Scalability Key to Enticing an Acquirer
April 01, 2021
WarRoom Cellars founder Andrew Nelson, who put together the deal to buy Bonny Doon Vineyard, said when evaluating a brand for acquisition he likes to ask if it can scale to 1 million cases.
Nelson said he gets some flak for that question, but in his keynote address during the recent Central Coast Insights conference, he said that simple metric provides an effective lens through which to evaluate potential deals.
He was quick to acknowledge that taking a brand to 1 million cases is another question all together, and not every brand can, or should, enjoy such growth.
After graduating from Cal Poly in 2007, Nelson worked in brewing and winemaking before moving into vineyard management for Diageo. In 2012, he became partner and general manager at Tolliver Ranch Brands with vineyard owner Rob Murray and the two would later form Rabble Wine Company.
Rabble found success with eye-catching labels depicting cataclysmic events in a woodblock style on wines that were both affordable and approachable. The company eventually leased the well-known “castle” tasting room on Highway 46 outside of Paso Robles, Calif. A few years later, Nelson left Rabble and Murray later sold the company to O’Neil Vintners & Distillers in a deal announced at the start of this year.
Nelson struck out on his own with new partners and formed WarRoom Cellars to, as he put it, “wage war against big wine.” That has since been softened to: “All for wine, wine for all.”
The company’s first deal was for the Lapis Luna brand in 2018, but the nascent venture garnered widespread media attention for its purchase of Bonny Doon in 2020. “They should be able to scale the company and get more successful than I did,” founder Randall Grahm told the Wine Enthusiast after the deal was announced. Grahm remains a partner in the company that produces around 35,000 cases.
“It’s such a special California brand,” Nelson said during the Central Coast Insights conference. “It really has an emotional connection with lots of people.”
The Bonny Doon wines are made at the Monterey Wine Company in King City, Calif. and all of WarRoom’s other wines are produced and packaged at facilities throughout the state. After making lease payments on a Paso Robles castle, Nelson said he has no plans to invest in buying or building a winery or even a tasting room, which he said is not necessary for brand building.
In addition to if a brand can scale, Nelson said a potential acquisition target should show good SKU focus. He said a company with a large brand portfolio in which no particular wine is outperforming the others is not attractive. Also Nelson stressed a company should have its inventory under control as well as all of its intellectual property. In 2016, Rabble Wine had to change the name of its brand Force of Nature, which at the time was sold in 35 states and had not been protected by trademark.
In addition to Bonny Doon and Lapis Luna, WarRoom produces a few other brands including the Big Red Monster and a rosé seltzer called Bubble Butt.
Partnerships have also been key to the company’s initial success. While Nelson and his team focus on brand development and production, Total Beverage Solution, which is an importer based in Charleston, S.C., handles all sales and distribution. WarRoom also produces licensed products with its most successful being the Hallmark Channel’s holiday themed wines.