It’s not easy starting a winery on the Central Coast.
Vintners deal with a litany of issues ranging from land-use regulations to money. Take for instance the process of opening up a tasting room. Until a Santa Barbara County Planning Commission decision last month, vintners of small-acreage wineries who wanted people to taste their wines couldn’t open a tasting room on their property.
Despite such challenges, the Central Coast wine industry brings in billions of dollars to the local economy. And perhaps because of those challenges, wineries—including those considered family-owned—have attracted the likes of some top investors, including former University of Georgia Bulldog and Heisman Trophy candidate, Terry Hoage (TH Estate Wines in Paso Robles), and Los Angeles Rams owner Stan Kroenke (Jonata Winery in Buellton).
Outside investment in local wine, if anything, highlights the dynamics of the industry itself.
While vintners like Bob Lindquist of Qupé may have a handle on the grape growing and winemaking side of the business, he told the Sun that things like sales and marketing can be beyond his scope.
“That’s the hardest part,” Lindquist said, adding that he sought out long-term partner Charles Banks of Terroir Capital for this reason.
Such partnerships give small wineries bigger influence on the market, or as Lindquist explained, “Being part of a larger company gives us more clout with distributors.”
They can also bring unwanted attention to small wineries, even if those wineries remain largely under local control.
That was the case when Banks was indicted on Sept. 8 in San Antonio U.S. District Court on two counts of wire fraud charges for an alleged scheme to scam millions of dollars from retired NBA champion Tim Duncan, who is also an investor in Qupé. Banks, who is out on bail, faces a maximum of 20 years in prison.
The charges had nothing to do with the local winery beyond the fact that it involved investors Banks and Duncan.
“Charles is a stand-up guy,” Lindquist said. “When you have a powerful celebrity like Tim Duncan coming after you, he’s got public opinion on his side. I think it’ll all come out in the court proceedings that it’s much ado about nothing.”
Lindquist started Qupé winery in 1982, and he sold a majority share in the winery to Banks in 2013, while maintaining his role as a partner.
Ownership in local wineries takes many forms, according to Morgen McLaughlin, executive director for the Santa Barbara County Vintners Association, and there are several funding models. Distribution for local wineries is a challenge, McLaughlin said, which is why partnerships help with expanding markets.
“A lot more wine is getting sold through big-box stores like Trader Joe’s, Whole Foods, and drug stores, and they’re looking for high volume,” McLaughlin told the Sun. “It’s much harder for a small producer to go that route, but having an owner who’s familiar with distribution can help navigate the waters.”
A handful of Central Coast wineries have partnered with big-money investors over the past several years.
Wine Spectator reported in 2002 that Sanford Winery took on Illinois-based Terlato Wine Group, which owns Napa’s Rutherford Hill Winery. The magazine also reported that Andrew Murray Winery, known for producing Rhone varietals and blends, was sold to Santa Monica real-estate developer John Zahoudanis for an undisclosed amount in 2006, and that Banks and partners Rajat Parr and Sashi Moorman sold Santa Rita Hills’ Sandhi Wines to Texas venture capitalist and oil driller Steve Webster last May.
And Reuters reported that Harvard University’s $36 billion endowment fund owns Brodiaea Inc., which recently spent more than $60 million buying about 10,000 acres in Santa Barbara and San Luis Obispo counties to grow grapes.
Bill Foley—who made his fortune in fast-food burger chains and insurance, and is the lead investor of the soon-to-be Las Vegas National Hockey League team that will begin playing in 2017—owns Foley Estate Vineyard and Winery in the Santa Rita Hills. And Paso Robles’ Justin Vineyards is owned by Beverly Hills billionaire couple Stewart and Lynda Resnick of The Wonderful Company, which owns the Fiji Water brand.
Some family-owned wineries may indeed be family-owned, but they might not fit the conventional image of that definition—that of a hands-on mom-and-pop-type operation struggling to get by.
Staff Writer David Minsky can be reached at dminsky@santamariasun.com.
This article appears in Sep 29 – Oct 6, 2016.