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Foley expanding wine empire with recent acquisitions

Bill Foley bought Chalk Hill Winery back in 2010. Foley is acquiring vineyards and wineries at a quick pace.

(Kent Porter / Press Democrat)
Published: Saturday, January 12, 2013 at 3:12 p.m.
Last Modified: Monday, January 14, 2013 at 2:28 p.m.

When a winery goes up for sale in Sonoma County, Bill Foley is the first one brokers call.

Facts

BUYING SPREE

Foley Family Wines has acquired 16wineries since its founder, Bill Foley, entered the wine business in 1996. More than half were purchased within the past three years.

1996: Lincourt Vineyards, Santa Barbara County
1998: Foley Estates Vineyard and Winery, Santa Barbara County
2007: Firestone Vineyard, Santa Barbara County; Altvs, Napa County; Merus, Napa County
2008: Sebastiani Vineyards and Winery, Sonoma County; Three Rivers Winery, Washington State
2009: Kuleto Estate, Napa County; Clifford Bay Estate Winery, New Zealand; Vavasour, New Zealand
2010: Chalk Hill Winery, Sonoma County; Eos Estate Winery, San Luis Obispo County
2011: Te Kairanga Wines, New Zealand
2012: Foley Johnson (previously Sawyer Cellars), Napa County; Lancaster Estate, Sonoma County; Langtry Estate & Vineyards, Lake County

Foley, who made his fortune in the title insurance industry, says he has poured more than $200 million of his own money into the wine business since buying his first winery in 1996. He now presides over a collection of 16 wineries from Alexander Valley to New Zealand, including four acquired in the past year alone, making him one of the most active buyers in Wine Country.

“Once I get into something, I go all in,” Foley said. “I just keep on going. I don't stop with just one little thing. I just keep trying to grow it and make it bigger and to keep on improving.”

Wine has become both a lifestyle and a strategic business opportunity for the 68-year-old insurance executive, who moved the base of his wine operations to Sonoma County in 2008. He now spends five months of the year at his home on the grounds of Chalk Hill Winery in the hills east of Windsor.

Colleagues and competitors say the former Air Force officer is both disciplined and decisive. He continually searches for wineries with untapped value and acts swiftly when he finds them to unlock their potential, consolidating back-office functions while giving creative license to winemakers and vineyard managers.

Foley has openly tried to emulate the late Jess Jackson, who built Jackson Family Wines into one of the world's largest wine companies before his death in 2011. Both men share similar traits, said Tim Matz, who worked as a senior executive under Jackson and Foley.

“They're very intelligent, visionary, and willing to take a risk,” said Matz, now managing director of Accolade Wines' North American operations. “And when a mistake is made, they just keep moving forward. They don't look back.”

But the self-described “serial acquirer” comes across as remarkably relaxed, quick to laugh and joke about his dogs, his Texas roots and his music preferences, which range from Italian opera singer Andrea Bocelli to pop star Taylor Swift.

On days when the weather is right, Foley enjoys walking along a three-mile path at Chalk Hill with his wife of 42 years, Carol, and their three dogs.

A cattle rancher who proudly traces his lineage to the Texas cowboys portrayed by actors Robert Duvall and Tommy Lee Jones in the classic TV miniseries “Lonesome Dove,” Foley clearly prefers Sonoma over Napa.

“Napa's interesting, but it's too congested,” Foley said recently while driving around the vineyards at Chalk Hill in his silver convertible Mercedes. “This is still country over here.”

Foley is viewed as an outsider by many in the wine industry, which he attributes to his busy schedule scouting target acquisitions.

“I really don't have much time,” Foley said. “I like to go out and have some dinner and talk to people, but I just haven't done it.”

During his visits to Sonoma County, he works 70 to 80 hours a week by his estimate. The remaining time is split among properties in Florida, New Zealand and Montana, where he owns high-end resorts and golf courses.

He enjoys playing golf and hanging out with wine industry brokers and other business executives who now live in Wine Country. He does make time for his closest friends, classmates from West Point, whom he's known since he entered the military academy in 1963.

“The older we've gotten, the closer we've gotten,” he said.

Foley graduated with an engineering degree from West Point and then served in the U.S. Air Force, where he attained the rank of captain. He planned to spend four days with 16 classmates in Santa Barbara this month.

During the Vietnam War, Foley lost 30 of 584 classmates, he recalled, a memory that drives his charitable giving to the Wounded Warrior Project. At Chalk Hill, he recently held a fundraiser for veterans returning from Afghanistan, which was attended by vets who had lost limbs or suffered from mental trauma.

“That was a real tear-jerker,” Foley said. “It's tough.”

After completing his military service stateside, Foley earned an MBA from Seattle University and a law degree in 1974 from University of Washington. He spent the next decade practicing corporate and real estate law in Phoenix, where he acquired a small title insurance company in 1984.

Over the next two decades, Foley led the company through a series of buyouts that created the largest title insurance company in the United States. Fidelity National Financial, which generates $5 billion in revenues annually, provides insurance that protects landowners from challenges to their ownership of a property.

Foley stepped down as CEO in 2007 but continues to serve as chairman of the company, which has an acquisitions arm that owns hundreds of steakhouses and restaurants, an auto parts manufacturer and a minority interest in WineDirect, a wine industry fulfillment, compliance and software business, to name a few.

Expanding into wine

Foley entered the wine business in 1996 with the acquisition of Lincourt Vineyards in Santa Barbara County, which he named after his daughters Lindsay and Courtney. He later established Foley Estates Vineyard in the Santa Rita Hills, and bought Merus, a cult cabernet sauvignon producer in Napa Valley, among others.

He expanded into Sonoma County in 2008, buying historic Sebastiani Vineyards and Winery in Sonoma, and moved management of the wine group to Sonoma County. With that acquisition, his business turned a corner financially, because he was able to consolidate the back-office functions across his wineries and realize more efficiency.

As the leader of a Fortune 500 company, Foley was surprised by the lack of business knowledge that he found in the wine industry.

“We had metrics we ran the business by, and we were very disciplined,” Foley said. “And when I got into the wine business, I found, a lot of times, it was people that wanted to have a good time. They didn't really quite understand their cost of goods, how to sell the wine, make a profit, how to establish their direct-to-consumer businesses.”

Foley is pleased with his current wine team. But he's been known to have high turnover among his senior executives.

He's demanding, he says, and needs people who can adjust to his company's fast growth. If his staff can keep up with him, they're rewarded. If not, he makes a change.

“My theory I've always had, in all the companies I've ever been involved with, is that if you allow mediocrity to survive in an organization, then increasingly everything becomes mediocre,” Foley said. “So we just don't allow it.”

In the acquisition stage, Foley taps a small, elite team of mergers and acquisitions executives from Fidelity National Financial to perform due diligence before he buys.

“They're a little like Delta Force,” said Mario Zepponi, co-owner and partner at Zepponi & Co., a mergers and acquisitions firm. “You have these special operations units that are so effective that they do the job of four or five people, because they're so exceptional, so talented.”

Once the sale is complete, Foley is quick to transfer responsibility to trusted associates.

“They're not only business associates, but friends,” Foley said.

Allure of wine

Foley did not enter the wine business until the age of 52, but has found it invigorating.

“It's not really work. I'm just kind of having a good time,” Foley said. “I'm fooling around trying to make decisions, trying to get things organized, trying to work problems out and then have a successful solution at the end of that problem-solving time.”

Owning wineries and their land gives him the chance to sit in on blending sessions with world-class vintners and roam the Chalk Hill vineyards with his chief viticulturist, learning what happens at every stage of the grape-growing process.

The business of wine, including dealing with distributors and negotiating the patchwork of laws that regulate alcohol sales, is enough of an intellectual challenge to keep him entertained.

“I do something for a while and I have to go do something else,” Foley said. “I have to keep the activity going in my life. And wine and vineyards, and buying other wineries and consolidating them, or buying vineyards and consolidating them, that's a lot of activity. So I'm not bored in this business. It's exciting every day.”

Even with annual revenues of about $100 million, he says his wine holdings are still not profitable from a tax standpoint.

That, in part, caused him to double-down on his investment in the wine industry. His acquisition spree — 16 wineries in 16 years — is designed to give Foley more clout with distributors that push wine out into stores and restaurants.

Foley aims to produce 2 million cases annually, nearly double his current size. Last year, the network of wineries under Foley Family Wines sold 1.15 million cases worldwide. About 825,000 cases were sold in the United States and the rest in Australia, New Zealand and the United Kingdom.

“I thought a million (cases) was enough, but it's not,” Foley said. “I need more influence with these distributors. ... You've got to have a lot of brands, and you've got to show them how they can make money off your products when they sell them.”

The finer things in life

Wine is not just a business for Foley. He makes time to enjoy the finer things in life, like an artfully prepared meal, a glass of wine, a good golf course, and friends to share in those pleasures.

In Sonoma County, he's eating and drinking the best the region has to offer, whether in restaurants or in the homes of culinarily gifted friends. At his home in Montana, he gets in a good workout every day.

“I go up there, lose weight, come back here, gain 20 pounds,” Foley said with a laugh. “Up 20, down 20.”

On the golf course, he displays an intense competitive streak, says longtime friend Ted Simpkins, who sold Lancaster Estate Winery in Healdsburg to Foley last year. He called Foley a “man's man,” adding “what you see is what you get.”

“He hates to lose,” Simpkins said.

Looking ahead, Foley still plans to expand his footprint in Napa and Sonoma, and is on the lookout for an Oregon winery and a hotel on Highway 29 in Napa. He's value-oriented, but “trying not to be cheap,” he said.

But he just passed on two wineries he was considering, he said.

“I passed on them because my wholesale guys and my infrastructure are ready to break,” Foley said. “We're slowing down. We have to digest what we've taken on here.”

To draw people to his network of wineries, resorts and golf courses, he is preparing to launch a membership program, called the Foley Food and Wine Society, which will reward his most loyal customers with discounts and access to exclusive experiences.

When the empire building is complete, Foley has a succession plan. Three of his four children, who range in age from 26 to 35, work in the wine industry. Daughter Courtney, 29, works as the Central Coast sales rep for Foley Family Wines and wants to be a winemaker. His son, Rob, 33, works at Chalk Hill and is interested in administrative and finance roles. His youngest son, Pat, 26, is on his way to New Zealand to get a masters degree in viticulture and enology.

They've logged overnight shifts in the vineyards, early morning distribution runs and stints in the tasting room.

“My kids work from the ground up,” Foley said. “They're not afraid to work, and they're not afraid to work for kind of slave wages,” he added with a laugh.

“Eventually, they will be running the business, which is great,” he said. “And they will know the business inside and out. I am very proud of them.”

(You can reach Staff Writer Cathy Bussewitz at 521-5276 or cathy.bussewitz@pressdemocrat.com.)

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