For two centuries, farmers have worked the vineyards in Sonoma County, blending soil, sunshine, science and sweat to produce grapes that are used to create some of the world's top wines.
Today, there are 1,500 farmers who grow the county's signature crop, selling their fruit to 550 local wineries or crushing it themselves to transform the juice into wines that are sold around the globe.
But increasingly, the county's largest wineries, together with a small group of big growers, are taking control of the vineyards and the $400 million crop they yield each fall.
The top five vineyard owners in Sonoma County control nearly a fifth of the county's grape supply, according to an analysis by The Press Democrat of county property tax records. The vineyards and winery assets on that land have an assessed value of more than a half-billion dollars, although the actual market value is likely much higher.
The two largest players, perennial rivals Jackson Family Wines and E&J Gallo, are locked in a virtual tie. Each owns about 3,200 acres, with Jackson Family Wines ahead by a mere 61 acres, including properties owned by affiliated companies, executives and family members. The vineyards, buildings and equipment on Jackson Family Wines' land are valued at $251 million on county tax rolls, and Gallo's is valued at $105 million, according to an analysis of county records.
Silverado Premium Properties, a Napa vineyard investment firm, is in third place, with nearly 2,400 acres of vineyards valued at $80 million, according to an analysis of county records.
The Sangiacomo family, a longtime grape-growing family in Sonoma, and Ferrari-Carano winery west of Healdsburg round out the top five. The two own a combined 2,300 acres of planted vineyards with an assessed value of $138 million.
In a region where much of the potential vineyard land has been planted, and what remains is considered ill-suited for vineyards or too environmentally sensitive to develop, these players have emerged as a dominant force in shaping the direction of the industry.
The leaders behind these companies have pioneered new growing regions and shaped the boundaries of wine appellations, a valuable marketing tool for growers and wineries. They impact what other wineries pay for grapes and the land on which they're grown. And they have contributed research on sustainability, even while reshaping the landscape and accelerating the move toward machine harvesting.
They ended up on top after a planting spree in the 1990s that more than doubled the vineyard acreage in Sonoma County to more than 60,000 acres, an expansion that altered the look and feel of the region while fueling the growth of an industry that has made Sonoma into a global brand.
Rising land values
Sonoma County long has been known as a place where grapes are grown primarily by independent farmers, not the wineries whose names are on the bottle. Two-thirds of the vineyards in the county are owned by independent growers, and about a third are owned by wineries, according to industry experts. By contrast, wineries dominate the vineyard landscape in neighboring Napa County, owning an estimated two-thirds of the land while independent growers there hold the other third.
"I think there's a perception that Sonoma County has these big growers and big wineries and that's what dominates the landscape, but that would be a misperception," said Karissa Kruse, president of the Sonoma County Winegrowers, a trade group funded by local growers. "The bulk of the vineyards are owned by families, a lot of them multigenerational. It's very much still a small-grower environment."
That may change in Sonoma County as wineries increase their vineyard holdings, responding to rising demand for California wines and predictions that there eventually won't be enough grapes to meet the need.
Jackson Family Wines, which currently owns about 3,230 planted acres in Sonoma County, wants to expand its holdings across the county to 5,000 planted acres, said Hugh Reimers, the company's chief operating officer.
With little available land, demand for premium vineyards will likely continue to drive up land values in Wine Country, experts say.
Over the past 15 years, vineyard prices have more than doubled in Sonoma County, ranging from $60,000 to $125,000 per acre for existing vineyards, according to appraisers. Planting on undeveloped land — if you can find a suitable spot — costs $30,000 to $50,000 per acre, Kruse said.
Growers are less able to pay the steeper prices than wineries because they don't have the profit margins that wineries have.
"The vineyard land has gotten to a point where it outprices growers, to make it pencil," said Steve Sangiacomo, partner at Sangiacomo Family Vineyards in Sonoma. "Wineries can pay more for land, because there's better return on the bottle than grapes."
Statewide, the biggest growers are getting bigger, but there hasn't been a corresponding increase in the footprint of smaller growers, said Glenn Proctor, partner and broker at the Ciatti Co., a San Rafael wine and grape brokerage firm.
"Smaller entities were probably more focused on survival than growth," Proctor said.
Even so, Proctor believes small growers still dominate in Sonoma County, compared with other parts of the state.
Whether they can afford to expand is another matter.
"They're getting priced out of the market, because they can't afford to pay the land costs necessary, because they can't compete with the wineries," said Robert Nicholson, principal at International Wine Associates, a Healdsburg wine industry mergers and acquisitions firm. "We are going to increasingly see more ultra-premium vineyards — high-priced, high-quality vineyards — in the hands of wineries, because they are the ones that are going to be able to afford the increasing cost of vineyards."
Securing grape supply
One of the main reasons wineries seek to own vineyards is to control the quality of the fruit that goes into the bottle.
Consumers are drinking more California wine, but some believe the vineyards that support that wine aren't growing fast enough to keep up with demand. Vineyard acreage in Sonoma County has grown more than fivefold since 1960, but has remained relatively flat over the past decade. It now stands at about 59,219 acres, according to the annual Sonoma County crop report.
"You can understand people like Gallo and Jackson wanting to own their vineyards so they can control their supply of grapes," said Tony Correia, owner of the Correia Co., a vineyard and winery valuation and consulting company based in Sonoma. "That's becoming a very big issue, especially as we go into what should be a shortage in the next few years. There is a real theory that a large winery should control their destiny, and the best way to do that is control vineyards."
At Sonoma-Cutrer, the sixth-largest owner of planted acres in Sonoma County, vineyards owned by the winery impart unique characteristics on the pinot noirs and chardonnays it sells, said Mick Schroeter, director of winemaking.
"The great thing about having our own estate vineyards is we have the ultimate control over the fruit that we produce, but also it's where those fruits are grown," Schroeter said. "There would be a lot of people that would love to buy them, but they're great for us."
Shaping growing regions
As the largest companies have grown, they've had the resources to experiment by planting in new areas, and the willingness to make risky investments.
The Sangiacomo family, which owns about 1,175 planted acres in the county, primarily in Sonoma Valley and Carneros, was among the first to plant in the northern Petaluma Gap area, and in the cooler Sonoma Coast region. That involves a lot of homework such as soil tests and small experimental plantings, Steve Sangiacomo said.
"People thought it was too cool to grow wine grapes out there, but we saw an opportunity to expand into a high-end category," Sangiacomo said.
Some industry veterans credit Kendall-Jackson founder Jess Jackson with helping to develop the Sonoma Coast region.
"Jess pioneered a lot of that. He really did," said Jon Fredrikson, a veteran wine industry analyst and consultant. "Even now, it's a lot riskier planting there, because you don't have the assurance that you're going to have the weather to get crops right."
The company is planting 500 new acres of vines in the Sonoma Coast American Viticultural Area this year, said Reimers at Jackson Family Wines. An AVA designation, which is granted by federal regulators, allows wineries to brand wines that originate from distinctive geographic regions and are often used by consumers to shop among a dizzying selection of wines on the market.
Gallo lobbied to have the boundaries of the Russian River Valley AVA expanded. Now its Two Rock Vineyard near Cotati, which spans 500 acres of land, is part of the region, which is famed for its pinot noir and chardonnay.
Representatives from Gallo declined repeated requests for an interview.
Beringer — owned by Treasury Wine Estates, which owns about 881 acres of planted vineyards largely in the Knights Valley AVA — helped establish that AVA, said Joel Fisher, director of corporate communications for Treasury.
Rodney Strong, the ninth- largest vineyard owner in Sonoma County with just under 800planted acres, was instrumental in the development of the Chalk Hill AVA. Rodney Strong also was one of the first to do massive plantings of pinot noir in the Russian River Valley, chardonnay in Chalk Hill and cabernet in Alexander Valley, said Rick Sayre, winemaker for Rodney Strong.
The largest companies also have helped steer the county's vineyards from hand picking to machine harvesting. Significant investment is required to make it work, not just on equipment, but also on the vineyards. Vines must be planted with enough space between the rows to allow for the high-tech harvesters, and machine harvesting on hillsides can be impractical or impossible.
But as the labor force shrinks, with tighter border restrictions and strengthened immigration enforcement, mechanical harvesting is becoming an attractive alternative.
About 35 to 40 percent of the county's vineyards are harvested by machine, said Nick Frey, former president of the Sonoma County Winegrowers.
"When you have the pressure on labor that's likely to increase … and when you look at how do you manage a crop in a short season, mechanization is going to have a place," Frey said. "They stem and sort in the field and it looks like a truckload of marbles when it comes into the winery. It's pretty phenomenal what some of the machines can do today."
Constellation Brands, which is the seventh-largest vineyard holder in Sonoma County with about 930 acres planted, farms about 80 percent of its vineyards by machine, said Steve Smit, vice president of vineyards and grape management.
"If there's a labor shortage now, we're not as affected by it," Smit said.
About 70 percent of Silverado's Sonoma County properties are harvested by machine, said Pete Opatz, vice president and chief viticulturalist for Silverado. Statewide, about 80 percent of the company's vineyards are harvested by machine. For Treasury Wine Estates, about 60 to 65 percent of its Sonoma County vineyards are harvested by machine, Fisher said.
By contrast, only 15 percent of the vineyards owned by Sangiacomo Family Vineyards are mechanically harvested, but that likely will increase, Steve Sangiacomo said.
"The labor market is tight," Sangiacomo said. "It's something that we're very conscious of, and we're looking at every way we can to mechanize."
The top wineries on the list have an impact on the price of grapes. If growers owned more of the grape acreage going into the wineries' bottles, they would have more negotiating power on prices. But when the wineries amass more vineyards, they're less at the mercy of growers, said Dave Murray, a real estate broker in Alexander Valley.
"The top five basically set the price for how much the wineries are going to pay for the fruit, because even though they might only own 20 percent, they're organized," Murray said.
Having Silverado, a vineyard investment company, among the top players helps stabilize the market, because it has more negotiating power with wineries, said Joe Ciatti, principal at Zepponi & Co., a wine industry merger and acquisition firm based in Santa Rosa.
"An independent grower, they can't stand up to a winery, but a bigger player like Silverado can," Ciatti said.
Jackson Family Wines alone controls a third of the Sonoma County pinot noir market, Reimers said. That gives the winery influence on the price and availability of a grape that nearly doubled in value in 2012. The company began planting more pinot noir in 2007, Reimers said.
"The reason we started planting was because we just couldn't find the right quality fruit at the right price for our $25 bottle of wine," Reimers said. "It's a really tough varietal to grow, and the supply can be up and down."
That lessens the company's reliance on outside growers.
"Our goal is to make sure we can keep our best fruit, but if there's people supplying grapes that are a lesser quality, we'll let those growers go," Reimers said.
The expansion by the largest players in the North Coast wine industry has increased competition for grapes and production space. Stag's Leap Wine Cellars, a Napa winery that sells its estate wines for $85 to $225 a bottle, has lost some of its grape supply and crush space as Gallo and Jackson Family Wines have expanded, said Steve Spadarotto, vice president and general manager.
"If I were running Kendall-Jackson, I would do the same thing," Spadarotto said. "They're brilliant, I applaud them, but it kind of hurts. It's making the entire industry more competitive, and I think it's becoming more of a system of 'haves' and 'have-nots.'"
News Researcher Janet Balicki contributed to this story. You can reach Staff Writer Cathy Bussewitz at 521-5276 or email@example.com.