Ask Andy Beckstoffer T'66 what he likes about the wine business, and you might expect to hear about his success. After all, the grapes have been good to the 67-year-old father of five, grandfather of four. Beckstoffer bought vineyards in Napa in the early 1970s, long before the area gained cachet, and continued through the years buying the best grape land in Napa, Mendocino, and Lake counties until his became the biggest family-owned wine-grape–growing operation in northern California. The value of his 3,000 acres alone—before he put the land into a permanent trust—had been estimated at $200 million. But Beckstoffer's answer reflects a man whose livelihood and ego are planted firmly on the ground: "Everyone in the wine business eats well, drinks well, and tells a good story." Can't argue with that. The number of Tuck alumni in the wine business may be miniscule compared with that for those who take more traditional routes, but the handful who have heeded the call of the oak barrel are all bottling vintages that earn 90+ ratings from top wine publications. They've taken different career paths and seek different rewards from their labors, but each can have the satisfaction of sipping a glass and knowing that both his mind and muscle went into it.
PrIcIng The hArvest And SAving THE LAnd
Here at the office of Beckstoffer Vineyards in Rutherford, California, the morning fog is just beginning to lift over the orderly rows of Cabernet Sauvignon grapes on the 250-acre vineyard. Two farmhands busy themselves with a truck bearing the Beckstoffer logo, although at this time in early summer, the grapes are but clusters of green specks awaiting their destiny in some of Napa's finest vintages.
Beckstoffer is purely a grape grower—primarily Cabernet Sauvignon, which thrives in the Napa Valley—and sells his harvest to 50 top wineries, including Acacia, Beaulieu, Kendall-Jackson, and Paul Hobbs. The wines made from his grapes carry price tags of between $40 and $250 a bottle.
"Everyone in the wine business eats well, drinks well, and tells a good story."
—Andy Beckstoffer T'66
As president of the Napa Valley Grapegrowers trade organization in 1976, he introduced a pricing method that values the grapes on the basis of the price of the wine they will eventually become, elevating them above commodity pricing and creating partnerships between growers and winemakers to achieve the desired properties in the fruit. The rough formula is to take the price of a bottle of wine and multiply it by 100 to yield the price per ton of grapes. In addition, many of the modern grape-growing techniques used today, including drip irrigation and bench grafts, were introduced to Napa by Beckstoffer.
His eldest son, David, is now COO. Beckstoffer has focused in recent years on conservation. "In the 20th century, we were users of our natural resources," he says. "In the 21st century, we're going to be preservers." At the end of this year, he will have placed 220 acres of prime vineyard land in The Land Trust of Napa Valley, which protects it in perpetuity from development.
VINTAGE STARTUPS
Other Tuck alums find pleasure in starting a winery from scratch, as Jim Schultze T'76 and John Bruno T'65 have each done. Both came to wine after successful careers in management consulting and the restaurant business, respectively.Schultze and his wife, Judy, run Windy Oaks Estate Vineyards and Winery in the Santa Cruz Mountains of northern California, overlooking Monterey Bay. There they planted 14 acres of Pinot Noir and one of Chardonnay. The Schultzes first learned about winemaking in the late 1980s, while living and working in Australia. They were about to buy land for a winery when a position opened for Jim in the U.K. From there, they took frequent trips to Burgundy. When the couple moved to California in 1994, they took winemaking courses at the University of California, Davis, and hoped to buy land. Twenty-five acres adjacent to their home became available a year later, and the fun began.
Schultze planted his first Pinot Noir grapes in 1996 and produced his first estate vintage in 1999. He and Judy subscribe to the Burgundian philosophy that views grape growing and wine making as one and the same. They consider themselves minimalists in that they don't filter, fine, or add enzymes to any of their wines. Most wineries pump their wine from fermentation tanks into barrels and out of the barrels into bottles. Schultze moves the wine by gravity alone to protect the delicate Pinot Noir grape. "Any kind of rough handling negatively affects the flavors," says Schultze. "You lose some of the subtle nuances that distinguish a really good Pinot Noir." The Schultzes also make yearly pilgrimages to France, where they purchase their oak barrels. Windy Oaks' 2006 vintage produced 1,850 cases; the vintage sells for between $30 and $60 a bottle. Schultze spends part of every day in his vineyard and employs only one vineyard manager. The lifestyle, he says, is laid-back. "The harvest months are incredibly high pressure—you're working as many hours as you can stand to work every day," he says. "The rest of the year is much more relaxed. It's really enjoyable."
"The harvest months are incredibly high pressure—you're working as many hours as you can stand to work every day. The rest of the year is much more relaxed. It's really enjoyable."
—Jim Schultze T'76
John Bruno's Oak Summit Vineyard, meanwhile, is in New York State's Hudson River Valley, a small but up-and-coming wine region two hours north of New York City. Bruno also makes Pinot Noir, and his recently released 2005 vintage yielded 200 cases.
Bruno was the third-generation family member to run the famed Pen and Pencil steak house in New York City. He sold the space to developers after 33 years and retreated to Millbrook, where he'd summered for 20 years. "I was looking for a gentlemanly endeavor," he jokes. "Turned out there was a great deal of work involved."
In farming four acres with the help of one employee, Bruno is returning to his family's roots. His maternal grandfather was a winemaker in northwest Italy, and Bruno's mother was literally born in a vineyard. (According to family legend, Grandma gave birth, took a shot of grappa, and went back to harvesting grapes.) His grandfather later opened Pen and Pencil and was a bootlegger during Prohibition.
Like Schultze, Bruno aims to farm as naturally and sustainably as possible. "It's a love/hate thing," Bruno says. "I want to burn the thing down sometimes, but when I sit here looking out over the vineyard, it feels good. And harvest is such an upbeat time." As he talks, he sips a Pinot Noir—but not his own. "We don't dare touch our wine because we have so little and it costs so much," he says of his $35 estate vintage. "We love to go to friends' houses when they serve us the stuff."
InvestIng In The vIne
Still other Tuck alums have approached the business from the investment side. Bill Hart T'67 is an investor in the Duckhorn Wine Company, based in St. Helena, California, which sells wine under the Duckhorn, Paraduxx, and Goldeneye brands. Duckhorn is a midsize winery, with 100,000 cases produced annually.
Hart, who founded Palo Alto–based venture capital firm Technology Partners and ran it for 21 years, met winemaker Dan Duckhorn in the mid-1980s and was one of a group of investors to help Duckhorn expand. "I knew Dan knew what he was doing, so we weren't likely to lose our money," says Hart. "But I didn't think there'd be a great return on the investment. My wife, Margie, and I just thought it would be fun to be shareholders—and it is." The perks are pretty good: the Harts attend various wine events, can entertain people at the winery, and get a lot of free wine.
In 1990, Duckhorn established vineyards in the Anderson Valley, an area south and east of Mendocino that wasn't yet known for great wine. It was a prescient move. Hart says that in an ironic twist of fate, Duckhorn could turn out to offer a return comparable with some of the best VC deals he made. (In March, the company had announced that it had retained an investment bank "to explore strategic alternatives.")
His contact with the business also led him to found Hart Vineyard, four acres of grape-growing land adjacent to his home in St. Helena, where he has revived 110-year-old Zinfandel and Petite Sirah vines. He sells his grapes to Robert Biale Vineyards.
Bob Spears T'76, a director in San Mateo–based Shoreline Venture Management, has also invested in the fruit of the vine. In 2000, he and four other investors funded Londer Vineyards—also in the Anderson Valley—which specializes in Pinot Nnoir, along with smaller bottlings of Chardonnay and Gewürztraminer. The vineyard was planted in 2001, the same year its first vintage debuted with grapes purchased from fellow Mendocino growers. In 2004, it began to use its own grapes, which now account for 40 percent of the total. This year, Londer will produce between 5,000 and 5,500 cases of wine.
"I want to burn the thing down sometimes, but when I sit here looking out over the vineyard, it feels good."
—John Bruno T'65
The vineyard is actively run by Larry Londer, a former ophthalmologist who spent 27 years living in Albuquerque before relocating to the Philo, California, vineyard with his wife, Shirlee, to pursue his winemaking dream. One of Spears's money managers had been a college roommate of Londer's and recommended the vineyard as an investment. Spears had gotten involved in agriculture before, co-owning thousands of acres of macadamia nut trees in Hawaii and Australia, which he sold in 1990. "I made money doing that, and I said I'd never tempt fate twice and be a farmer again," says Spears. "It took me 10 years to lose my mind again, but it's been a decent venture." Londer Vineyards became cash-flow positive at the end of five years. Spears isn't active in the day-to-day life of the vineyard, but he does make the 2½-hour drive from the Bay Area roughly four times a year. While the wine and the accolades it has drawn have been enjoyable, Spears doesn't see the vineyard as a lifestyle-only investment. "I actually thought there was an opportunity to have some fun and make it a profitable venture," he says.
A Toast To The FuTure
An old joke in the wine business is that the best way to make a small fortune with a winery is to start with a large fortune. Everyone interviewed agrees that launching a winery in Napa today is not a likely path to profitability. "In 1976, I said Napa Valley land would some day be $100,000 an acre," says Beckstoffer. "Nobody believed me. Now it's $200,000 or $300,000 an acre and more for the good stuff." New frontiers where land is cheaper—such as Lake County, California, where Beckstoffer is developing his "Red Hills" appellation—can be a critical factor."
Bruno recommends making your fortune doing something else and then starting a vineyard. "We ended upgrowing better grapes than imaginable because we're not trying to make any money at it," he says. Oak Summit Vineyards is not far from break-even, and that suits Bruno just fine.
Many small wineries, such as those run by Bruno and Schultze, sell almost all their wine directly to consumers through wine clubs or Internet sales. Distributors help a wine achieve visibility—important for a bigger brand such as Duckhorn—but they also take 50 percent of the revenue, gobbling up profit margin.
Two young alums have found unique ways to enter the wine business. T'05 Andrew Chun saw a unique opportunity when he was working for Bain Capital in San Francisco. Everyone who visited him wanted to go to wine country, but for him, the full-day pilgrimage—the heart of Napa is roughly a two-hour drive from the city—was getting old. "I would have to tell them to add an extra day to the trip because we already had a fun city day planned," he says. "I thought about that for a while and decided maybe I could bring the wine country here."
His startup, Press Club, will be a retail wine-tasting room in San Francisco where wineries in Napa and Sonoma can have tasting tables in one location. He brought the idea with him to Tuck and put together his business plan in the second-year Advanced Eentrepreneurship course. The project won the Dartmouth Entrepreneurial Network's 2005 entrepreneurship contest for non–venture capital startups. Then in spring 2005, first-years in the required project component of the curriculum—then known as the Tuck Leadership Forum—helped develop Chun's marketing plan. And by the time he graduated, things were already rolling. Bill Hart has been on Chun's advisory board since the project's early days and was later joined by Mark Kovac T'96, currently a partner at Bain & Company. Multiple wineries have already committed to the Press Club, and Chun is currently building out the space, which will be located underneath the Four Seasons Hotel San Francisco. It is scheduled to open in March 2008.
An old joke in the wine business is that the best way to make a small fortune with a winery is to start with a large fortune.
Chun's classmate, Mati Adler, had wine experience before coming to Tuck: he wrote for Wine Spectator, learned the auction business at winebid.com, and worked harvests at wineries in Sonoma and New Zealand. Adler discovered Tuck while reading that Andy Beckstoffer went there. Now an associate in mergers and acquisitions for Credit Suisse in New York, Adler works on deals involving the wine industry. "Institutional capital is now pouring into the wine business," he says. In the future, Adler hopes to start a business relating to the space where quality wine and quality investments intersect.
Beckstoffer, Bruno, Hart, Schultze, and Spears all agree that their time at Tuck helps in running a wine business. Beckstoffer says his education gave him confidence that he could "play with the big boys" and calls it the most important two years of his life. "Through Tuck and beyond, you develop this instinctive ability to model things financially in your head," says Hart. And, as Schultze adds, "In winemaking you're taking in many, many facts and trying to sort through what's important and what's not in order to come up with an approach and a philosophy that makes sense."
Let's raise a glass to that.
