Saturday, August 27, 2016

Gallo Buys The Prisoner Wine Company

This post is sourced entirely from the article of the same name by Mitch Frank in the June 30th Wine Spectator magazine. I might add that the post is written on August 13th when I finally got around to reading the magazine so it's not really news at this point.

Gallo is always news for this industry though because it is the largest wine company in the world and they do a good job in that rarefied stratosphere.  We have written about the mass marketers of this industry in the past so after a cursory look at The Prisoner's brief history, we'll go right to the transaction.

Dave Phinney created both The Prisoner, a red Zinfandel-based blend, and the Orin Swift brand in 2000.  With immediate success from The Prisoner sales, Orin Swift quickly became a line of varietal wines including Saldo, Cuttings, Blindfold, and Thorn.  In 2010 with annual sales at 85,000 cases, Phinney sold the Orin Swift line to Huneeus Vineyards for $40 million.  Huneeus has an amazing track record of success which we documented in our January 31st '13 blogpost.  In the past six years Huneeus increased sales to the 170,000 cases currently which led Gallo to purchase the line for $285 million dollars.

So what did Gallo buy?  The five brand names above.  There never have been any vineyards or wineries as part of the Orin Swift project.  Everything has been contracted.  Gallo of course has plenty of vineyards already with winery capacity for several new Orin Swift-ian operations.  So the purchase was for the brand names alone.

And that is the way the wine business works in this modern era.  Whenever an independent winery is sold to an industry player it's just the brand that is purchased.  It's called consolidation and it's the same in beer and liquor and cheese and sausage and the prevailing wisdom is to take the mass marketers' money and get out of their way.  They always pay well.  Let them have it.

Gallo has announced that the Orin Swift wines would be made at Franciscan Vineyards going forward which was another Huneeus successful project before ending up with Gallo.      

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