DeLoach Vineyards: under new management

Wines & Vines, Oct, 2004 by Tina Caputo

When DeLoach Vineyards filed for Chapter 11 bankruptcy protection in May of 2003, the news was unsettling to many people, aside from those in the DeLoach family. In a time of economic difficulty and oversupply, the DeLoach filing was a sign to many well-established California wineries that they could be next. After all, DeLoach was a Russian River pioneer in the mid-'70s, and had earned a reputation as one of the region's great producers.

What went wrong? Were the grape glut and the economy entirely to blame?

"Sometimes you simply don't see things coming," explained winery president Michael DeLoach, "like 9/11, which drastically affected our business, or the continued downturn in the economy, or the lack of a viable global economic recovery or the vast oversupply of grapes and bulk wine. To my thinking, the only things worse than the last two years in the wine business were Prohibition and the Depression. But somehow, the grapes planted at the turn of the century are still in the ground here. It's reassuring."

Though many California wineries struggled with the same problems during the last few years, DeLoach said he now realizes that there are things his company could have done differently.

"Due to how we were financed and structured, our size and our experience--or lack thereof--we felt the hard times a little more than others," DeLoach said. "With 20/20 hindsight, of course, we could have started cutting costs, selling land and laying people off years before--but given the information we had at the time, this would have seemed crazy. Demand was growing in the double digits, and grape prices were high, unless you prudently had them under long-term contract, like we did. These things ended up working against us. Following the demand curve turned out to be the wrong decision."

The only thing left to do, DeLoach recalled, was file for bankruptcy protection--a decision the family did not take lightly. "You simply get to a place where the right thing to do is bite the bullet, put your ego aside and ask for help in obtaining the time necessary to restructure your business, pay people back and keep the business moving forward," he explained. "Most of our creditors agreed with what we were doing, and have been very helpful and patient. We've been at this for 30 years--it wasn't like we were trying to pull a fast one. I have kids and it would be great if they could work here too, continuing the tradition."

Enter Boisset

After filing Chapter 11, the DeLoach family stepped up its search for an outside investor to help pay off its creditors and get the winery back on its feet. In November 2003, the family struck a deal with Burgundy-based Boisset, France's third-largest wine company. The owner of several California brands--including Lyeth, Joliesse, Christophe and Fog Mountain--Boisset paid a reported $17.5 million for the DeLoach brand name, trademarks, inventory and original winery. DeLoach retained ownership of two additional winemaking facilities, and winery founder Cecil DeLoach still owns about 450 acres of vineyards.

According to Michael DeLoach, Boisset was the best possible choice for the winery's new owner.

"When Jean-Charles (Boisset) and I first met, we were finishing each other's sentences," DeLoach said. "Our visions were that closely aligned ... Jean-Charles' drive, energy and sheer amount of creativity is astonishing. I think it's fairly obvious that without our relationship with Boisset, and Jean-Charles Boisset specifically, it would have been very difficult indeed to try to realize our vision, and it would have been simply impossible to do it in a two- to three-year timeframe."

DeLoach's vision--set in motion three harvests ago--was to scale back the winery to the small, terroir-driven Russian River Valley estate producer it had been before its expansion in the latter half of the '90s.

"This has been so much more than a corporate acquisition, or consolidation or purely a business proposition," DeLoach explained. "This is about certain beliefs and traditions that both our families hold dear. This is about wine, first--and not just any wine--this is about Pinot Noir. Boisset, as the largest producer in Burgundy, knows about Pinot Noir. Now we have a collaboration between winemakers in Burgundy and the Russian River Valley ... It's a mutually beneficial relationship we are all very excited about."

Jean-Charles Boisset, president of Boisset America, also believes he has found an ideal partner in DeLoach.

"We've always wanted to develop and grow our presence internationally, and more specifically in the United States," Boisset said. "Therefore we've been looking at how we could potentially mirror Burgundy in the U.S. A key approach for us, since our strong development here in the '90s, was to one day find an upscale terroir-driven type of winery in the best possible region. We had, for a long time, been doing analysis of every possible area, including Carneros, Sonoma Coast, Russian River, Green Valley and so forth, and we really thought the Russian River was the place to do this."