Luxury Group forming in Napa

Wines & Vines, July, 2004

Constellation Brands, the world's largest wine company, Domaines Barons de Rothschild of France and the Huneeus family, with wine holdings in Chile and California, have formed a joint venture to acquire the Chalone Wine Group and form a company to produce and market high-end wines.

The plan hinges on Domaines Rothschild--which already owns 46% of Chalone's outstanding stock--buying enough shares to control the company. That is not expected to be a problem.

Control of the new company will be equally shared. Constellation and Domaines Rothschild are putting up cash for the stock buyout. If that is successful, Constellation, which owns Franciscan Vineyard in Napa, will put its Oakville vineyard into the pot and the Huneeus family will add its Quintessa vineyard and winery. Domaines Rothschild will contribute its present 46% of Chalone shares to the joint venture. Rothschild will, at some future point, make a Napa wine for the group, either at the existing Quintessa or Franciscan winery or at a new winery to be built.

The total value of the deal is estimated at about $210 million. Not a blockbuster in terms of money, but significant in long-term impact on the premium wine market. The deal mixes the marketing clout of Constellation with the terroir-based philosophy of Chalone and Agustin Huneeus, who got his start in the wine business in his native Chile. Huneeus has long been a leader in establishing the importance of terroir wines, or as he calls them "wines from a place." Chalone, with wineries in Napa and Monterey counties and in Washington state, has also followed the estates concept of vineyard-driven wines. Constellation, on the other hand, has only moved into the premium wine sector in the past few years. The New York-based company, which is publicly owned, is also a major importer of beer and spirits.

Domaines Barons de Rothschild, owned by the Rothschild family (Chateau Lafitte Rothschild), owns a number of premium wineries in France, Chile, Argentina and Portugal.

Most industry comments were positive, but some observers took a more cautious view, wondering if such a transnational group could hold the focus firmly on the quality established by Chalone and Agustin Huneeus over the years.

Agustin Francisco Huneeus, the son of Agustin Huneeus, is expected to head the company. He had been CEO of Franciscan Oakville Estate Winery, which his family had sold to Constellation, but left that post a few months ago.