Wine news is rarely shocking, but this is: Constellation Brands, the third-largest wine company in the US, has purchased super-high-end Napa Valley winery Schrader Cellars.
"I think that everyone is shocked, me included," vineyard mogul Andy Beckstoffer told Wine-Searcher.
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It's not surprising that a first-generation Napa winery – one that has earned 100-point scores from Robert Parker 15 times – has been sold. Fred and Carol Schrader have no children. Nor is it unusual for Constellation to buy a wine brand. In the past two years Constellation has spent a reported $700 million to buy Meiomi, The Prisoner and Charles Smith Wines.
But Constellation and Schrader is an odd pairing. Schrader's wines, most of which cost more than $350 on release, are far more expensive than anything else in Constellation's portfolio.
Beckstoffer will play a major role in the deal, even though he was not part of the sale. In fact, a change in his pricing model in 2014 that made grapes like those that Schrader buys much more expensive might have been a factor in pushing the Schraders to sell.
Constellation's business model has generally been to buy a popular brand like Meiomi and make a lot more of it: Wine Spectator reported that the popular sweet Pinot Noir already makes more than a million cases a year. But Meiomi was already available in mini-bottles on airplanes when Constellation bought it, and it costs less than $20 a bottle. Schrader makes less than 4000 cases a year of its pricey wines. It's not like Constellation can put Schrader in convenience stores – or can they?
Schrader makes its wine from purchased grapes, so the deal included no vineyards: just the Schrader brand, very important grape contracts with Beckstoffer, and most of Schrader's wine inventory. But it's not hard to see a future for a Constellation-owned Schrader without those prized Beckstoffer grapes.
It is hard to overstate how important Beckstoffer has been to Schrader's success.
Schrader is an art and antiques dealer who was previously married to Ann Colgin. They got into the wine business together, but she kept the cult Cabernet brand Colgin after their divorce. He forged out on his own in 1998, a notoriously cool and wet vintage, with grapes from Atlas Peak, but did not like the results. So in 2000 he went to visit Beckstoffer to buy grapes from his To Kalon vineyard.
Today, Schrader makes more than half a dozen different Cabs from Beckstoffer grapes. Some are clonal selections from single blocks of To Kalon Cab. He also makes Cabs from Beckstoffer's Las Piedras Vineyard, but Beckstoffer To Kalon Vineyard is the source of both Schrader CCS and Schrader Old Sparky, which have earned 14 of Schrader's100-point scores from Parker. The 15th went to a separate bottling, RBS, also from Beckstoffer To Kalon Vineyard.
In 2014, Beckstoffer told all the growers who buy from him that, when contracts expire, he will now charge a minimum of $18,000 per ton (the Napa average is $6800 per ton) but, more importantly, that he will charge 175 times the bottle's retail price per ton of grapes, according to a 2015 story by Alder Yarrow. Previously, Yarrow reported that many cult producers like Schrader were paying about 100 times the bottle retail price.
"We intend to protect the integrity and unique quality of the Beckstoffer To Kalon Vineyard," Beckstoffer told Wine-Searcher. "I suspect that they will want the same. Gonna be interesting!"
Left unsaid is that there is more than one section of To Kalon vineyard, and that may be part of Constellation's thinking.
To Kalon was a name used in the 1800s by Hamilton Crabb for what was then an enormous planting. In the 1950s, the Mondavi family purchased more than 300 acres of it; Napa land was cheap then. Opus One was founded in the 1980s as a joint venture between Mondavi and Baron Philippe de Rothschild on some of Mondavi's To Kalon holdings.
In 1993, Beckstoffer purchased an 89-acre portion of the original To Kalon vineyard. But Mondavi still considered To Kalon its trademark. Schrader sued to use Beckstoffer To Kalon Vineyard on its bottlings and won that right in a lawsuit settlement in 2002.
In 2004, Constellation bought Robert Mondavi Winery, and with it, its portion of To Kalon, which is much larger than Beckstoffer's. But the high-end reputation of Mondavi wines isn't what it was in the previous century.
Wine industry analyst Barbara Insel, CEO of Stonebridge Research, said that part of Constellation's motivation to buy Schrader may be to buy a place in premium wine lists.
"As the three-tier market gets more and more competitive while the US consumer continues to premiumize, how do brands like Constellation stamp their mark on that segment," Insel told Wine Searcher by email. "One step was buying Mondavi, but Mondavi is not at the superstar level, so how to further enhance the brand? In this crowded marketplace, there are too many brands and only a few have the following at the premium level to command space in the trade: Caymus, Silver Oak, etc. Shrader can, especially on-premise. There aren't that many brands that have that following."
But it's also possible to look at the Constellation purchase as a way to earn more from its own To Kalon grapes. Robert Mondavi Winery doesn't fetch the same premium prices and respect as the cult winery clients of Beckstoffer's vineyard, so it's possible that Constellation's To Kalon grapes are now undervalued. Schrader and Constellation vice president Sam Glaetzer told Wine Spectator that, once the deal settles, some parcels of the Mondavi To Kalon Vineyard Cabernet would go to Schrader.
Winemaker Thomas Brown is expected to stay with Schrader, according to a press release, and that would soothe some worried Schrader mailing list customers. Can Constellation make a Schrader Old Sparky and Schrader CCS from a different vineyard? Will customers notice or care if the word "Beckstoffer" no longer precedes "To Kalon?"
"The problem is maintaining the specific special identify of these cult brands," Insel said. "They obviously can push volume through the trade but will the brands retain their specialness? Does Constellation plan to grow the market? That would obviously dilute the position of the brand."
Terms of the deal were not disclosed, but presumably Fred Schrader can now afford to go buy his own wine in a restaurant. Maybe soon you will be able to buy Schrader wine too. Look for it wherever wine is sold.
