Glass Half Full
Trumping all the politics of free trade, Donald Triggs
of Vincor International has purchased wineries
in the U.S. He's also selling wines to the French
By MICHAEL RYVAL
Friday, September 28, 2001
Nestled in the midst of vineyards that spread across a windswept portion of the Niagara peninsula is a large, concrete-glass-and-wood structure with a postmodern feel. Its flat roof floats on a network of wooden trusses, and while one end presents high, formidable walls, the other has a series of large windows that let in natural light. It could be a school, or a high-tech plant.
It's a winery, no real surprise-but a new take on an old design. "It's a contemporary interpretation of the oldest building in Canada-the barn," says Donald Triggs, president and ceo of Vincor International Inc.
A stocky 57-year-old who took up a career in marketing and finance after growing up in Manitoba farm country, Triggs points to the trussing design inspired by the old post-and-beam system, and to the huge doors in the centre that create a Great Hall. Designed by Toronto architects Kuwabara Payne McKenna Blumberg to house Vincor's Jackson-Triggs winery, the $10-million facility was finished this summer, eight years after the brand's launch.
"We focused on the wine first," says Triggs, as he walks into the production area. "When we had the brand and the economics made sense, we invested in the winery. In our view, it's symbolic of the Canadian industry going on the global stage."
It's not the only symbol. Vincor leads a thriving wine industry-one that, a decade ago, was doomed to buckle under free trade. Vincor is the nation's largest wine producer, with a 25% market share. Its brands range from L'Ambience in the "popular" category ($7 or less a bottle) to the "ultra-premium" Inniskillin Wines ($15 and up). Vincor also owns Wine Rack, the largest independent wine retailer in Ontario.
Last October, Vincor established a beachhead in the vast U.S. market when it spent $95 million (U.S.) to acquire R.H. Phillips Inc., a mid-sized winery located in the Dunnigan Hills, just northeast of California's Napa Valley.
Phillips has annual production of 500,000 cases of "super-premium" wine-retailing for $10 to $15 (U.S.) a bottle-and posted revenues last year of $26 million (U.S.). The acquisition catapulted Vincor to fourth-largest wine company in North America by volume, and 23rd-largest in the world by dollar sales. It also obtained access to the U.S. market. Established in the early 1980s, Phillips has a network of 26 agents and brokers, plus 22 in-house salespeople that now move Vincor's product line as well.
In August, Vincor made another strategic move when it acquired Hogue Cellars, a Washington State winery with annual sales of 450,000 cases of premium and super-premium wines, worth $30 million (U.S.). (The deal will be financed by a $105-million equity underwriting that will be used to pay down around $35 million of Vincor's $260 million in debt.) Combined with Phillips's sales, the acquisition will move Vincor to one million cases and effectively double its presence in the States. As well, it will double the size of its dedicated sales force to 50 people. "This move expands our strength in the U.S.," says Triggs.
"Phillips in particular was a very smart move," says Toronto wine writer Tony Aspler. "By undertaking the expansion in production, Vincor won't be able to sell it all in Canada. They'll need another market." In particular, Aspler anticipates that Vincor will develop a niche for its sweet ice wines, which retail for $35 to $85 for a half bottle. Canada is the world's largest ice wine producer, mainly because of its cold climate. But the process of building a niche outside Canada will take time, says Jacques Kavafian, an analyst with Toronto-based Yorkton Securities Inc. Although glowing wine- journal reviews have created a cachet for the product, Kavafian says that "for now, Canadian ice wines are very much under-penetrated in the U.S."
Still, the Phillips acquisition has paved the way to change that. "I get 25 calls a week from wineries around the world, asking to be distributed," says Mark Lauber, who heads Lauber Imports Ltd., a Somerville, N.J.-based importer that represents around 100 California wineries and handles about one-eighth of Phillips's output. "If Vincor had come to me earlier, I would have said, 'Thanks, but no thanks.' The Phillips acquisition gives them leverage." In addition, Lauber expects to help Vincor build its image with its Inniskillin ice wines in better New York and New Jersey restaurants. "From that platform, they may be able to launch other wines."
These will presumably be the pricier table wines that Vincor develops in the Okanagan and Niagara. Introducing them will fit nicely with the direction Triggs has taken since the late 1980s.
A born marketer, Triggs had earlier earned his corporate stripes running John Labatt's Ridout Wines. Labatt decided to exit the wine market in 1989, at which point Triggs and winemaker Allan Jackson joined forces to buy the Ridout brand. At the time, the wine industry braced for a flood of cheap imports due to the NAFTA. "You had two choices as a Canadian wine producer," recalls Triggs. "Go to higher price points if you wanted to stay small. Or get bigger fast if you were in the popular-priced segment."
Cartier Wines, the vehicle that Jackson and Triggs created out of Ridout, initially pursued both avenues. In 1993, the partners acquired Inniskillin, a prestige Niagara-on-the-Lake winery known for its ice wine. A year later, they teamed up with industrialist Gerry Schwartz and the Ontario Teachers Pension Plan to take over T.G. Bright & Co., a maker of popular-priced wines. That merger resulted in Vincor and doubled annual sales to $125 million. The company went public in 1996. As more acquisitions followed-London Winery, Okanagan Vineyards, and Dumont Vins & Spiritueux, all in 1996; and Okanagan Valley's Sumac Ridge in 2000-revenues grew exponentially. For the fiscal year ended March 31, 2001, Vincor had sales of $300 million. But expansion plans have also meant a dramatic increase in the company's debt load, from more than $133 million last year to $260 million. By the end of fiscal 2000, by Triggs's account, about 40% of the revenue growth since going public had resulted from acquisitions, but about 60% was organic.
It's not only about raising the top line. Triggs clearly has his eye on quality, and will readily boast about Vincor's critical recognition. Last November, Jackson-Triggs was recognized at the International Wine and Spirit Competition in London, England, winning the best Canadian producer award, for the second year in a row. It swept the 2000 All-Canadian Wine Championships, claiming 28 medals, more than any other winery. And at this year's San Francisco International Wine Competition, the company's ice wine won best dessert wine, also for the second year. Among the vintages that drew raves was the Meritage 1998 Proprietors' Grand Reserve. Wrote David Lawrason, in Wine Access: "Full bodied to say the least, almost massive in girth but nicely packed onto a solid tannic frame."
Wines like Meritage tend to be pricier-$15 and up a bottle. But that's where the growth is. "The super- and ultra-premium segments are growing at around 20% a year," says Triggs, attributing the increase to demographics, as aging boomers are more likely to drink expensive wines. "That's why we're investing in vineyards-to drive that growth." By 2006, Triggs hopes to increase production of higher-priced wines to 60% by volume, and 75% by dollar, from today's figures of 50% and 66%, respectively. At which point, annual sales in Canada are expected to reach $400 million.
In the U.S., Vincor's target for 2006 is $300 million (U.S.) in revenues. This will be achieved partly through an expanded profile for ice and table wines, and partly by boosting R.H. Phillips's output. Phillips has the capacity to produce 750,000 cases a year. "There is an opportunity to build global brands," says Triggs, anticipating a global consolidation over the next few years. "Inniskillin and R.H. Phillips have that potential. So do Jackson-Triggs, Sumac Ridge and Hogue."
There's more. Last fall, Triggs concluded joint ventures with two French wine houses to develop wineries in Canada. One partner is Groupe Taillan, of Moulis, Bordeaux; it owns several estates that boast the "Grand Cru classe" designation. Taillan is developing an 80-acre site south of Oliver, B.C., in the Okanagan Valley. Called Osoyoos Larose, the estate winery expects to release its first Bordeaux-style wines from merlot and cabernet franc grapes in 2003.
On the other side of the country, on 130 acres of the Jordan Bench of the Niagara peninsula, Vincor has joined with Boisset, and La Famille des Grands Vins-the largest wine house in Burgundy-to establish Le Clos Jordan. This new winery will release its first vintages by 2005. Boisset is providing the winemakers and viticulturists to produce the wine from pinot noir and chardonnay grapes.
"We really believe that piece of land is extremely appropriate for a first-class project," says Jean-Charles Boisset, vice-president of the firm, adding that the property has similar climatic conditions to Burgundy's Côte d'Or. "The potential for pinot noir is awesome."
Amazingly enough, Boisset and Vincor intend to ship the wine not only across North America, but back to France. Granted they will have to surmount the notorious chauvinism of wine consumers. But, says Boisset, "If we make a spectacular wine, which we intend to do, people will be interested."
Frank Gehry, the celebrated Canadian-born architect who designed the Guggenheim Museum at Bilbao, is now finishing a design for Le Clos Jordan. To seal that deal, Triggs took a visit to Gehry's Santa Monica offices and invited Gehry to a tour of the undeveloped property in Jordan, Ont.
"After touring the site, [Gehry] waved to me: 'This is where we will build the winery.' It wasn't until then that I really knew it would happen."
Will it become a tourist attraction? Triggs smiles and cites Gehry's own self-deprecating reply: "I have to compete with Niagara Falls." But a Gehry building in Canada-now, that's a symbol.
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