LMR's Recent Acquisition Highlights the Need for Scale in Napa

Following last class, I was curious about Long Meadow’s strategy to acquire different vineyards and brands through Napa. Their most recent acquisition was of the well-respected Napa property Stony Hill Vineyard in August 2018. This acquisition was interesting for two reasons. First, it highlighted how the changing Napa landscape has reinforced the need for scale for vineyards to operate profitably. Secondly, Long Meadow Ranch bucked the recent trend of buyer profile as a (relatively) boutique, family-owned vineyard.

Stony Hill Vineyard is a well-respected producer of Chardonnay in the Napa Valley and had been family-owned and operated for the last 70 years. However, the vineyard’s lack of scale precipitated the sale. Sarah McCrea, part of the selling family, said, “It’s just very hard as a small winery to get attention from distributor.” Smaller wineries such as Stony Hill have had to lean on the more profitable direct-to-consumer distribution channel as the three-tier system increasingly favors larger volume vineyards. This has hampered financial performance which prevented the family from making much needed capital investments to the property.

Long Meadow Ranch’s also represented a different buyer than typical recent Napa transactions. As more family-owned vineyards have sought capital, larger corporations (e.g., Constellation from the Inniskillin case) and private equity firms or other investors have emerged as the typical buyers. A family-to-family transaction (with Stony Hill retaining a piece of equity in the combined entity) represented an outlier. It will be interesting to see how successful Long Meadow Ranch will be at utilizing the Stony Hill brand and property in conjunction with its larger core properties and the Farmstead restaurant. How will it cross-sell between its property and monetize its unique story and brand? Or will it dilute the overall story and make it more difficult to tap in to Farmstead’s 240k annual visitors? I am interested to see how this unfolds and whether it may set a new trend for an “authentic” multi-branded vineyard acquisition strategy.

References:

https://www.sfchronicle.com/wine/article/Napa-Valley-s-Stony-Hill-Vineyard-sells-to-Long-13186631.php

https://www.northbaybusinessjournal.com/northbay/napacounty/8684301-181/long-meadow-ranch-stony-hill-vineyard-wine-acquisition-napa