January 23, 2017

Earl Brown & Sons, the largest grower and packer of apples in the state of Oregon, has been acquired by Washington State-based fruit company, Foreman Fruit Company, for an undisclosed amount.

Under the terms of the deal, Earl Brown & Sons will retain its name, and the Brown family will remain in place to manage the operation that includes 1,000 acres of apple orchards and 115 acres of wine grapes.

Since its founding 40 years ago, Earl Brown & Sons has spun off a variety of businesses including the Watermill Winery in Milton—Freewater, Oregon, and Blue Mountain Cider, which was not included in the sale transaction. With the capital gained through the deal, the company plans to expand its reach into additional niche markets.

Foreman Fruit is providing additional capital to fund the leasing of more land and the development of another 60 acres of apples and 10 acres of grapes. Currently Earl Brown & Sons packages between 850,000 and one million boxes of fresh Honeycrisp, Red Delicious, Golden Delicious, Granny Smith, Fuji, and Lady Alice apples per year, reports the East Oregonian, and its Watermill Winery has annual sales of approximately 3,500 cases.

“They’ve created a number of businesses, and a number of very excellent orchards and vineyards,” said Alan Groff, president and CEO of Foreman Fruit Company. “There’s a nice intersection of our capabilities.”

Although still in the early stages of integrating the wine business, Foreman Fruit believes that the venture holds significant, nascent potential for growth.

“I think this is really great wine that is, perhaps, undersold,” Groff told the East Oregonian.

Land of Apples

Apples are mainly grown in three regions in the state of Oregon – the Willamette Valley, the Mid-Columbia Valley, and the Milton-Freewater area, where Earl Brown & Sons is located, according to some of the latest data from the Department of Horticulture at Oregon State University. Acreage in 2010 totaled 6,200 acres and the industry saw a farmgate value of $38 million.

Oregon ranks in the top 10 apple production states in the U.S. according to the state’s Office of Economic Analysis, accounting for between 1.2 and 1.4 percent of the country’s total output. Washington State, however, dominates the sector. In 2013 the U.S.’s apple exports held a value of $1.2 billion, with Washington accounting for 75 percent of this total and Oregon, only 0.4 percent.

One of the temporary issues that might be hindering growth in the state’s apple sector may be a shift occurring in the varieties that are being grown. For years the Honeycrisp variety was a market leader. However, certain traits of the variety have led to producers and consumers trending in another direction. Although the Honeycrisp has offered a level of crispness, juiciness, and the attractiveness of a premium product, the New York Times states there are other issues, including its inability to withstand long periods of storage, inconsistent flavor, and difficulty in growing that are taking the shine off the variety.

Part of the shift across orchards in the U.S. Northwest is also seemingly connected to the rising popularity of cider and stronger demand for certain apple varieties from craft brewers.

“We’re on the cusp of something that’s really going to take off,” Brad Sleeper, an orchardist in the Coast Range foothills above Oregon’s Haag Lake who produces 40 varieties of cider apples, told Capital Press. “These new cideries are all going to need apples.”

Cider production has been popular across Europe for centuries, where the industry has developed the high-tannin varieties of apples that produce the most sought-after ciders. This attention to detail is moving into the major apple producing regions of the U.S. where craft brewing of ciders is taking off.

“The region is emerging as a national leader in craft cider production and our cider culture is clearly being established. However, in order for our industry to be a fully sustainable cider region, we need a reliable source of locally grown cider apples,” Sherrye Wyatt with the NW Cider Association told Capital Press.

And Wine…

But, despite the potential for growth that the apple industry presents in the U.S. Northwest, the acquisition of an Oregon winery may prove just as profitable for Foreman Fruit, as winery properties in the state are increasingly on the radar of both investors and large-scale producers.

Wine production in Oregon increased from 1.6 million cases in 2004 to 2.8 million cases by 2014 according to the Oregon Wine Board, making the state the third largest producer in the U.S.

“Oregon wine is compelling and thought-provoking,” Stacey Gibson, wine director and general manager of The Woodsman Tavern in Portland, Oregon told Market Watch. “Every Pinot Noir reflects its vintage and vineyard, and Oregon’s cooler climate produces excellent acidity, even in a ripe vintage.”

Wine production took hold in the Willamette Valley in Oregon more than half a century ago, and although regions like Napa Valley still generally commandeer people’s perception of top wine regions, the Willamette Valley was named the Top Wine Region of 2016 by Wine Enthusiast Magazine.

“Just as New Zealand is known for Sauvignon Blanc and Argentina is known for Malbec, Oregon is known for Pinot Noir,” Precept Wine CEO Andrew Browne told Market Watch. “Oregon has carved a niche, and that focus helps it get onto wine lists and retail shelves.”

Winery purchases in the region this year include Jackson Family Wines’ acquisition of Penner-Ash Wine Cellars and WillaKensie Estate, and Crimson Wine Group’s purchase of Seven Hills Winery according to Great Northwest Wine. Meanwhile, Bacchus Capital Management has backed both DeLille Cellars and Dobbes Family Estate, and acquired the historic Panther Creek Cellars.

Other purchases in recent years include Gallo’s acquisition of Columbia Winery and Covey Run, Foley Family Wines’ purchase of Four Graces, and Maison Louis Jadot’s acquisition of Resonance Vineyard.

-Lynda Kiernan

Lynda Kiernan is Editor with GAI Media and daily contributor to GAI News. If you would like to submit a contribution for consideration please contact Ms. Kiernan at lkiernan@globalaginvesting.com