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California cult-wine makers pursue label of exclusivity

Michael Browne, co-founder and winemaker of Kosta Browne Winery in Sonoma, Calif. Kosta Browne, which makes pinot noir, has become one of the hottest wineries among investment bankers, venture capitalists and enthusiasts.
Michael Browne, co-founder and winemaker of Kosta Browne Winery in Sonoma, Calif. Kosta Browne, which makes pinot noir, has become one of the hottest wineries among investment bankers, venture capitalists and enthusiasts.
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By Edward Robinson
Saturday, January 29, 2011; 5:15 PM

On a warm autumn afternoon, a steel-framed concrete warehouse north of San Francisco is inundated with grapes. Forklifts bearing fruit from the nearby Russian River Valley deliver their loads to a slow-moving conveyor belt.

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Flanking both sides, winemaking interns pick out stems and sunburned grapes as they groove to hip-hop music thumping from loudspeakers.

It's the crush at Kosta Browne Winery, a Sonoma County maker of pinot noir that's become one of the hottest wineries among investment bankers, venture capitalists and enthusiasts. Michael Browne, Kosta Browne's co-founder and winemaker, grabs a cluster from a tub and eats some of the grapes. They burst with berry flavor, and the seeds are nutty, not bitter.

"They're popping; they're ripe," shouts Browne, 42, a ruddy-faced man with Elvis-style sideburns. "They're beautiful."

William Price, a co-founder of buyout firm TPG Capital in Fort Worth, would be happy to hear that. Price, whose Vincraft Group owns a majority stake in Kosta Browne, is betting on the next generation of California cult-wine makers.

These ultra-premium wineries shun retailers and make it hard to buy their wines, building a following through word of mouth. Cult pioneers - Colgin Cellars, Harlan Estate and Screaming Eagle - have reshaped the economics of the high-end market by fetching Bordeaux-caliber prices at auction.

The new crop of wineries is reaching for cult status in an industry in which it can take decades to turn a profit. For years, Browne and his partner, Dan Kosta, scraped together money every harvest to buy grapes and lease space and equipment at nearby wineries to make pinot.

They toiled at night as waiters and bartenders so they could devote their days to the exploitation of the grape. Bedeviled by rogue yeasts and other oenological disasters, the two men at times thought they might lose their sanity and their business, Browne says.

"The wine business is like a step up from a dot-com," he says. "It's very shaky, and it takes so much longer to make money than other businesses."

Even so, for all of the angst about the economy in the real world, the good times are rolling in the rarefied domain of high-end wine. Buoyed by rising demand from flush Asian and Latin collectors, the Liv-ex Fine Wine 100 Index, which tracks the price movement of the world's most-sought-after wines, soared 39 percent in 12 months that ended Nov. 30.

Astronomical prices

The world's top auction houses sold an all-time high of $252 million in wines in 2010 through mid-December, with California reds drawing record prices.

Six bottles of Harlan Estate's 1997 vintage from the Napa Valley sold for $7,170 - 30 percent higher than the top estimate of their value - at an October auction.


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