British beverage giant Diageo announced Monday that it has agreed to buy zinfandel specialist Rosenblum Cellars for $105 million.


The respected Alameda-based winery has a strong presence in Sonoma County, with a tasting room in Healdsburg and numerous wines made from local grapes, including Sonoma Valley, Alexander Valley and Rockpile.

The acquisition is aimed at strengthening Diageo's high-end wine portfolio, which is managed in Napa.

"The company currently does not have a brand primarily focused on zinfandel," Diageo said. "The addition of Rosenblum Cellars will immediately give it one of the most recognizable names in a booming category."

The sale is the latest example of global beverage companies beefing up their high-end wine portfolios through acquisitions. In December, Constellation Brands bought the five California wineries of Beam Wine Estates for $885 million.

Diageo is one of the world's largest spirits companies, owning brands such as Smirnoff vodka, Guinness stout and Johnnie Walker whiskey. Its wine portfolio is a relatively small portion of its total revenue, but includes powerhouse brands such as Beaulieu Vineyard and Sterling Vineyards in Napa.

In 2004, Diageo outbid Constellation Brands for the Napa-based luxury wine company Chalone Wine Group. The $186 million deal gave the company a presence in Sonoma County wines with Orogeny Russian River pinot noir, and Moon Mountain Vineyard and Dynamite Vineyards in the Sonoma Valley.

Since then, Diageo's Napa wine division, Diageo Chateau & Estate Wines, has remained relatively quiet. It showed some interest in the three wineries of the bankrupt Legacy Estates Group in 2005, but was outbid by Kendall-Jackson owner Jess Jackson. It was also reportedly interested in Beam.

The acquisition makes perfect sense for Diageo because it acquires fast-growing wines made from several regions of California, said Mario Zepponi, a Santa Rosa wine investment banker.

"That brand has very positive momentum," Zepponi said.

A Minnesota native and former veterinarian who moved to the Bay Area in 1970, Kent Rosenblum turned a passion for home winemaking into what became a serious business in 1978 when he and his wife Kathy founded Rosenblum Cellars.

The winery's first release was a single-vineyard zinfandel from the Sonoma Valley that won high praise. It opened its Alameda winery in 1987 and today produces about 190,000 cases a year. The winery doesn't own vineyards, but produces more than 40 different vintages sourced from growing regions around California, including 22 different zinfandels, according to the company's Web site.

"Our business model has been not to own any real estate or any vineyards and to just put everything into the wines," Rosenblum said Monday.

The winery has taken on a number of investors over the years to fund its growth, and today about 250 people own shares, Rosenblum said.

The investors didn't force a sale, he said. Rosenblum, 63, said his advisers convinced him the time was right to test the waters for a sale. It turned out that Diageo paid even more than his advisers estimated the winery would fetch, he said.

Rosenblum, who has agreed to stay on as winemaker, said Diageo promised the company would leave winemaking decisions up to him.

"It's about 98 percent in the bag, so I think it's looking pretty good," Rosenblum said. "Everyone seems pretty happy."

The winery is well known as one of the best zinfandel producers in the state, and is one of the "Three R's" that include Ravenswood and Ridge Vineyards, Zepponi said.

Medium-sized wineries often find it difficult to break through to the next level of production and distribution, Zepponi said. Many wineries between 100,000 and 200,000 cases find it difficult to grow their brands further because of the costs required to expand production and the challenges posed by consolidation among distributors, Zepponi said.

Diageo will be able to save the winery a significant amount of money through lower costs of things like glass and corks, and will probably also increase production and improve distribution of the wines around the nation, Zepponi said.

The transaction is expected to close by the end of March.

You can reach Staff Writer Kevin McCallum at 521-5207 or kevin.mccallum@pressdemocrat.com.