A Graton wine company announced an agreement Friday to sell its fast-growing Mark West pinot noir brand for $160 million to beverage giant Constellation Brands.
The deal, one of the largest local wine label sales in recent history, marks the second time wine entrepreneur Derek Benham has built a small Sonoma County wine brand into a national powerhouse and sold it. In 2001, Benham and his brother, Courtney Benham, sold their Blackstone merlot wine brand for $140 million to a partnership created by Constellation and BRL Hardy.
"It's pretty impressive that Derek Benham could do it twice," said Joe Ciatti, partner at Zepponi & Co., a Santa Rosa wine industry brokerage firm. "You normally get the brass ring only once, but he's done it twice with Constellation. He builds great brands."
The 600,000-case Mark West brand, produced by Benham's Purple Wine Company, is the nation's best-selling pinot noir, Constellation said.
The transaction includes the Mark West trademark and inventories of wines from three California appellations: California, Russian River and Santa Lucia. Grapes from the Russian River appellation make up a small fraction, less than 1 percent, of the pinot noir produced by Mark West.
Purple Wine Company was founded in 2001 by Derek Benham. The company sold just under 1 million cases of wine last year, said Lisa Ehrlich, vice president of marketing.
The company, which invests its money in marketing wine rather than acquiring vineyards, sources grapes under long-term contracts with a network of growers.
Its campaign, "Pinot for the People," aimed to make affordable pinot noir available to a broad audience. And it worked. The brand won the Impact Hot Brand Award in 2010 and 2011, an award that recognizes sales growth, and was named one of Symphony IRI's Top 30 Momentum Table Wine Brands in food and drug stores for 2011.
"Derek Benham is the all-time master of creating brands and selling them at very nice prices," said Jon Fredrikson, president of Gomberg, Fredrikson & Associates, a wine industry consulting firm based in Woodside. "For history to repeat itself after Blackstone ... is remarkable."
The brand's meteoric sales growth has continued this year, jumping 35 percent in the last 12 weeks, Constellation said. Now, Purple Wine Company has annual revenues that are "well north of $100 million," Benham said.
"We go at this with a sort of guile and cunning that starts in the marketplace, and then work back to production, and the right product and taste profile," Benham said. "I'm not saying there isn't luck involved, especially on an exit like this."
Although Benham sold a major brand to Constellation before, he wasn't expecting the offer. In fact, his company was working on an expansion strategy to land national chain accounts to increase sales to more than 1 million cases per year when Constellation came knocking.
"It was a total surprise to me. I didn't know they were back in M&A mode," Benham said. "They're poised to take it. They've got the infrastructure in place, they've got global reach, they've got a 55 million case portfolio."
Its a major transformation for a brand that had ceased production when Benham acquired it a decade ago. Benham obtained the brand almost by accident when he purchased a production facility, now his Sonoma Wine Company. Mark West had suffered through a series of ownership disruptions, Benham said. But he saw a brand name that had recognition in a region known for pinot noir.