During the 1970s and 1980s, a time when the California wine industry was still emerging from its post-Prohibition doldrums, it was led mostly by small family wineries that fell into two categories – those that had been around for a generation or two and were often grape growers first before becoming winemakers, and those who had already made their financial fortunes elsewhere and had fallen in love with the California winemaking lifestyle.
Then in the 1990s, these family wineries began facing existential issues that are still being played out today, especially when several children and grandchildren are involved: what will happen when – and if – the next generation takes over? The most famous, Robert Mondavi, decided to become a publicly traded corporation, then crashed and burned when investors became unhappy, forcing the family to sell the business to Constellation in 2004.
Sell the family silver
Since the turn of the century, several family wineries that helped put Napa Valley on the map have sold their businesses – among them Raymond, Louis M. Martini, Duckhorn, Heitz, Araujo, Stony Hill, Far Niente, Stag’s Leap Wine Cellar and, just recently, Joseph Phelps – to other wineries or to wine conglomerates, some headquartered in Europe.
Or become a corporation
At the same time, another group of family-owned wineries started taking another path to the future. Rather than selling the business to corporations, they would themselves become family corporations. They took on all the trappings of companies on the stock exchange with formal boards of directors, multiple brands in their portfolios, new vineyards and wineries far from “the old home place” and often top executives hired from the outside. The difference was these families fully or mostly still own their businesses.
These include the Davies family of Schramsberg, the Mondavi family of Charles Krug, the Duncan family of Silver Oak and the Wentes and Cakebreads with their eponymous wine businesses. Perhaps most notable is the Jackson family. Before he died of cancer in 2011, Jess Jackson gave an origin statement whose sentiment is probably shared by all first generations of wine families who came to winemaking from other professions. "When my family and I founded Kendall-Jackson in 1982,” Jackson said, “we simply wanted to create extraordinary wine from California's best vineyards.”
From that simple start, the family grew and with it the business. Today Jackson Family Wines is run by Jess Jackson’s wife and business partner, Barbara Banke, and multiple members of three generations of Jacksons. Together, they continue the growth path forged by Jackson and Banke a couple of decades ago. As a private corporation, Jackson Family owns 28 brands or wineries in California, 4 in Oregon, 3 in Australia and one each in Chile, France, Italy and South Africa.
From recent interviews and prior discussions held with these family wineries, here is a consensus of what it takes to succeed as a corporate family wine business:
Growth in revenue will most likely be necessary as mom-and-pop wineries need to provide at least some income to support second and third generation family members.
In many cases, they provide actual jobs as well. Unlike with primogeniture, which allowed family wineries to be passed down to the oldest child, generally male, in much of Europe, American families have to share the wealth at some point. Often, as noted, the business is sold or, occasionally, one member of the family will buy out the others – a process that may need to be repeated in subsequent generations. Becoming a corporation and expanding business is an attractive alternative. If that doesn’t work out, the company may be worth more if it is sold at a later date.
Look for opportunities beyond the brand and beyond the home base.
“The Cakebread family has been very thoughtful about growth over the past 50 years,” says Aaron Fishleder, who spent 20 years in management at another family-owned wine business before joining Cakebread in 2020 as VP for operations. “We saw an opportunity in other incredible viticulture areas outside of Napa like Washington state and the Central Coast and are excited about using our winemaking expertise to craft delicious wines from these unique grape growing regions.”
Indeed, family-owned wineries in Napa Valley and Sonoma County such as Cakebread, Jackson Family, Silver Oak, Gallo and Littorai have all been instrumental in the development of Anderson Valley in Mendocino County as a prime Chardonnay and Pinot Noir region.
The Wente family headed south. “We expanded into Arroyo Seco in the 1960s, mostly to avoid urban sprawl,” says Aly Wente, VP of marketing and experiences for Wente Family Estates and fifth-generation family member. “At the time, the taxes on land in Livermore” – a traditional winegrowing area east of San Francisco where the Wentes are headquartered – “were the same as they were on houses, and my grandfather was afraid we’d be priced out of the area. We Wentes pioneered Arroyo and Seco and Monterey.”
Hire professional management.
Recruiting professional management permits companies to add expert experience while allowing the family to maintain oversight.
Third-generation brothers Peter Jr. and Marc Mondavi decided to work within a corporate structure at C. Mondavi & Family not long after their father died, perhaps trying avoid the family feud that their father and their uncle, Robert Mondavi, famously had when they took over the business their father, Cesare Mondavi, had established in 1943.
Today, they have a board structure that allows the family to control the business while recruiting professional wine executives with considerable outside experience. This took the burden of day-to-day management off the family’s back and kept any family differences to board meetings where everyone has a vote.
Decide on how the family might add value to the company.
And its ’s continued growth. “Bruce [Cakebread] is extremely passionate about sustainability and is working with me and my team to identify opportunities to continue incorporating new approaches and technologies,” Fishleder says. “Dennis [Bruce’s brother] has continually focused on building our relationships with key accounts across the country. Bruce and Dennis’s children sit in on board meetings and participate in committee roles and winery events as time permits.”
Wente Family also has a CEO from outside the family, but the family still helps run the company from marketing to winemaking. “We were a small family up until the fourth generation,” Aly Wente says. “Luckily, almost everyone in the family wants to participate, including five of the six in the fifth generation, and the youngest is working for Southern Glazer’z [a major wholesaler] and may eventually return.”
While continuing to serve on the C. Mondavi company board, “We are essentially brand ambassadors who do a lot of traveling to support the distribution and sales force,” Peter Jr. says of himself, brother Marc and some of their children.
Always protect the family brand that built the winery’s reputation.
“Staying true to the family’s values, dedication to quality and our classic winemaking style are a few things that we have never strayed from over the past 50 years,” Fishleder says, speaking for the Cakebread family – and the Cakebread corporate brand.
Although hired from the outside, top executives can become very protective of the brand and feel like “just one of the family.”
Feel free to establish additional brands.
Each winery owned by Jackson Family Wines is its own brand, often using the name used by the family that sold it to JFW. In 1994, the Davies family that owns Schramsberg, the Napa valley premium sparkling wine brand, began making Cabernet Sauvignon and eventually Pinot Noir. Rather than dilute the Schramsberg brand, the red wines eventually took on the name J. Davies, and second-generation owner Hugh Davies built a separate winery for it in 2012.
“The main reason that you expand the number of brands is the same reason you invest in more than one stock,” Wente says. “We own or farm more than 3,000 acres of grapes primarily in Livermore and Monterey, so we like to diversify our brands and offerings. A second reason is that we are a mid-size player increasingly sold to wholesalers, so we have to find ways to compete with the big dogs. You do that by trying to have a bigger share of mind with the trade.”
Urge the next generation to gain outside expertise.
Most family corporations have rules that dictate a stipulated time period that a young family member has to work elsewhere to gain experience before returning. Wente says all six members of the fifth generation have first worked elsewhere in the wine business, and there will be even more stringent rules with the sixth generation. “Recently, we added that hopefully they got promoted in their jobs elsewhere,” she says, “and they can only come in if there is an open role. They also need to interview – we’re a business, not a charity.”
Allow outside financial investment in the company at your own risk...
...and as a last resort!
While any company may at some point need extra funds to expand or to meet emergencies, securing a loan may be preferable to allowing an outside investor to buy a part of the business or to becoming publicly traded.
A few years ago, Michael Mondavi talked about the last days of Robert Mondavi winery as an independent, but publicly traded, wine company. At that time, he was CEO of the company, which after some golden years became overextended and in financial danger. Under attack by his board members, including his siblings, Michael left before the company was sold.
“Let’s be honest,” Mondavi said, “I was fired. After we went public [in 1994], the rules changed.” He believed, he said, long-term visions were hampered by the need for short-term earnings. Similar forceouts have happened elsewhere when majority “partners” no longer wanted family members to be around.