Sebastopol vintner at the helm to ensure survival of small wineries amid consolidation
The megadeals within the North Coast wine industry have picked up in 2022.
The list is notable: Shafer Vineyards in the Napa Valley was bought by a large South Korean conglomerate. Joseph Phelps Vineyards, another iconic Napa winery with holdings in Sonoma County, was purchased by LVMH Moet Hennessy to add to its collection of premium wineries. Foley Family Wines just last month finalized a sale to obtain Silverado Vineyards, which gave the Santa Rosa wine company premium land in Napa Valley.
The moves also have triggered a deeper conversation: How can local midsize and small wineries survive in this rapid era of consolidation?
That’s especially on the mind of Anisya Fritz, who, with her husband Lynn are owners of Lynmar Estate in Sebastopol. That’s a premium winery known for its award-winning Burgundian varietals along with exquisite hospitality, which includes lunch pairings by chef David Frakes with many ingredients grown on the property.
Fritz notes the transactions come at a time of many challenges: climate change; increased costs for labor and supplies; and a discerning younger consumer with a wide array of drink choices. Those issues present obstacles for even a well-regarded winery like Lynmar Estate. The Fritz family has held the land for more than 40 years and have a track record of high scores from critics. The winery now has more than 80 acres of estate vineyards and a yearly production of around 11,000 cases, she said.
“I think there’s going to be a shakeout. I think it’s going to be throughout the industry. It’s going to be big, medium and small that are affected,” said Fritz.
The issue goes beyond the personal for Fritz and overlays with her professional experience as an academic. She came to the United States from India at 17, obtained a Ph.D. in business strategy and became a business professor at 25. Fritz has taught for a decade at Sonoma State University on courses about wine entrepreneurship for the next generation looking to make their mark just like such pioneers as Jess Jackson and David Stare.
“She is a rare individual whose life experience combines academic insights in the arena of strategy with the real-world experience of running a small winery,” said Ray Johnson, executive director of the Wine Business Institute at Sonoma State.
Despite such threats, the 57-year-old Fritz also remains bullish on small wineries in the U.S. industry. The optimism comes even as the deck increasingly feels stacked against them in contrast to the big wine companies, which have the financial resources and the economies of scale from which they can make premium wine for much less money.
“The fact is that small wineries are the ones that are really bringing new customers because that's where people have the personal experience,” Fritz said. “I think feeling connected somehow to the producer has always been important and continues to be important.”
That is occurring locally with such younger winemakers as Chenoa Ashton-Lewis of Ashanta Wines and Martha Stoumen of her namesake label, both who are making wines from organically grown grapes that are processed as minimally as possible ― often under the term known as “natural wine.”
Scribe Winery in Sonoma has gained a devoted following in part to celebrity sightings of entertainers, such as Amy Schumer, which has attracted interest on social media.
“Small wineries are where you are seeing the innovation. Natural wine. Organic wine. Celebrity-endorsed wine,” she added.
Small wineries, however, must improve their financial operations to survive, Fritz said, such as shaving costs and finding additional efficiencies in their operations. That’s especially the case as the 10 largest wine companies in the United States account for 78% of domestic wine shipments, according to Jon Moramarco, managing partner of wine consulting firm bw166. That leaves more than 11,000 wineries in the U.S. to fight over the remaining 22%, mostly selling direct to consumer. Sonoma County has around 450 wineries with a very small number of large ones.
“There's not a lot of people who truly understand the financial pressures of owning a winery,” Fritz said.
Cash flow is a constant concern because small wineries have to pay for upfront costs such as barrels and bottles and then have to wait as much as 18 months before they start to receive a return back on sales, she said.
“My observation has been that a large number of small wineries, in particular, are run by people who are passionate about making wine or growing grapes and really don't want to be bothered with the marketing,” she said.
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