Changes at some well-known California brands bode ill for the wine industry’s future.
© Rocco Ceselin/Sebastiani | Sebastiani’s historic Sonoma tasting room and winery could be bulldozed to make way for housing.
For five years, Duckhorn has been working on a luxurious upgrade of the Napa Valley tasting room for its Paraduxx brand. Just a month before it was set to open, the private equity firm that bought Duckhorn in December announced that it is winding down the Paraduxx brand.
Meanwhile, across the county line, the city of Sonoma is considering rezoning the Sebastiani site from “agriculture” and “wine production” to “Sonoma Mixed Use”, which would allow housing to be built where wine was produced for more than 120 years.
It’s yet another sign of the downturn in the California wine business. As many as 30 percent of red grapes in the state went unpicked last year. Domestic wine sales continue to slump and are lower now than they were six years ago. Lower sales overall will inevitably lead to closures of some brands and facilities.
And now it’s happening. Los Angeles-based Butterfly Equity announced earlier this month that it will wind down its brands Canvasback, Migration and Postmark, in addition to Paraduxx. The company said those four brands account for only 3.9 percent of Duckhorn’s gross profit. Butterfly said the company will focus on its core brands: Duckhorn Vineyards, Kosta Browne, Decoy and Sonoma-Cutrer, and will also continue making Calera, Goldeneye and Greenwing.
Butterfly plans to close its Migration tasting room in Napa and its Canvasback tasting room in Walla Walla, WA. It still considers Sonoma-Cutrer a “core brand” but plans to close its dedicated tasting room in Sonoma County next month.
It’s a blow to Washington’s wine scene. Duckhorn’s arrival in 2013 with the purchase of a vineyard on Red Mountain for Canvasback was celebrated as a validation of the region by one of California’s best-known brands. Now, the opposite message is sent. But it’s obviously not just about Washington.
“The Duckhorn strategy shift seems to be driven in part by two big economic changes,” said Mike Veseth, also known as The Wine Economist. “The first and most obvious one is a continuing reset in the global wine market. Consumption is falling almost everywhere and wine businesses need to adjust to the new reality of lower sales and uncertain growth prospects.
“The reactions are magnified in the case of wineries like Duckhorn and Vintage Wine Estates that expanded in the era of zero to negative real interest rates,” Veseth told Wine-Searcher. “Investments that made sense when wine was growing and money was free just don’t pencil out today. Duckhorn’s new private equity owners need to sell assets to recoup their investment and set the stage for the future with fewer brands.”
Change of flight plan
The deluxe Paraduxx tasting room is a casualty. The brand’s flagship wine, a Zinfandel-based red blend, is like The Prisoner, but it has never taken flight, perhaps because ducks aren’t as cool on a label as bondage. In 2020, Napa County approved Duckhorn’s proposal to increase production at Paraduxx by 50 percent and annual visitation by 87 percent. The Paraduxx tasting room right off Silverado Trail just north of Yountville was heavily remodeled. But now it will be used for something else.
Butterfly’s current plan for that site is to sell off the remaining Paraduxx inventory while also selling tastes of Duckhorn’s Pinot Noir brands: Calera, Kosta Browne and Goldeneye. Duckhorn has another tasting room in St Helena that it plans to remodel beginning next year.
At least Duckhorn is not planning to build housing on its vineyards (not that it could in unincorporated Napa County because of the agricultural preserve law.)
The situation in Sonoma with Sebastiani is a bit different. Sonoma Community Development Director Jennifer Gates told Wine-Searcher that the city is undergoing a comprehensive general plan update, as it does every 20 years. Sebastiani is the only site in the city where wine production is currently allowed, though wine production stopped in 2021.
Wine had been made on the site since 1825, when it was called San Francisco Solano de Sonoma Mission Vineyard. Samuele Sebastiani bought it in 1902. Sebastiani was the only winery in Sonoma County to operate throughout Prohibition, making sacramental and “medicinal” wines. (Fun fact: you could get a doctor’s prescription to legally buy and drink alcohol during Prohibition for many medical complaints, including indigestion and depression.)
In 2008 Foley Family Wines bought Sebastiani. In 2021, Foley shuttered the Sebastiani winemaking facility in the city of Sonoma, laying off 30 production workers. Foley continues to make Sebastiani brand wines elsewhere.
A group named Save Sonoma created a protest site online concerned about the city rezoning the site to “Sonoma Mixed Use,” which the group claims would not only allow, but actually require housing to be built. Gates told Wine-Searcher that while the state of California does have requirements for each city to build additional housing, there are no plans to do that currently.
“We’re expanding use to allow housing if the site is ever developed,” she told Wine-Searcher.
A spokesperson for the company said: “The potential development of the site was not initiated by Foley Family Wines & Spirits.” But who knows what the future holds?
“Rezoning of the Sebastiani site is collateral damage [of the downturn of the wine industry],” Veseth said. “I love that place with its history. Sad to think that it is more valuable as housing than history.”
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