Photo: Laughing Stock's David Enns (left) and Arterra's JayWright
When Vincor International was acquiring wineries a decade or
two ago, chief executive Donald Triggs generally retained the management of
those wineries.
As an example, Kim and Erica Crawford, the founders of New
Zealand’s Kim Crawford Wines, were given a two-year contract to run the winery
after Vincor bought it. In fact, they remained eight years before leaving to do
their own thing again.
Jay Wright was one of Vincor’s senior executives at the
time. Now, he runs Arterra Wines Canada, the Mississauga-based company that operates
the Canadian wineries once part of the Vincor portfolio. Arterra was formed in
December, 2016, after Constellation Brands sold its Canadian wineries to the
Ontario Teachers Pension Fund.
This week, Jay used the Kim Crawford template when Arterra
acquired Laughing Stock Vineyards, the premium Naramata Bench winery founded in
2003 by David and Cynthia Enns. The founders will stay on to manage Laughing
Stock. David just turned 60; Cynthia is in her late 40s; and both are healthy and full of energy.
“This is more about business as usual and a partnership,” Jay said in a
recent interview. “It is not about changing David’s dream. It is about allowing
David the opportunity to dream bigger. Our philosophy is about partnership. The
last thing we want to do is not allow these guys to continue to fulfill their
legacy and their dreams. Having an opportunity to partner with a creative
genius making wonderful iconic wines in a new part of wine country for us was
important.”
He adds: “Opportunities to partner with classic iconic wine brands like
Laughing Stock Vineyards are rare and serendipitous.”
In fact, Arterra was not shopping to acquire wineries. In the Okanagan,
where it runs about 1,200 acres of vineyards, Arterra already owns
Jackson-Triggs, Black Sage Vineyards, Sumac Ridge, See Ya Later Ranch,
Inniskillin Okanagan and 50% of Nk’Mip Cellars. It also owns Steller’s Jay, a
major sparkling wine brand. Jay already had a lot on his plate.
“As a new company, we have been very focused on standing up as an
independent Canadian company,” Jay says. “We have been very focused on
confirming our strategy for the future and becoming an independent company; on unplugging
ourselves from Constellation Brands; and on hiring people and setting up the
infrastructure for the future.”
Late last summer, while he was introducing new employees to Arterra’s Okanagan
properties, it was suggested that he look at Laughing Stock Vineyards which had
retained Deloitte Canada to solicit (very discreetly) offers for the business. At
first, Jay said his schedule was pretty tight. The schedule went out the window
when he met David and Cynthia Enns and grasped what they have built.
Laughing Stock was in play because the founders recognized that they were
at a turning point with their business.
“It’s not that we hit the wall,” David says. “But last year was a big
harvest. We did almost 160 tons. We were maxing out the facility, and that is
just because of the fruitfulness of the vineyards. We have had five growing
seasons that were stellar. We have literally gone from 5,000 to 10,000 cases in
that five years.”
Their choice, he concluded, was either to retrench, or to keep growing
and filling the pipeline supplied with wines that were selling out faster and
faster.
“You can’t stop a machine,” David says. “It is either going forward or
backwards. Going backwards was not really a fun proposition. To go backwards
meant losing people and taking on more responsibility, which was not the
direction I wanted to go.”
So they hired Deloitte to find a partner to support growth. Seven
companies considered the opportunity and four made offers, including Arterra.
“We wanted to find the right partner for us and for what we wanted to do,”
David says. “We wanted to slow things down and re-focus on some of the things
we like to do. I don’t think we will ever be out of the wine business. It is an
integral part of who we are now. It’s our community.”
Even though Jay Wight was not looking to acquire,
he changed his mind after and Paul Kasselbaum, Arterra’s chief winemaker, spent
a morning in early August at Laughing Stock. They clicked immediately with
David and Cynthia.
“I was inspired and excited,” Jay recalls. “I went back to our owners
[Ontario Teachers] and said I know we are still in the early phases as a
company and we aren’t shopping; but my gut tells me this would be a really
interesting partnership to cement our foundation for the future, as our strategy
is changing to become more focused on premium wines and investing in the
Canadian wine industry.”
Adding premium wines to the portfolio is central to Arterra’s strategy.
That contrasts with the Constellation Brands focus, which did not nurture all
of the premium wine opportunities that Vincor had created.
“For many years, Constellation was just a distribution company in Canada,”
says Jay (who worked with Constellation in the U.S.) “I am still disappointed
that Osoyoos Larose left the fold. I am still disappointed that Le Clos Jordan
has not continued.”
He refers to two joint ventures that Vincor had created with major French
wine producers. The French partner in Osoyoos Larose took over Constellation’s
50% a few years ago. Le Clos Jordan, located in Ontario, made several vintages
of premium Pinot Noir and even commissioned a spectacular winery design by
Frank Gehry before Constellation shut it down.
Laughing Stock brings premium wines and a premium address to Arterra. “I
have always been jealous that we did not have an opportunity to be involved in
the Naramata Bench,” Jay says. “It is one of the top sub-appellations in the
Okanagan.”
The new partners give David access to additional grapes and to more capacity.
One of the elements that cemented the deal was a tour of Arterra vineyards.
“It helped seeing the vineyards with Troy, in the south Okanagan,” David
says. “We know the south Okanagan really well because we have 22 acres there. The
care and attention was good; it was solid. That makes all the difference to me,
because that is the authenticity. We know what farming looks like, good, bad
and indifferent – this was good farming. Cynthia and I were both impressed.”
David has been offered access to Arterra’s grapes. Jay says that the Arterra
strategy is to direct the grapes to “the highest and best use.”
One of the first priorities likely will be addressing Laughing Stock’s
capacity constraints. If David’s advice is taken, the production of Laughing
Stock white wines will move to a facility dedicated to white wines. That would
free up the capacity for almost 3,000 cases more of reds at the Naramata
winery.
“That would be a logical next step,” David says. “We could build a retail
space on it that had more tasting room capacity. We turn away so much business by
having just five or six parking spots. We are open all the time but by
appointment. We will probably still continue that, but it would be a much more
expanded version. Now, we turn people away. Who turns people away in the wine
business?”
Currently, three-quarter of Laughing Stock wines are red. They are made
in a gravity-flow winery designed at the outset to make Portfolio, Laughing Stock’s
flagship red blend, which sells for just under $50 a bottle.
“The challenge we have is we cannot even meet demand now [for Portfolio],
and have not for five years,” David says. “Every year, we sell out sooner and
sooner. We just released Portfolio 2015 in October and the warehouse is near
empty.”
“Like in five weeks!” laments Jay Wright. “I can’t get any.”