The sky is falling, or at least that’s the sense one gets when reading wine industry news over the past year.
Every morning, my email inbox cues up yet another dirge of reports on grape gluts, government bailouts, bankruptcies, and generational reckonings for wine and alcohol in general. And despite a handful of diamonds in the dirt highlighting hope, and a few new acquisitions among the super-premium and up segments, the overarching tune persists in a distinctly minor key.
But quietly, in the secluded cradle of the Pacific Northwest — and obscured by the cacophonous knock-on effects of Chateau Ste. Michelle’s ongoing woes — a relatively new player has been on a massive buying spree.
Who is this new Seattle-based competitor scooping up winery after winery? And given the current climate of panic in the industry on the whole, what’s driving them and what’s the endgame?
Ackley Brands has been around less than a decade, starting with the 2016 purchase of Oregon’s Montinore Estate, a respected biodynamic producer in Willamette Valley. The company is a wine-centric offshoot of the Ackley family business, Ackley Capital. “We’re not a venture capital firm, nor to be construed with a typical private equity firm,” says Brandon Ackley, founder and president of Ackley Brands. “We’re a family using our holdings to invest in our own backyard.”
The core of Ackley Capital’s prior legacy lies well outside the world of wine. “We own a direct mail and commercial printing company in the Pacific Northwest and were able to diversify,” Ackley says. “We wanted to apply some of our manufacturing skillset to another local industry that had some proven staying power. The wine industry was our first investment outside of our printing company, and we haven’t stopped investing in the beverage space.”
The subsequent years after the Montinore acquisition saw a few modest additions to the portfolio, including a foray into beer with local craft operation Mac & Jack’s Brewing Co. But it’s over the past year that things have really gotten interesting.
In 2024 alone, Ackley Brands has acquired no fewer than five wineries. And these new purchases aren’t some unknowns or one-off trophies. They’re a basketful of significant and historically important wineries in the region with well-established track records — a statement to the industry that a serious new Pacific Northwest contender has officially arrived.
The 2024 shopping binge began with acquisitions of market stalwarts Columbia Winery and Hogue Cellars from E&J Gallo in April, immediately followed by Washington’s prestigious Betz Family Winery and its Oregon Pinot Noir sister operation SUNU in May.
“Personalities in brands are great and resonate with customers, but I would say our flagship brand is the Pacific Northwest.”
That purchasing pace was already raising local eyebrows. But the cherry on top came in August when Ackley Brands announced that it had closed a deal with The Wine Group for the purchase of internationally recognizable Charles Smith Wines for an undisclosed sum. The brand — whose eponymous and charismatic founder originally sold it to Constellation Brands in 2016 for a tidy $120 million — has been an industry masterstroke since its inception, deftly balancing bang and buck, with quality winemaking tethered to slick monochromatic labeling at an affordable price.
The banner year saw Ackley Brands quadruple in size. “I really wish that these opportunities didn’t all land in one year, but so be it,” Ackley says. “Charles Smith Wines is an iconic brand. It opened up many international doors for us that were nonexistent before … but I would caution about a single brand being our flagship.” he adds. “Personalities in brands are great and resonate with customers, but I would say our flagship brand is the Pacific Northwest.”
So what prompted Ackley Brands to finally throw down a huge stack of capital during such a surly moment for the wine business — while so many others are tightening purse strings, shedding brands, and increasing liquidity to survive the storm?
Among the raised eyebrows are those of Brandon Moss, winemaker at the lauded Gramercy Cellars located in the bustling little heart of eastern Washington wine country, Walla Walla. “I noticed Ackley first with the Charles Smith acquisition,” he says. “In an industry that seemed to be shrinking a bit inward, this was clearly news in the opposite direction.”
Entering an inherently tricky industry at a dicey moment in its history doesn’t add up on first glance, but there’s a method behind the perceived madness. “It’s risky,” Moss says, “but I do believe they are in for a long play. … So maybe risky like stock trading, not risky like sports gambling.” Judging by the bitter pills currently dispensed by my daily email inbox, there’s obviously blood in the streets, and the old contrarian investment strategy dictates that now’s the time to buy.
“The opportunities showed themselves one after another and they were all good,” Ackley says. “We’ve been looking for the correct opportunities over the past 10 years. … Funny how things happen. A lot of money was spent, but valuations were fair.” The recent calamities rattling the wine industry seem to have opened up a rare window of opportunity for those brave enough for the game — and sporting sufficient liquid capital and leverageable assets amid a market downturn.
“The acquired brands are treasures to us, and feel like once-in-a-lifetime wins, each having unique merit that differentiates them.”
Rob McMillan, executive vice president and founder of the Silicon Valley Bank Wine Division, agrees that Ackley might be onto something in Washington, due to the wine region’s unique economic structure. “Washington has one big player [Chateau Ste. Michelle], then a lot of small players,” McMillan says. “Washington has some advantages there.”
Due to that massive cornerstone’s recent strategic contraction, an opening may be presenting itself for those relatively smaller, financially healthy wineries to procure some high-quality grape sources for the future while padding margins. “There’s a huge oversupply that’s backed up,” McMillan says. “It’s tough on the growers, but that provides opportunity for wineries to have more flexibility on pricing.”
During the 2021-2022 post-pandemic economic unwinding from 2020’s wine sales boom, in moves to beef up the balance sheet and focus on ongoing premiumization trends, Constellation offloaded a hefty crateful of labels to California-based behemoths E&J Gallo and The Wine Group — the world’s two largest wine companies. The Wine Group transaction included Charles Smith Wines, which was flipped to Ackley this year.
But what appeared a temporary pawn for the hulking corporation is considered a key building block for the Washington upstart. Charles Smith Wines is a complementary component for an already impressive portfolio within the context of the region, and at a glance hints at Ackley’s strategy.
“Brands can’t simply rely on distributors to represent them, they need to get their sales staff into wine shops and restaurants to sell their own products. A bigger sales force from Ackley will help that to happen.”
“The portfolio was built to be non-competitive with itself and to have a touchpoint in all price categories, varietals, and regions,” Ackley says, adding that the image of the acquired wineries is also part of the structural strata: heritage brands, iconic brands, and a dose of emerging brands all fulfilling their own part in the unexpected play. “[They] landed in exactly the category we wanted to go deep with,” he says of the new acquisitions and their place in the overall portfolio. “The acquired brands are treasures to us, and feel like once-in-a-lifetime wins, each having unique merit that differentiates them.”
Moss at Gramercy Cellars likes what he sees despite the high risk involved right now, and thinks the Ackley strategy can benefit not just its own portfolio but the region at large — including independent prestige operations like Gramercy.
“Brands can’t simply rely on distributors to represent them, they need to get their sales staff into wine shops and restaurants to sell their own products. A bigger sales force from Ackley will help that to happen,” Moss says.
And while it’s easy for a label to get lost in an enormous portfolio like that of The Wine Group, Ackley’s relatively nimble size and tight regional focus is a desirable attribute. “They can market Washington to the world and only improve the acceptance of Washington wines,” Moss says. “In addition, they purchased great brands that have a longstanding place in the industry as high-quality producers.”
It’ll require some steady helmsmanship to navigate the current state of the market. But the long game appears to be Ackley’s plan. There’s a clear and focused intent behind the moves, and the group seems to have waited patiently for the right moment to scoop up exactly what it was after at the right price.
Despite viewing Ackley’s acquisitions as a potential glimmer of hope, McMillan at SVB thinks the jury is still very much out on the buying spree. “A lot of people enter this thing thinking that they’ve got it, but they don’t,” he says. “Ackley has something that they believe works, and they see this as the right move now. It could be, but might not be. It’s impossible to compute where [the bottom] is.”
Time will tell whether or not it’s been wise to grasp the proverbial falling knife.
Still, Ackley’s surprising 2024 grand entrance onto the stage of major Pacific Northwest players might just be the wine business news of the year in this quiet but acclaimed corner of the wine world. It’s been a lot all at once, but Brandon Ackley seems confident about the unconventional pace. “We knew it was a difficult business to be in,” he says. “However, others have succeeded, so why can’t we?”
The article This Private Equity Company Is Quietly Becoming a Pacific Northwest Wine Powerhouse appeared first on VinePair.
