will rely on Foley’s 170-member sales staff to help boost its sales efforts as well as building a relationship with major distributors — such as Southern Wine & Spirits of America and Republic National Distributing Co. — that dominate the wholesale market. Those big wholesalers do not pay any attention to small wine companies because they are motivated by volume of sales.

The Banshee team saw an immediate effect, such as getting a 20 percent reduction on the cost of bottles because Foley has much more leverage with suppliers. Ziegler said he could not imagine having that kind of pull when he formed the business at a bar in the Dogpatch neighborhood of San Francisco with Steve Graf, his brother-in-law, and Noah Dorrance, who is no longer with the company. They relied on their savings, family friends, angel investors and mortgage refinancing to garner the $60,000 to get Banshee off the ground.

Foley was amenable to not tinkering much with Banshee, especially in its business model that drives 60 percent of its sales through restaurants and the remaining accounts mostly through independent retailers. It does have a strong relationship with Whole Foods Market, which is now owned by Amazon. It also sells some of its wine directly to consumers through tasting room visits.

“It’s a good way to build a brand,” Reimers said of restaurant sales. He added that Foley can help Banshee keep up its current pace and grow in certain markets, such as the profitable Florida wine marketplace, while still retaining its DNA that made it unique. “We don’t want to go into the big chains.”

The Banshee deal is a lesson in patience, Reimers said. “The problem with most wine companies is that they don’t have it,” he said. He noted Banshee was probably not a good fit for Jackson because its proprietor Barbara Banke prefers assets such as vineyards or wineries. “Bill is open to things that are asset-light,” Reimers said.

Foley is noted for its more traditional brands that include Sebastiani Vineyards and Winery in Sonoma, Chalk Hill Winery in Healdsburg, Foley Johnson in Napa Valley and Lancaster Estate in Alexander Valley. The deal allows Foley to court a younger audience and further its stake in the segment of pinot noirs above $20 a bottle — one of the most highly coveted places in the marketplace.

“We don’t sell a lot of pinot noir,” Reimers said of Foley’s portfolio, which includes almost 30 labels and 3,000 acres of vineyards worldwide.

Like Banshee, Foley also is under pressure to grow. Wine Business Monthly estimated the company sold 1.2 million cases in 2017, but Bill Foley said in an interview last year that his company needed to reach at least 2 million cases annually so it could continue to get the attention of large wholesalers and retailers.

Reimers said Banshee is the first of many deals to come this year for the company, which also brought in Gerard Thoukis as senior vice president of marketing in November after he served more than 20 years at E&J Gallo Winery in Modesto.

The ability to source from Foley’s vineyards will be the biggest change for Banshee. Rising pinot noir prices played the most significant factor in Banshee’s future as Sonoma County pinot noir went from an average of $3,043 per ton in 2009 to $3,917 per ton by last year’s harvest. Even as those price hikes sucked up his cash flow, Ziegler was reluctant to raise his bottle price beyond the $25 level. The brand is noted for its balanced style between wines with a ripe flavor and those that have more acidity and minerality, focusing on vineyards from the Sebastopol Hills area west to Fort Ross on the coast.

Banshee will also get access to Foley’s production facilities, which will ease the burden of its winemakers who had to schedule their harvest around the availability of third-party crush facilities.

“It’s going to be like a kid in a candy store,” Ziegler said, noting that it could allow for Banshee to make estate vineyard vintages. “They have more vineyards than they have brands to sell them in. We have a brand and no vineyards.”

Editor’s note: The story has been updated to reflect the renaming of Foley Johnson.

You can reach Staff Writer Bill Swindell at 707-521-5223 or bill.swindell@pressdemocrat.com. On Twitter @BillSwindell.

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