Issue link: http://winesandvines.uberflip.com/i/152772
FINANCE "The model evolved," Bronfman said. "The private-equity side of things became more interesting—to portfolio companies and to us—while the second-lien idea didn't seem to catch on as well." "We got off a couple more loans and suddenly fell into this new model in the industry of partnering with winemaker-owners from an equity perspective," Kaufman said. "They do what they do best, which is make great wine, and we do what we do well: aid in running wineries and putting in people to help with marketing and the rest." "We focus on brands where our value-add is in marketing, distribution and sales," Bronfman said. "That's where my expertise is." Part of that focus has been to find great winemakers and back them. "The equity focus came about when we started talking with people like Ed Sbragia," Bronfman said. Sbragia is the former winemaster for Beringer Vineyards and founder of Sbragia Family Vineyards in Geyserville, Calif. "Ed is a fantastic winemaker, getting great scores, but (he) wasn't as strong on the business side and needed a partner to free him up to do what he does best: the wine." Sbragia, who goes "way back" with Bronf man, started talking to Bacchus when "Sam's bird dog Quinton Jay came around," W e focus on brands where our value-add is in marketing, distribution and sales. That's where my expertise is." —Sam Bronfman Madrigal Family Winery and De Lille Cellars. Their focus on partnering with exceptional winemakers runs throughout the portfolio, including Joe Dobbes, founder and winemaker of Wine By Joe and Dobbes Family Estate in Dundee, Ore., and Bob Lindquist, founder and winemaker of Qupé in Santa Maria, Calif. "These people want to stay in the wine business," Bronfman said. "Ed is a winemaker. Joe Dobbes and Chris Upchurch (founding partner and winemaker of De Lille Cellars in Redmond, Wash.) are winemakers. They don't want to sell their businesses. They need money to grow them. We can bring money and expertise. People see us as effective and good partners." And so a model was established that allowed Bacchus to deploy capital and expertise, much in line with the original focus on creating a "string of pearls" that predated the creation of the fund. Today, there are eight pearls on the string, and the team at Bacchus is working on raising their second fund, perhaps to add another strand. Sbragia said. (Jay serves as managing director at Bacchus, where he is responsible for sourcing and evaluating potential transactions.) Sbragia had a lot of options, but he went with Bacchus for more than just capital. "I'm an operating guy. I needed marketing muscle." Bacchus brought that muscle by providing marketing, communication and finance assistance and even hiring an experienced GM, Steve Cousins. Sbragia raised money from Bacchus in 2011, while the impact of the financial collapse was still draining the wine business. "When tough times come around, people go into a shell and try to protect what they have," Sbragia said. "That's not going to grow a business. I didn't want to do that." Bacchus also got the business focused. "They got us on track.…Bacchus came in and gave us resources and incentives." Helping winemakers grow After Sbragia, Bacchus went on to do deals with Maritime Wine, Panther Creek Cellars, the bacchus portfolio T he Bacchus Capital Management portfolio is made of eight total deals: two debt and six equity, of which one is debt and equity, according to Bronfman. The firm is headquartered in San Francisco, Calif. Location Annual Case Production Vineyard Founder/ Acreage Winemaker Debt Cameron Hughes (Exited) San Francisco, Calif. 250,000 0 Cameron Hughes Andretti Winery Napa, Calif. 30,000 42 Mario Andretti Qupé Santa Maria, Calif. 36,000 54 Bob Lindquist Debt & EQUITY Wine by Joe Dundee, Ore. 125,000 214 Joe Dobbes Equity DeLille Cellars Redmond, Wash. 16,000 Madrigal Family WInery Calistoga, Calif. Maritime Wine Trading Collective, Nine North San Francisco, Calif. Napa, Calif. 15,000 Sbragia Family Vineyards Geyserville, Calif. 16,000 McMinnville, Ore. 7,500 6,000 60 Chris Upchurch 40 Chris Madrigal 100 Chris Nickolopoulos 52 Ed Sbragia 100% Acquisition Panther Creek Cellars 38 W in es & V i ne s s e p t e mbe r 20 13 0 Tony Rynders, consulting