Dr Vino's wine blog

Coravin, the company formerly known as Wine Mosquito, has raised another $22 million in private equity funding. That brings the total equity sold to $40 million (plus another $3 million in debt). The lead investor of this round, closed on November 8, was not publicly disclosed. Neither were company revenues. Nor was the valuation.

The privately held company, based in Burlington, MA, sells a wine preservation/extraction device that uses a hollow needle to penetrate the cork of a wine bottle not unlike a mosquito if Bacchus designed mosquitoes. Over about 30 seconds, it injects argon gas to pressurize the bottle and then extracts a glass of wine without removing the cork. The device lists for about $300 retail and replacement argon canisters list at $18 a pair. That’s enough argon for about 30 glasses of wine.

While this price is low for restaurants compared to many by-the-glass systems, it does seem steep for consumers. Nonetheless, the company continues to raise capital at an astonishing clip. Sales were briefly halted in 2014 after complaints of exploding wine bottles. The company now recommends using a “wine bottle sleeve” when opening bottles.

The parody Twitter account @shitmysommsays recently tweeted “If you need a Coravin at home, you need more friends.”

The last company in the wine space to raise this much private equity was Lot 18, which raised $33 million in 2011.

UPDATE: Vivino, a wine app developer, raised $25,099,884 in private equity funding in January of this year.

Daniel Johnnes may be the closest thing the American wine world has to Burgundy royalty. Yesterday he announced that he has joined Grand Cru Selections, an importer and wholesaler based in New York City, as a partner. It’s a big move, if somewhat “inside baseball.”

“This is an opportunity to be a partner in a young and dynamic company that I didn’t want to pass up,” he said by phone.

Johnnes, 60, helped pique America’s interest in Burgundy wines When he was a sommelier at the erstwhile restaurant Montrachet in the early 1990s, he hosted winemaker dinners with the likes of Christophe Roumier and Dominique Lafon that encouraged American collectors to add Burgundy to their cellars. In 2000, he tapped his connections in Burgundy to hold the first “La Paulée de New York.” This bacchanal now alternates annually between NYC and SF and is marked in red on the calendar of collectors. It also functions as a sort of “Burgundy university” for the sommeliers who work the event. Johnnes brokers a number of wines including Roumier and Lafon that he will be bringing to Grand Cru. He was #4 on our NYC wine power list a few years back. He currently is spending a year in Lyons.

Grand Cru Selections was started in 2010. Ned Benedict, a founding partner, said of their strategy: “we’re trying to build a really well-conceived portfolio of wines. Burgundy is obviously really close to all of our hearts.” But, he underscored, “we’re not trying to become a house of Burgundy–other regions are very important to us too.” Their portfolio includes the wines of J.L. Chave, Marquis d’Angerville, and nine wines from Piedmont, among others.

Sour Grapes, a new documentary about wine fraud, is being released on Netflix next month.

The movie centers on the case of convicted wine counterfeiter Rudy Kurniawan. In fact, the film’s two directors, Jerry Rothwell and Reuben Atlas, met at Kurniawan’s trial in Manhattan where they had ventured separately, each with an eye to making a documentary. In a phone interview, Rothwell said they quickly decided to join forces after speaking with witnesses who had testified in the trial.

One of those was Laurent Ponsot who welcomed them and the camera crew to his Burgundy domaine. Rothwell says that the film “a bit like a detective story.” Ponsot is positioned in the film as one of the detectives, trying to solve the mystery of fake bottles and the perona of Rudy Kurniawan. Others include the investigative team of Bill Koch as well as Maureen Downey and Don Cornwell.

One of the things about the film that is apparent from the trailer (above in case you get this via email and the youtube clip doesn’t render) is that they have real clips of Kurniawan walking and talking as opposed to those courtroom drawings that made him look like an alien life form (but courtroom sketches don’t do anybody favors, just ask Tom Brady). At one point he even jokes “I refill and put the cork back”! Rothwell says much of this footage came from another documentary about wine collectors shot in 2002 but that didn’t see the light of day.

Rothwell says that the Netflix came on board early, as well as ARTE, the Franco-German TV network. He says that he started the project just after Kurniawan was arrested but work and filming in earnest lasted about a year, which is fast. Working with Netflix streamlined it too and made for fewer headaches.

The Kurniawan story seems a perfect fit for TV or movies. The rights to a dramatic version of the story were sold in 2012.

Charles Banks, a former owner of Screaming Eagle whose current wine and hospitality holdings have been pegged at $200 million, was indicted in federal court today on two counts of fraud. Banks, 48, is accused of defrauding Tim Duncan, the NBA legend, of $20 million in investments.

Yahoo sports has the story:

The indictment was unsealed Friday in a San Antonio courtroom, where Banks surrendered himself and was led into the courtroom in handcuffs. Banks surrendered his passport and a $1 million bond was issued for his release pending trial. He is facing a potential maximum sentence of 25 years in federal detainment.

The FBI has been investigating Banks for a year. The SEC later filed suit against Banks in Atlanta where he resides accusing the financial adviser of defrauding investors.

Banks has amassed a global portfolio of wines under his Terroir Capital that includes Mayacamas of Napa Valley, Qupé of Santa Barbara and Wind Gap of Sonoma. The company was a founding partner in Sandhi, though that stake was sold earlier this year.

Banks had previously denied wrongdoing, telling Forbes in January, “We are proceeding aggressively to have [Duncan’s] claims litigated.” Banks was released after posting $50,000, five percent of the $1 million bail set in his case.

* “Feds charge — and sue — Tim Duncan’s former financial adviser” Mysanantonio.com
* The SEC complaint

Vietti, the Barolo winery founded in 1893 and known for its single-vineyard wines, has been sold to the American Kyle J. Krause. According to Wine Spectator, the sale includes the winery in Barolo’s Castiglione Falleto, the brand and 84 acres of vineyards. Luca Currado, enologist and current head of the winery, will be staying on as CEO. The parties did not reveal the price paid.

The story is a curious since top vineyards in Barolo generally get sold to…people in Barolo. Perhaps the increased interest in the wines of Barolo is driving international investor interest in seeking real estate plays or trophy wineries. In any event, the recent dollar strength certainly helps American buyers. And the prices they are willing to pay are now high enough to pry the keys to the cellar out of the hands of some locals. Either way, Vietti seemed to really be on a roll with their wines and I am surprised to learn that they have sold.

Kyle Krause owns a chain of convenience stores based in Iowa known as Kum & Go. (The corporate umbrella of Krause Holdings includes Solar Transport, a hauler of refined fuel and the Des Moines Menace, a team in the fourth tier of the American pro soccer pyramid). It’s hard to imagine Vietti on the shelves of a convenience store but if that happens, it will certainly give Kum & Go a leg up over 7-Eleven’s wines! With 400 stores in 11 states and $2.1 billion in revenue, Kum & Go ranks 163rd in private companies in the US according to Forbes. It was founded in 1959 by William Krause as Hampton Oil Company.

Krause and has wife Sharon have five children. Krause told Wine Spectator that “My mother’s family is Italian and I have always had a passion for Italy and for Barolo.” He has been acquisitive in Barolo, purchasing some 30 acres of vineyards last year, though not always emerging as a successful bidder. The other sites Krause owns in Barolo will now be folded into Vietti. Currado says they will increase the quality of Perbacco, their Langhe Nebbiolo. Hopefully it will remain the great buy that it is today. The Barberas are also excellent values.

Related:
Wine Spectator story on Vietti purchase
Maker of Kedall-Jackson buys Copain
Constellation Wines buys The Prisoner for $300 million

Tumult (anarchy?) is the current state of the main political parties in Britain after the Brexit referendum. Will the vote to exit the EU leave the British wine trade in any better shape than the political parties?

By way of background, the UK was, pre-Brexit vote, one of the bright stars in the wine world. While consumption has been slowing in the main producing countries of France, Italy and Spain for some time now, the UK was heading in the opposite direction: the wine market is vibrant, diverse, growing and by some measures, the second still wine market to the US. Somewhat astonishingly, a recent survey by the wine trade group WSTA showed wine as “the most popular alcoholic drink in the country.”

Post-referendum, the pound Sterling has fallen to 35 year lows against the dollar and tumbled nine percent against the euro (and even more as jitters about Brexit gripped the currency market earlier in the year). Historically, wine was one of the things par excellence that the British traded for: Adam Smith observed this in his example of “wine for wool” highlighting the comparative advantage of nations. (More recently, England has seen a domestic wine industry emerge but it is still not enough quantity at low enough prices to slake the thirst of British.) So the quick take is that Riojas, Burgundies, Baroli, and all other euro-denominated wines just got nine percent more expensive. (The currency-related price increases may take several months to filter through until existing inventories need to be refreshed at the new currency levels but preliminary reports indicate it is already being felt in France.) With 80% of wine in the UK sold at retail and much of that at thin margins, the consumer will feel the brunt of the currency impacts.

Over half of the price of the average bottle of wine in the UK is tax, so the government could conceivably cut the wine tax to offset the currency effect. But since HM Treasury is as desperate for revenue as most treasuries, that is highly unlikely especially since wine brings in £8.6 billion to the public purse.

There is, of course, the human element too and many non-British EU citizens live in Britain and work in the wine trade. London is a hotbed for restaurants and there are many non-British EU citizens who work as sommeliers. Their futures are all up in the air now.

The uncertainty following the referendum has sent the pound plummeting and many economic forecasters now see a recession looming for Britain. In the end, since the referendum was only advisory, and there’s been a wave of resignations among the political class, there’s a fair chance that no politician will actually trigger Article 50, which starts the clock and makes inevitable Britain’s departure from the EU. And if, in the delay, the economy suffers, British unity itself is under risk, new leadership emerges that can better articulate the cause for “remain,” there could be calls to rethink and “Bremain.”

With all the uncertainty, the Brits could certainly use a glass or two of wine. But whether they will continue to reach for it with such enthusiasm remains to be seen.

Billionaire and famed wine collector Bill Koch’s wine cellar is up for auction at Sotheby’s in a three-day sale happening now. Koch is selling about 20,000 bottles with an estimated range of $10-$15 million. But don’t worry, he’ll still have plenty to drink since he’s only selling about half his famed collection.

I attended the live auction at Sotheby’s in New York yesterday. In the large auction room where numerous famed art pieces have sold, bidders turned out in person and online/phone to get a piece of the action. Jamie Ritchie, president of Sotheby’s wine Americas and Asia, and Eli Rodriguez, vice president, called the 914 lots starting at 10 AM and continuing without interruption until bidders had a crack at them all. Even though the bidding took place in dollars, the current bid was displayed in no fewer than six currencies that ticked higher with each increment.

The most celebrated lot of the day was 10 bottles of 1945 Mouton Rothschild, which sold for $343,000 (including buyer’s premium). To convert that into something other than the six currencies on the board, that’s about the price of three Teslas, or $1,372 per ounce. Swirl that in your mouth for a minute–but please, don’t spit.

Other notable wines yesterday included ’59 Haut-Brion and ’61 Palmer. There will be over 2700 lots during the three days; check out the lot listing online but the hard-bound, 500+ page catalogue is a work of art itself. Interestingly, the write-ups rely exclusively on Serena Sutcliffe’s comments about the wines and eschew point ratings of any kind from any critic.

The cellar has tremendous breadth and, given Koch’s litigious and crusading ways, bidders seemed to be enthusiastic, with many lots making a mockery of the estimates even in some of the lower-priced lots (yes, some Bordeaux lots sold in the $1,000 range). There’s something for everyone: perhaps the lowest-priced lot yesterday was a 12-bottle case of Gibson, Barossa Vale Shiraz 2002 for $368 (including buyer’s premium). And, yes, the wine comes under screw cap. Read more…

April frosts bring May floods?

Weather at harvest used to be dicey with rains. But now severe and unusual weather events are buffeting the Burgundy region throughout the growing season with shocking and disheartening regularity. Devastating hail storms pounded vintages 2012, 2013, and 2014.

Last month, there was some bitterly cold weather overnight on April 27, which led to frost damage. By the BIVB’s estimates, 46% of vineyards in the region were badly damaged. Jasper Morris, the Burgundy Director at London’s Berry Bros & Rudd, wrote about the frost damage on his blog:

The Beaune vineyard I partly own, Les Pertuisots, seems to have lost everything, as do neighbouring plots, while a few yards down the road the Clos des Mouches was much less affected, according to the Drouhins. There is no rhyme nor reason, and even vineyards which have not been affected in living memory, such as Le Montrachet, have been badly damaged this time round.

Bill Nanson writes this week on his blog:

Honestly the vines are ‘all over the place’ you can really see the lack of consistency when you walk in the vineyards; there are big sprouts of growth here-and-there, surrounded by a much smaller average growth of leaves. The first, larger shoots, are those who survived the frost, the latter is the new growth (recovery) from the previously dormant buds. I’ve never seen such higgledy-piggledy growth in the vines.

And then there is flooding and hail this week in Chablis, as seen in the photo above with more on Bill’s blog.

What does all this mean for the region? Well, a final judgement of the Burgundy 2016 vintage will be best rendered when tasting the wine in the glass–quality has been snatched from the jaws of defeat in several recent, difficult vintages. But it certainly looks as if yields will be down with the resulting wine volumes, which, of course, means…higher prices for consumers and possibly declining revenues for producers.

Some producers have recognized this double whammy and made long-term plans to diversify, buying properties in lower cost areas such as the Jura or some cru Beajolais.

Burgundy…a wine that can bring so much pleasure yet also so much pain–on consumers’ wallets and producers’ balance sheets.