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Fiji Water is set to dilute a Paso Robles Icon: Justin Vineyards & Winery

This news just-in from the L.A. Times earlier today; "the Fiji Water Company., the imported bottled water firm owned by Beverly Hills entrepreneurs Lynda and Stewart Resnick, has acquired one of  San Luis Obispo County’s Paso Robles oldest and most popular boutique wineries, Justin Vineyards & Winery for an undisclosed price, adding upscale wine to their investments in bottled water and pomegranate juice." Maybe they will  now make some yummy sparkling Pomegranate juice [hope not] to buff out Justin's line-up of stellar wines.

The reporter [P.J. Huffstutter] covering this surprising piece of wine-country news is obviously out of his/her element, because just about anyone with even the most cursory knowledge of the Central Coast wine-scene understands Justin Vineyards and Winery is not just another "California winery" as it was stated in the title of the L.A Times article. I'm also pretty sure no one really identifies Justin as being part of SLO county, even though technically that's true.

In fact it was, Justin that really helped put Paso Robles on the proverbial wine-map as great place to grow and vinify amazing mind blowing juice. Now the Baldwins have sold out to corporate giant Fiji Water. Who knows how it will pan out, but corporate take overs by companies that have never been in the wine business will not likely produce the kind of fruit we maybe use to seeing bottled from this wine country icon.

From the outside looking in: According to Gretchen Morgenson of the New York Times; "to most investors, mergers or acquisitions are the stock market's equivalent of catnip. Takeover bids typically provide a nice boost to investors' portfolios and confirm their stock-picking smarts. And to hear the executives orchestrating the events as they unfold tell it, they always produce greater profits at the combined company down the road." but as a member of Justin and a huge fan of their product, I remain skeptical, that a company like Fiji has any interest in the passion of producing blockbuster vino that the Baldwins had, when they were the owners of Justin.

From the inside looking out: I've been through acquisitions before and I can tell you it's never "catnip" to the employees of the affected business. Instead it is nothing more than a huge shake-up, where many folks are let go, salaries go down and there will be a streamlining and restructuring of the business model which had propelled Justin to the winetastic heights it had achieved during the time the Baldwins were involved. Say, goodbye to the Social Media position, say goodbye to $1400 "new" French Oak barrels and say goodbye to complimentary tastings of Justin's wines for Isosceles wine club members. Maybe, I'm wrong and I hope I am but we've all heard the promises before. Just saying!

Look Out: The employees of Justin should be afraid, be very afraid; the layoffs [especially at the higher levels] that [Fiji Water] promised were not coming, are coming like a pallet of Fiji Water tumbling unto the floor of grocery chain outlet near you. So yeah, I hope I'm wrong, but I'm probably not. It will start from the top down. Again, [I defer to an expert on these situations, but you be the judge] according to Gretchen Morgenson of the New York Times; "Because mergers require the extensive use of estimates on matters like job cuts and asset write-offs, for example, deals represent an opportunity for management to throw everyday expenses into the merger cost bucket and make operating results look better than they actually are." I think some jobs may be going into that "cost" bucket.

Even though according to the L.A Time article the Baldwin's said they would stay on with the business and  even though un-like other wineries [some of their peers] who've felt the squeeze of falling California land prices, “Justin has been doing quite well,” Cochran said. “They’ve just had their best year ever, we plan to take a lot of that good momentum and push it farther.” Un-huh more like "famous last words", well only time will tell and of course these thoughts are just wild speculation at this point. So take it with a grain of salt.

This acquisition of Justin represents the eighth California winery this year, twice as many as last year and the most since 2007, when eight purchases were completed before the recession, according to the San Francisco-based Wine Institute. What's next? "There will be more deals like this, without question," said Jack Daniels, co-founder of Wilson Daniels Ltd., a wine marketing firm in St. Helena [read more]so stay tuned I think I see a trend here.

Strange Indeed: "What makes the deal for Justin unusual is that the company doesn't appear to be in trouble, unlike many other purchases this year," said Vic Motto, co-founder and CEO of Global Wine Partners, an investment bank in St. Helena. Which in my mind begs the question, why then did they want to off load what supposedly has the appearance of all green lights.

Stranger Still: Last month, Foley Family Wines picked up Eos Estate Winery in Paso Robles, which was in receivership [because of the sub-par quality]. To me this is odd, why would anyone want that place? I love Foley Wines especially since they stole away the winemaker from Sea Smoke. Not sure even a new winemaker could make a dent in quality gap of their [EOS] east-side fruit. Foley has been busy adding depth to portfolio [not wine] of wineries that they own and EOS is the latest acquisition.

Another One Bites the Dust: Just like title of one of my favorite songs by Queen, another of my favorite wineries has bit the dust. Again another shock and awe with the 2009 sale of Kosta-Browne, a 10,500-case winery in Sonoma County specializing in [high-end] Pinot Noir, to the Vincraft Group, for about $40 million, according to the The Wine Institute. Look for the memberships roles to open up, the overall quality will to go down and the prices will go up and finally look for these two guys to hit the Willamette Valley soon or the beaches of Aruba. Take your pick.

Who knows which winery is next on the chopping block next, but in these tough economic times, you never know which wine icon may be the next to fall. There has to be a reason behind the increase of California wineries selling like the proverbial hot-cake; what those reasons are, remain unknown. It's odd that even some very successful companies [wineries] who don't need to sell just to survive, are selling and moving on. It could be because these companies see the prevailing wind of change [down-ward spiral] in California politics that potentially will take the entire state into receivership along with every business in the state. How, in the form of overly burdensome taxes and obnoxious regulations, that have sent many businesses running from the state like rats on a sinking ship. But who knows the real answers, the truth of the matter remains to be seen. Until next time, sip long and prosper while you still can, cheers.

Comments

Anonymous said…
This sale a real disappointment. I really hope you're wrong about Fiji, but you're most likely not.
Bill Eyer said…
My hope is that I'm wrong! But honestly what does a bottled water company understand about what it takes to make it in the wine business. Even though wine is more than 70% water, the two are as far apart as day and night.

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