If ever there were an industry that lends itself to family ownership, it’s the wine business. At least that is the thinking of the Mariani family, owners of Banfi Vintners, importers and producers of wines from around the world.
“Wine is not a short-term business,” says Banfi co-CEO Cristina Mariani-May. “It requires patience, which is something family ownership brings. Also, a lot of our wholesalers and leading producers around the world are family-run, too, and families working with other families carries a lot of weight.”
The company, based on Long Island, N.Y., and founded in 1919, is well into a deliberate, step-by-step transition to the third generation. The Marianis have worked with a family business consultant for more than ten years to ensure their enterprise remains under family ownership and management.
Cristina, 42, and her cousin James Mariani, 48, currently serve as co-CEOs in an arrangement that mirrors the team leadership provided by their fathers. Second-generation members John Mariani Jr., 81 (Cristina’s father), and Harry Mariani, 76 (James’s father), still have active roles as chairman emeritus and president emeritus, -respectively.
The co-CEO arrangement was developed through the family’s work with the Family Business Consulting Group. It is but one of many manifestations of the process the Mariani family has undergone to address transition issues, governance and even operations. The family also works with Partners Consulting in Milan, Italy, since the company’s Castello Banfi vineyard estate in Montalcino, Tuscany, is an important profit center as well as a great source of family pride. “The two teams know each other very well,” says Cristina. “They work in unison so we can make sure that strategically, managerially, and organizationally, we are aligned in all of our businesses.”
Multiple market segments
Banfi’s headquarters, a 60-room manor that once served as a country retreat for members of the Vanderbilt family in Old Brookville, N.Y., underscores the company’s devotion to longevity. It’s filled with museum-quality furnishings and artwork. A 12th-century Tuscan table and 17th-century George Brooke grandfather clock grace the library, which stretches across the building’s west wing.
The $358 million company is one of America’s leading wine importers. It jumped to prominence in 1969 when it introduced Riunite Lambrusco, a light frizzante varietal that struck a spark with Americans weaned on soft drinks and fruit juices. Marketed through variations on the slogan, “Riunite on ice … that’s nice!,” it became the country’s leading imported wine for 26 years.
That success was quickly followed by distribution deals for Chilean wines like Frontera and Walnut Crest, currently the best-selling wine brands in the portfolio from Concha y Toro of Chile, which sold 2.4 million cases in the U.S. in 2012. Two million cases of the Riunite labels were sold last year. In 2011, Banfi acquired Pacific Rim Winemakers, a deal that gave the company small vineyards in Washington and Oregon.
But popular wines are only part of the Banfi story. The company also imports top luxury wines like Brunello di Montalcinos: Poggio all’Oro Brunello di Montalcino Riserva, which retails for $150.
The family also produces wines of its own at both foreign and domestic vineyards. Castello Banfi, established in 1978, was named “International Winery of the Year” at the International Enological Concourse in Verona. Overlooking the vineyards is a medieval fortress meticulously restored as a hospitality center that boasts a glass museum, an enoteca and two restaurants. The family built a 14-room boutique hotel on the property. Among other interests in Italy, Banfi tends two vineyard estates in Piedmont. About one-third of total revenues come from Italy, the rest from the U.S. importing operations.
Growing with the industry
Banfi was founded by John Mariani Sr., an American of Italian descent who established the company in New York just a year before Prohibition. For the first 13 years, he kept it alive by importing Italian specialties and spices as well as manufacturing medicinal bitters, an alcohol product permitted under the law. When Prohibition was repealed, Mariani stuck deals with several Italian vintners to bring their products to the U.S. The company was named after his aunt, Teodolinda Banfi, chief of the household staff of Pope Pius XI, with whom he and his mother lived during much of his childhood.
John Sr. and his wife, Eva, had three children, all of whom joined the family business as adults. Their daughter, Joan, was the first, although she left the company five years later when she married. John Jr. came on board in 1956 after college and a two-year stint in the army. Harry, the youngest, joined the staff a week after graduating from college in 1959. John Sr. turned the firm over to his sons in 1963 and passed away in 1972. “If my father and uncle saw further than my grandfather, it was because they stood on his shoulders,” says James, Harry’s son. “They brought it to a new level, and a lot of that was concurrent with the growth of the wine industry in America.”
Today, Banfi has about 500 employees (150 in the U.S.). Included among them are numerous third-generation family members in addition to the two co-CEOs. These include James’s sister Virginia and his brother-in-law Marc Goodrich (husband of his other sister, Katie); as well as Joan’s sons, Bob and Bill Whiting. John’s brother-in-law, Neill Trimble, is vice president of advertising. Ownership remains under the control of John and Harry, although it is being passed along through various tax-sensitive trusts.
“In the long term,” Cristina says, “we’re trying to leave the business stronger than when we entered it. The goal is to pass it along to the next generation.” She joined the company in 1993 and James joined in 1991, although both grew up in the business. They were named co-CEOs in 2008.
Long before then, explains Harry, “There was discussion about going public, and that was quickly sidestepped by both of us. But we had to discuss it with the third generation and they, too, quickly squashed that idea. Keeping it a family company helps keep that pride of ownership, without an obligation to outside shareholders. It would have been a diversion that would have made us run the company a lot differently, and not for the better.”
Enter the consultants
One of the earliest decisions Cristina and James made was to bring in a consulting firm to help iron out the difficulties. “We were too busy making wine, importing wine and selling wine to sit down and think about things like the difference between the relationships of brothers and cousins,” James explains. “We needed someone to facilitate this process. We were suffering some frustrations, but they helped us see that those frustrations are natural and our intentions all aligned.”
Cristina says she and James were experiencing typical youthful impatience with the pace at which control was being transferred but realized after working with the consultants that most of their frustrations stemmed from poor communications.
Steve McClure, principal of the Family Business Consulting Group, led the team that worked with the Marianis. “We first met with all of the family members who were actively involved in the business,” McClure recalls. “We spent a week with them, concentrating mostly on Cristina and James with the idea that they were going to build the plan for their own roles as well as for the governance function. The younger generation prepared a plan and presented it to the senior generation. Our role was to facilitate it and show them what some other family businesses had done in similar circumstances.”
The family found that process very helpful. “I found out very quickly that we did not have to reinvent the wheel in terms of family business,” Harry says. “Almost all of the problems that we faced were faced before by other family companies, and we could gain perspective from their experience.”
McClure says it’s not unusual for consultants to work with a client like the Mariani family for well over a decade. “Their needs change—it goes from planning for succession to multiple shareholders getting on the same page,” McClure says. For the Marianis, he says, “We helped them develop a board of advisers and create a plan for managing and adjusting their roles over time. It was a multi-year plan for them [Cristina and John] to gradually take over day-to-day operations of the business.”
The transition work in progress
At present, the co-CEOs, along with three outside members, serve on a newly constituted board of advisers that meets quarterly. “We bring it bigger strategic topics and air some of our concerns,” Cristina says. The independent members, who serve one-year terms, have varied backgrounds in M&A, wealth management and marketing. “We look forward to expanding the board to round out its expertise,” Cristina says. The outside members were recruited through wine industry networking.
One of the major decisions made in the transfer of operating control was to name co-CEOs. As McClure explains it, “The co-CEO arrangement was a facilitated option. The shared leadership directly replaced the divided areas of responsibility that Harry and John had. They [Cristina and James] have made adjustments around their skills and capabilities that don’t necessarily follow the job descriptions you would pull off the shelf for somebody else. They’ve tailored it for their business needs as well as their individual needs.”
Initially, James and Cristina divided responsibilities basically along geographic lines. He managed affairs in the U.S. while she devoted her time and energy to operations in Italy. “Now there is more crossover,” James says, “so we have to figure out, especially with our executive time, how we work with more overlap in responsibilities.”
The overlap is intentional, although each gravitates toward the areas in which he or she feels most adept. James leans a bit more toward sales and distribution while Cristina spends more time on marketing and brand building.
“We’ve really learned to work together,” Cristina says. “It’s not one person taking over one responsibility and the other not. We share almost everything with the other partner. It’s high-maintenance, but it works for us.”
Their personalities play a role, too. “We complement each other,” Cristina notes. “I might be a little more impulsive, while he really likes to think things through and be a bit more conservative in his approach. Bringing the two of us together makes a nice mix.”
The co-CEO arrangement isn’t too far removed from the way John and Harry managed the company as a sibling team, although they had more traditional titles of chairman and president, respectively. When it was first proposed, John told James and Cristina that open, persistent communication between them would be the key to making it work.
“The co-CEO arrangement was challenging at first, due to the human desire to succeed,” John points out, “but logic prevailed. Seldom does an individual acquire the talent to manage all business facets. Both have combined their talents to create a unique synergy.”
The fathers also stressed the need for the co-CEOs to work in unison. Essentially, each has veto power in the event of a decision deadlock, although Cristina says they go to great lengths to avoid it. “Our management team is our first sounding board,” she explains. “If we can’t get a clear picture from that, we usually call the consultants and bring it to the advisory board. If we still can’t resolve the issue, we decide to not move on it. A decision not to act is still a decision.”
The family also works with the consultants on communication with family members who are not active in the company, an important constituency as the number of cousins (six) and grandchildren (13) grows. “Once a year we have family shareholder meetings,” Cristina says. “It includes the cousins and siblings who are not working in the business. We bring them up to speed on what’s happening.”
In 2012, the Marianis decided they need a three-year strategic plan, so they brought in an additional consultant from the Family Business Consulting Group. “One [consultant] focuses on the family business aspects like transitions, board planning and keeping us in line with our roles. The other helps us with strategic work,” Cristina explains. “Selling fine wines and selling popular brands are two different businesses. The consultant helps us identify our strengths and weaknesses and figure out our execution.”
Interim stage
Even after all these years working on it, the transition to the third generation is not yet complete. “Passing the business from the second to the third generation isn’t an event like a baton pass,” James says. “It’s more of a process.” His father, Harry, still comes the office every day while his uncle, John, checks in frequently while indulging his passion for travel. “They empowered themselves during the transition period to be able to come together and say ‘no’ to something if they feel it is not good for the business,” James explains. “If they feel we are going in a direction they’re not comfortable with, they can come in and talk about it and, if need be, say ‘no.’ With that right in mind, they are comfortable delegating 99.9% of the decisions to us.”
John and Harry try not to get involved in the nitty-gritty of day-to-day decisions. “Harry and I combine 125 years of experience, which has transformed into wisdom,” John observes. “We are more akin to a board of directors, guided by logic. We advise and consent.”
“John and I have to be on the same page to veto something the co-CEOs desire to have,” Harry adds. “The family consultant is a big help if there is a stalemate, but generally we are able to work out the decisions.”
There are other issues still being resolved, and this arrangement won’t last forever, James says. “We know that subsequent generations will need a more formal board of directors,” he acknowledges. “We also had to develop policies for entry into the business by future generations. Cristina and I had to take a leadership role in promoting those.”
James and Cristina have four children between them, ranging in age from six to 14. The fourth generation also includes nine other cousins. The key to the work the Marianis are doing today, James says, is “to balance the development of formal management systems with the culture and values we want to maintain as a family business.”
Dave Donelson is a business writer in West Harrison, N.Y., and the author of the Dynamic Manager Guides and Handbooks.
Copyright 2013 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permssion from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.