Justin, which makes about 50,000 cases of wine a year, was founded in 1981 by former investment banker Justin Baldwin and his wife, Deborah. The 160-acre property includes a hotel and a restaurant.
“It’s actually a perfect match,” said John Cochran, president of Fiji Water, in an interview. “The Justin folks have done an exceptional job of building a great business, primarily based on fantastic products. And despite all the success that they’ve had, there’s still a great opportunity, given consumer demand for the product, to carefully grow that consumer presence and distribution.”
The acquisition is one of eight this year for California wineries, twice as many as last year and the most since 2007, when eight purchases were completed before the recession, according to the San Francisco-based Wine Institute.
“There will be more deals like this, without question,” said Jack Daniels, co-founder of Wilson Daniels Ltd., a wine marketing firm in St. Helena.
Before the recession, the market was flooded with bottles priced from $25 to $100 as existing wineries ramped up production and new entrants came to the market, Daniels said. Now many are sitting on excess inventories as middle-class consumers cut back purchases of pricey wine and opt for bottles below $20.
‘Excellent Reputation’
Justin, which sells wines ranging from a $15 sauvignon blanc to a $62 cabernet sauvignon blend called Isosceles, has “an excellent reputation and are perceived as a high-quality producer,” Daniels said. “But there’s a lot of those wineries out there today.”
What makes the deal for Justin unusual is that the company doesn’t appear to be in trouble, unlike many other purchases this year, said Vic Motto, co-founder and chief executive officer of Global Wine Partners LLC, an investment bank in St. Helena, California.
“It’s an outlier,” Motto said. Since the economic slump, expanding wineries have been reluctant to sell for a discount, and those that have are in distressed situations, he said. “Those wineries that were highly leveraged were squeezed as sales went down. They just couldn’t sustain that.”
Troubled Assets
This year’s wine deals included purchases of troubled assets. In June, Sutter Home Winery paid $6.5 million for the real estate of former Havens Wine Cellars, which was liquidated last year. Last month, Foley Family Wines picked up Eos Winery in Paso Robles, which was in receivership.
Jeff Menashe, chairman of Demeter Advisory Group LLC, the San Francisco firm that worked on the Justin deal, wouldn’t say how much the winery sold for. He said it was comparable to five other sales in the past two years that involved growing luxury wineries in California.
Among those was Diageo Plc’s $105 million purchase of Rosenblum Cellars, a 200,000-case property in Alameda, a 2008 transaction that Demeter worked on. Another was the 2009 sale of Kosta Browne, a 10,500-case winery in Sonoma County specializing in pinot noir, to Vincraft Group, for about $40 million, according to the Wine Institute.
During the recession, consumers drank less in restaurants, hurting producers who relied on sales of bottles that cost more than $10. California wholesale wine sales were unchanged in 2009 from the previous year, and the value of retail sales dropped 3 percent to $17.9 billion, the Wine Institute said.
Best Year Ever
The situation is different with Justin, Baldwin said.
“We’re finishing up the best year we’ve ever had,” he said. Part of the reason he decided to sell is for financial planning, Baldwin said. He was also concerned that to “build off of what we’ve developed in our 30-year history,” they wouldn’t have “the financial wherewithal” to do that on their own.
“It’s not a distressed asset,” Fiji’s Cochran said.
Resnick is no stranger to the world of agriculture. He and his wife are the biggest growers of citrus, pomegranate, almonds and pistachios in the U.S. His Roll International Corp. owns Fiji Water, the bottled water shipped from the remote South Pacific island; POM Wonderful pomegranate juice; Teleflora, the flower delivery service; and Suterra, an environmentally friendly pesticide.
The Resnicks had been looking to buy a winery for years and never found a match until they were introduced to the Baldwins by Demeter, according to Cochran.
“They’ve done such a nice job of building up a business, most of the things you look at are such a train wreck,” Cochran said. “Stewart’s been buying businesses for 40 years, and it’s rare that he’s looked at one that got better as the process went on, not worse.”
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