The sale of Laughing Stock Vineyards to Arterra Wines Canada was announced this week. The sale, for an undisclosed amount, closed November 30th. It’s the latest in a string of high profile Okanagan winery deals.
Arterra is the reincarnation of what used to be the Canadian division of Constellation Brands (formerly Vincor). It’s owned by the Ontario Teachers Pension Fund, with access to a formidable pool of capital.
Laughing Stock sold to Arterra for a reason, well, a few reasons. As in all the recent Okanagan winery transactions, LFNG were actively looking for a buyer. And, from several prospects, the Canadian wine giant turned out to be the best suitor.
I was invited to meet with Laughing Stock co-owner David Enns and Arterra CEO Jay Wright, just before the deal closed.
Laughing Stock co-owner and winemaker David Enns (l) with Arterra Wines Canada CEO Jay Wright
How Come?
I asked when and why the Enns decided to sell. It came down to capacity, explains David Enns.
“We were looking at the next vintage (2017) with 7,500 cases of red in barrel. We knew we’d be at 10,000 cases in a facility built for 6,000 cases.”
He says Laughing Stock has never taken on new contracts and has turned grapes away on a regular basis. They’ve also tried hiring more people.
“But it didn’t work out. It takes a while to introduce people into our culture:
Run lean. Work hard. And make good wine.”
Laughing Stock felt they had gone as far as they could. In my experience there have been few wineries so well conceived and executed. LFNG as a brand is beyond smart. It appeals to a certain level of sophisticated consumer in so many ways. But beyond that, the wines have always been well made and extremely focused.
“The challenge was how to maintain what we do without going backwards—because we’ll always be in the wine business,” Enns insists.
“We decided the first thing to do was to find somebody to represent us discretely at the highest level. It’s not a garage sale,” laughs David.
“So we partnered with Deloitte. We gave them specific directions as to who we thought would be a range of good partners.”
Timing is everything
Contrary to popular belief, Arterra wasn’t actively looking to expand its already substantial portfolio. They’re still very much in the process of building the new company, says Wright.
“We’re still hiring people to be really effective for the future. We weren’t considering what ended up happening here. But serendipity happens.”
Wright and some of Arterra’s senior management, including head winemaker Paul Kassebaum, happened to be in the Okanagan when Laughing Stock had recently come on the market.
A phone call from the Enns led to a furtive, early morning meeting.
“We snuck in and spent some time in the winery. I was inspired immediately and quite excited, to be quite frank,” says Wright. He adds:
“I’d always dreamt about the Naramata Bench and finding an iconic winery to partner with. It helps speed up my dream. That is to get us focused back on Canada, on the appellations which are spectacular and on the entrepreneurs who have the dreams and creative juices to drive the legacy forward.”
It may not have been in the plans. But, evidently, something clicked…
“When I met these guys both Paul and I walked away with a big smile on our faces and thought: Great wines, wonderful people, similar values. Let’s make this happen.”
Our owners said “If you think it’s right, go for it.”
“It was that simple … “
Until the lawyers got involved…
“Plus, it was harvest time,” says David.
(Very) early days: Laughing Stock owners David and Cynthia Enns having just launched their wines. The backdrop has changed somewhat since then… But I love the mood in this pic c. 2005
Laughing Stock: Building on the past
Naturally, the Enns want the Laughing Stock story to continue and be a thriving legacy.
It’s important not to lose that momentum, says David. “For us we’ve got the momentum going. We have the enjoyment of great relationships in the marketplace. We’ve stuck to our knitting of not having a product proliferation of 20 wines. We just want to go deep and continue to improve. There’s the volume challenge: we can’t meet demands. And we’re up to our production limits. It’s a perfect storm. We just don’t want to walk away from it …”
“There are growth opportunities for our brand and we just need some help. This has turned out to be great.
“We’re pleasantly surprised about the language being used. About getting back to being creative, being entrepreneurial and helping to grow the brand. It lets us take away the noise around it, especially for Cynthia. Because the wine business is highly bureaucratic. Paperwork, licensing and so on (are) a shocking drag on good business.”
He also says it’s crucial to solve the cross border shipping problem.
“I think there’s a national profile that’s going to happen in the wine business because of interprovincial shipping. Even though we’re across the country it’s so painful to do business with Ontario and Quebec. It really is.”
“We have huge demand from our past association in the investment management world in Ontario and Quebec. And in Boston and New York … So here are these great relationships and I can’t even exploit them because we can’t ship wine. It’s got to change.”
An emphasis on partnership
As part of the deal, the Enns will remain on the property and continue to manage the winery. For now, at least, David Enns will continue to make the wines.
Jay Wright says: “The model for us is really simple. It’s partnering with folks who have a vision and a dream. It’s to take away some of the hassles and allow them to get back to what they love to do the best. And continue the growth of Laughing Stock Vineyards.”
However, it’s apparent that this is something of an exploration of possibilities for both parties.
“I think for the industry it’s helpful for us to connect with entrepreneurs,” says Wright. “Especially now, with Canadian ownership, to play a role in bringing the industry forward in ways that when we were a distributor of a global company weren’t as much of a priority.”
“Connecting and understanding David’s and Cynthia’s concerns around the industry allows us to prioritize and focus on where we want to bring regulatory change over time.”
It’s an opportunity, he suggests, to collaborate on “evolving regulations in our industry, for both boutique and other wineries.” And Enns agrees.
“It’s an area where Cynthia and I can kick in. If we have the muscle from Arterra and Jay behind us, we can attract the attention from the regulators, seriously, globally…”
So what lies ahead?
Says Enns: “ Business as usual is the mantra.”
And as for production levels? “There’s no reason for it to dramatically change, although it’s natural to have some growth to meet the demand… “
As to how that growth plays out, says Wright: “We’re in discussions now. How do we continue to leverage their vision for growth in the future? As a company we’re back in investing in vineyards again and expanding our capacity for quality wines. So the question is: How do we do that so David has the opportunity to set the pace at a level that makes sense for the quality of wines he’s got?”
Enns says: “There’s some really easy low hanging fruit—like separating red wine making from white wine making. Two different presses, two different facilities. That gives us breathing room.”
“One super motivator to partner with these guys is the quality of vineyards that they have,” says Wright. It’s all about the vineyard. That’s where it starts. And not just great vineyards but how you care and nurture those vineyards.”
“We live in a vineyard, we’re staying on the Naramata Bench,” says Enns.
“Think of it this way: Yes we sold the company. No I’m not going to Tahiti. And yes, I’ve reinvested in the community already…”
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