Italian Giant Buys into Oregon

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Italian PInot Gris specialist Santa Margherita has purchased Roco Winery for an undisclosed price.

The Willamette Valley property is seen as a good fit for Santa Margherita.

© ROCO Winery
| The Willamette Valley property is seen as a good fit for Santa Margherita.

It used to be the French who were eyeing up property in Oregon, but now Italy has joined in the fun, as a PInot Grigio specialist shifts focus to Pinot Noir.

In early January, Santa Margherita (SM) USA, a subsidiary of Santa Margherita Gruppo Vinicolo, acquired majority ownership of Roco Winery in Oregon. The Newberg-based winery was founded 20 years ago makes approximately 20,000 cases annually of sparkling wines, Pinot Noir and Chardonnay.

Santa Margherita USA president and CEO Vincent Chiaramonte would not disclose the purchase price, nor would executives at Roco. However, Chiaramonte did say that: “Santa Margherita USA has been looking for world-class wineries to join our portfolio. It made sense to acquire a winery in the US. Roco Winery has a reputation for producing critically acclaimed wines.”

According to Rollin Soles, Roco’s minority owner, SM’s Marzotto family represents “five generations of winemaking and 10 wineries in Italy… They are just the kind of long-term minded Euro investors [that] the Willamette Valley deserves.” 

The acquisition may be a win for both the importer’s 10 key Italian brands – which include Masi and Ca’ del Bosco – as well as the reputation of Oregon wines in Europe. It also gives SM an appealing, domestic sparkling wine brand to adds to its stateside lineup.

The fine print

While speculation emerged that the acquisition might allow SM to sell Italian wines direct-to-consumer (DtC) from Roco’s Willamette Valley tasting room that is not likely to happen as it would not be legal, according to John Hinman, a partner in the San Francisco-based, alcoholic beverage law-focused firm of Hinman & Carmichael.

A DtC play also wouldn’t be necessary for a company as large as SM, as large producers and importers don’t tend to try replace the wholesale or retail tier. So SM’s motives in this purchase are likely to focused on other incentives.

An acquisition like this is “often more about building connections to consumers and learning how to effectively engage with them. It can also be a great way to test new brands and products before trying to launch them with distributors,” says Stephen Rannekleiv of Rabobank.

No doubt that this acquisition will give the SM’s Italian brands more exposure in the US. market. Himan adds: “There are many synergies to a portfolio, the most important being increased distributor and retailer clout. SM right now is a very recognizable brand with a significant following … [so] SM will leverage its clout with the Italian portfolio to develop an international market for Oregon Pinot. This is a better deal for Oregon than for Italy.”

What is more, there are other reasons – legal issues aside – that SM might not want to sell its wines via Roco’s tasting room. Rob McMillan, founder and executive vice president of the Silicon Valley Bank Wine Division, says that “it wouldn’t make sense to buy a property for its reputation and directly compete against that acquisition by selling a parent company’s brand on site”.

A smart move

The acquisition is not a surprise for industry executives. The Italian wine giant has been looking to make an investment like this for some time, according to Mario Zepponi, a wine merger and acquisition advisor at the Santa Rosa-based Zepponi & Company. He adds that the importer has been shopping around the Pacific Northwest for the past few years as “climate change issues in California are too expensive and risky in comparison to the burgeoning Pacific Northwest wine region”.

The reasons many international entities are looking to Oregon are manifold. “Oregon is a premium region with … [a] reputation for quality. Oregon has an advantage of lower real estate prices than many coastal areas of California, which gives owners greater flexibility in pricing, and in many cases, a lower regulatory burden versus California,” concurs McMillan.

Another Willamette Valley producer, who is currently distributed in more than 40 markets, also had some insight to share on why international wine companies might seek out made-in-Oregon brands.

The winery is better known for PInot Noir and Chardonnay than Pinot Grigio.

© ROCO Winery
| The winery is better known for PInot Noir and Chardonnay than Pinot Grigio.

“Oregon has really finally burst onto the world stage and is quickly catching up to California as a global wine brand,” shares Steve Thomson, CEO of the Salem-based Cristom Vineyards. “The wine industry is an increasingly global playing field. Oregon has 1, pull; 2, very strong margins; and 3, the limits to volume that should keep margins high for the long run.”

Oregon has continued to grow its reputation as a fine wine producer both at home and abroad, perhaps even more so than neighboring Washington. “Oregon has a solid reputation, and the region continues to build awareness among consumers by leaps and bounds. Oregon DtC sales growth outperformed all other major wine regions last year,” Rannekleiv says.   

Willamette Valley producers also know a thing or two about making Pinot Grigio, which has long been one of SM’s strong suits. This dates back to David Lett, who was the first to plant Pinot Gris in Oregon after her founded the Eyrie Vineyard in 1965. The name Roco, also fits nicely in an Italian wine portfolio.

The big plus: wholesale distribution

It is clear that SM is talented at managing many labels of different sizes and styles so adding Roco to the lineup should be an easy value add.

“This acquirer has a reputation for running many different wine brands successfully and will undoubtedly increase the size of production with custom crush and seek more three-tier distribution in the next decade,” McMillan says.  

Christian Miller is principal of Full Glass consulting, a Berkeley, California-based wine-industry data analyst.

He notes that “this is essentially what Constellation did on a large scale with Ravenswood. This strategy usually [but not always] entails a reduction in average price for the brand. The reduction may come in the form of discounting the existing wines or expanding with a second label or lower-priced tier.”

Zepponi adds that – no matter how prudent an investment it might be – it is likely to take time before the parent company to successfully leverage its new investment. SM “will probably need to spend time understanding the wine brand and its investment in Roco before it is in a position to leverage the Roco infrastructure for purposes of selling SM wines”. It is a process he bets might take upwards of 18 to 24 months. 

Lessons from Oregon

No matter how the SM team decides to move forward with its new acquisition, it will certainly be on track to learn more about key US consumer preferences and winery tasting room best practices with the addition of the Roco winery.

It is a move that – much like, in a lower-key move, when sparkling wine producer Zonin bought Virginia’s Barboursville Vineyards in the 1970s – will allow SM a closer look at the American wine buyer and the country’s legal distribution challenges. “Other European wineries have viewed acquisitions of a US brand as helpful by having feet on the ground and a better understanding of the consumer and labyrinth of regulations within the US,” McMillan says.

Rannekiev concurs that the purchase will serve as a crash course in American wine marketing. There is much a company like SM can learn about, “how tasting rooms are operated here and apply them to their wineries in Europe. We’ve certainly heard this cited as a bonus benefit from other European wineries we’ve talked to that have looked at acquiring wineries in the US.”

And Oregon is just as good – and less expensive – a place to study up on the American consumer as California.

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