BMO juices up US wine unit with new hiring, bets on industry recovery

By Nivedita Balu

TORONTO (Reuters) - Canada's Bank of Montreal is betting on a recovery in U.S. wine sales, juicing up the business it acquired through last year's $16-billion purchase of Bank of the West with more hiring and a focus on wealthy individuals, the unit's head said.

BMO sees opportunity as the $107-billion U.S. wine market slowly recovers after years of bumpy sales when temporary closures of restaurants and pubs during the pandemic wiped off millions in sales, resulting in surplus stock. High interest rates have also boosted borrowing costs.

"We are even more focused on being the finance source and the advisory source for wine transactions, for wineries buying and selling each other," said Adam Beak, who leads BMO's wine and spirits group in Napa, California, in an interview.

He did not provide details on the number of hires.

Beak, who previously headed the team at Bank of the West, said the lack of a strong U.S. capital markets team before the acquisition made it difficult to serve bigger clients seeking access to capital. He is betting on BMO's established mid-market advisory team and wealth-management business to sign up those clients for new services.

"We had kind of reached the ceiling with what we could do at Bank of the West. And this (acquisition) has just really opened up opportunities," Beak said.

A partnership with California-based merger-and-acquisition advisory Zepponi, which has advised wineries and vineyards in acquisitions by Constellation Brands and E. & J. Gallo Winery, gives BMO access to its high-profile clients.

BMO and Silicon Valley Bank are among the biggest advisors to the U.S. wine industry, industry experts said.

Beak said BMO's team was expanding its wealth-management products by focusing on makers of premium wine, which are typically smaller businesses owned by wealthy individuals.

Its competitor, Silicon Valley Bank is focusing on its roughly 400 high-profile wine industry clients, offering them guidance and standard commercial banking products.

"Ironically, our expertise has more value in down markets, so we are still growing and adding substantial new business," said Rob McMillan, founder of SVB's premium wine division, which is now part of First Citizens Bancshare.

The banks' 2024 wine industry reports had diverging views. SVB noted the industry's need for production efficiencies and better marketing, while BMO said 71% of U.S. wineries were forecasting revenue growth this year.

"It's not a good time yet, but we think that we may have found the bottom, and recovery is starting," said Erik McLaughlin, CEO at wine industry consultancy METIS, referring to the sector's medium-priced bottles.

(Reporting by Nivedita Balu in Toronto; Editing by Rod Nickel)