Has wine regained its passion?

Has wine entered a new age of romanticism, shunning the regimental order eschewed by multinational corporate machines? Chris Losh considers the recent rush to sell assets, including Brown-Forman's sale of Fetzer to Concha y Toro - and wonders what Gerard Depardieu might make of it all.

I once saw the chunky French actor Gerard Depardieu being followed by a rather prissy television crew round a vineyard he owned in the Loire. "What do you do with this vineyard?" asked the interviewer in a rather exasperated fashion as the star of Cyrano de Bergerac lumbered gamely amongst the vines like an arthritic Labrador.

I’ve never forgotten the look on the actor’s face. Incredulity, disdain and pity all fought for dominance on his craggy visage with incredulity narrowly taking it on points.

"Why, walk in it of course," he said, as if speaking to a half-wit. And, with that, he was off again. It is in some ways an episode that goes right to the heart of what attracts and frustrates in the wine world – the diffidence, the romance, the arrogance, the triumph of the visceral over the logical.

And M Depardieu’s reaction came back to me recently when I was considering some of the wine purchases we’ve seen in the last six months.

Go back less than ten years and it was Big Deals all the way down the line. In less than two years Constellation alone spent US$1.6bn on Mondavi, $1.3bn on Vincor and nearly $900m on Fortune Brands’ wine business. Wine was hot, and the inflated prices reflected that. In its ‘gotta have it’ splurge, Constellation resembled a drunk teenager let loose in a shoe shop with her father’s credit card.

Well, those credit cards have long since been cut up. And wine isn’t that hot any more either. Certainly not for spirits companies who can’t get rid of the stuff fast enough.

Remy Cointreau off-loaded its fizzes for EUR400m (US$576.8m) last month, while Brown-Forman punted Fetzer, Bonterra et al to Concha y Toro for $238m in the spring. These two sales – but particularly, the B-F/Fetzer one - suggest companies who want to get out of wine and back to the comforting embrace of an industry that they understand asap.

The Fetzer sale is good news for a pair of brands that had, frankly, been treading water for the last decade and are in need of a bit of love and attention. It’s good news for Concha y Toro, too, and not just because they’ve got several brands, over 3m cases of sales and instant green kudos for something of a knock-down price.

Fetzer and Bonterra will be about 15% of Concha’s total business, so should be easy to assimilate, their potential for organic growth, simply by doing the basics better than Brown-Forman managed, is obvious, as is the strategic benefit to the Chileans.

"The USA market will become the number one wine market in the world," says Giancarlo Bianchetti, global marketing director for Concha y Toro. "California represents more than 60% of the wines consumed in the US, so having a presence here with a Californian winery is very relevant to taking full advantage of the market."

Although Fetzer retails at more or less the same price point as Concha’s stalwart Casillero del Diablo, they are very different wines. The latter is a traditional kind of label, that majors on its heritage, the former is an eco-friendly surfer-dude of a wine – albeit one that could do with spending more time in the gym and less time supping Pina Coladas at the beach bar. But there is likely to be very little cannibalisation of sales, which probably explains why Concha’s shares jumped 7% when the deal was announced in March.

Plus the whole deal raises some interesting wider questions.

Firstly, this is a powerful symbolic move for Chile. Although a number of the country’s wineries have set up operations in Argentina, this is, as far as I can see, the first time a Chilean company has moved outside Latin America. From being a country that richer, more experienced ‘elders and betters’ came to in order to invest, dispense knowledge to forelock-tugging locals and walk off with suitcases stuffed with cash, Chile is now confident enough to export its expertise outside of its comfort zone.

Secondly, Concha is essentially in the hands of the Guilisasti and Larrain families who have a controlling interest of shares. They are prudent, so self-effacing as to be practically invisible and clearly in this for the long haul. Having been careful about what they have spent in the past, they are in a decent position to pick up juicy well-priced morsels being cast off from the plates of cash-strapped global giants now.

Moreover, there are a number of other family-run wine companies out there (admittedly not as big as Concha) who must be waiting with interest to see which brands the bigger companies are looking to get rid of. Warren Buffet famously made his fortune by buying shares when people were selling, and selling them when everyone else was buying. For those wine companies who didn’t overstretch themselves in the 1990s and 2000s, the next few years might represent a good opportunity. And if I were a bank, a private company with low debts, good assets and a long history would be a more attractive lending proposition than a massively indebted global player.

It’s not quite true to say that the days of big companies getting bigger are gone - Concha, after all, is hardly small. But what I think we are seeing is a return to specialisation, to companies concentrating on what they do well, rather than all trying to be Megacorp Enterprises Ltd.

Does the Concha deal, I wonder, herald the dawn of an era when we will see more wine brands back in the hands of wine people? Owners who, while they are businessmen (and women), will still understand exactly what Gerard Depardieu meant when he said vineyards were for walking in?