Is Cecchetti Merger Racke’s U.S. End Game?

Racke USA, which has struggled for more than two decades to find significant traction in the U.S. market, has merged with the brains and brawn behind the hot-selling Pepperwood Grove brand, Roy Cecchetti.

Once best known as the owner of Sonoma’s venerable Buena Vista Winery, Racke has now merged its remaining U.S. operations into a new company, Cecchetti Racke which says it expects to sell 140,000 cases of wine in 2009, grossing about $8.4 million.

Roy Cecchetti will share a co-presidency with Marian Kopp, who headed Racke USA. Kopp is expected to specialize in international sales and marketing while Cecchetti will focus on domestic operations.

VENTURE =  RACKE’S U.S. END GAME?

Cecchetti Racke appears to be Racke’s end game after a long period of erratic sales performance in the United States. In 1991 Racke GmbH + Co. KG (a German family owned company headed by Marcus Moller-Racke) bought Buena Vista, Haywood and Robert Stemmler wineries to great fanfare.

The company hired quality local managers, but reportedly never allowed them full authority. “There was too much second guessing from the family,” said one former manager. “Things never jelled into a coherent strategy.”

MUSICAL BRANDS

Racke sold Haywood and Buena Vista to Allied Domecq in 2001 beginning a chaotic period. Fortune Brands acquired the wineries in 2005 then spun them off to Constellation Brands in December 2007 which then rolled them into a new company in June 2008, Ascentia Wine Estates headed by former a Allied Domecq executive.

MAKING THE REIT MOVE

The Ascentia Wine Estates deal was valued at more than $200 million. As part of the deal, the land and wineries were acquired by SBV VinREIT, an LLC operated by Entertainment Properties Trust (NYSE:EPR).

For the latest deal from Entertainment Properties Trust, see Carneros Vintners Unconventional Financing, Creativity & Challenges Offer Significant Lessons.

Peter Haywood reacquired his namesake winery in September 2008.

DOMESTIC AND IMPORT VALUE BANDS STRESSED

Cecchetti Racke’s brands will include:

• Line 39 from Lake County,
• Golden Kaan from South Africa (a joint venture between KWV and Racke),
• Espiritu de Chile and Espiritu de Argentina (both joint ventures between Aresti   and Racke),
• Vitae from Italy (joint venture Racke and Torrevento), and
• Redtree, a line of California value wines

CECCHETTI BRINGS SUCCESS,  “STREET CRED” TO VENTURE

Roy Cecchetti and his wife Rachael launched Cecchetti Wine Company in 2007, the second time Roy has launched a California wine brand.

In 1985, he co-founded Cecchetti Sebastiani Cellar with his brother-in-law Don Sebastiani. The company grew to become one of the fastest growing California wineries with annual sales of more than 500,000 cases and revenues over $25 million with their flagship brand, Pepperwood Grove.

The Pepperwood Grove brand is currently owned by Don Sebastiani & Sons of Sonoma and includes nine varietals. Impact Magazine has named Pepperwood Grove a “Hot Brand of the Year” seven times.