Disengaging 1 | Islands

Disengaging 1 | Islands

by | 'May 4, 2017' | Disengaging | 0 comments

Peter Cannon

The mist is rising over the vineyards and I feel like I’m on an island in the clouds as I look out the windows of my tower office here at the winery. Nothing is more beautiful to me than the sight of grapevines in their orderly rows on the hillsides below my window, appearing and disappearing as the breeze blows the fog across the ridge. The winery has been my favorite place since my dad and I built it back in 1986. But today, I feel like an island myself, isolated from my family and totally at sea. Cannon Bridge Winery was our dream, and now that dream is coming true, but what is our success going to cost us? My sister Joyce, her children, my own adopted children—it seems everyone is angry or turning a cold shoulder on me.

I don’t know whether to fight, or run, or just keep my head down and ignore it. Here we are, headed toward our 28th harvest of grapes on Cannon Bridge land—exceptionally high quality cuttings that took all our combined knowledge and connections to find and propagate into the beautiful vines we have today. We grafted the delicate European vines onto our sturdy common American rootstock, tended them like family, and prayed. We knew we could make the finest wine in the region with these varieties, and our award in 2007 really put us on the map.

This year, Cannon Bridge’s own production is finally substantial enough that we won’t need to bring in grapes from any other source—not even our family grape-growing business, Cannon Springs Farm. I should be elated, but all I do is worry about what Joyce, and my niece and nephew, Grace and Matthew, will say to me when they see me. They are having a terrible year. On the one hand, I feel bad for them, but on the other, when I’m under the gun and looking at the debt my wife and I took on, and what a long road is ahead of us, I think, “Well, welcome to the club.”

I loved my dad, curmudgeon that he was. Pete Cannon—a legend in these parts. He taught me everything I know about growing grapes, and he and I had the same dream for the wines we could produce from this rocky, jagged ridge here in Mendocino County. But damn, how I wish he hadn’t just gone ahead with his will without asking Joyce and me. One word. One word. “Bloodline.” And then that one phrase he always said: “Work to own.” Did he stop to think about what this would do to all of us? If we had known what he was planning, maybe we could have talked with him, maybe help him see the implications of his ideas. If we had only known in 2002 how this all would turn out.

Or maybe it wasn’t just the will. Maybe when I left Cannon Springs Farm to start the winery—leaving Joyce to run the increasingly complex grape growing business on her own, most of the time—I frayed the line between us. When she started opposing me at Cannon Bridge board meetings, it got a lot more frayed.

I need to remember to talk with Amanda Owen Cooper about this at the next board meeting. I wonder whether her family ever went through something like this.

Joyce Cannon Portman

The siege continues. I feel like our grape-growing business, Cannon Springs Farm, is getting attacked from all sides. We’ve been farming this land since the 1880’s (when our great-great-grandfather decided he had had enough of mining for gold) and I’m going to need every bit of that knowledge we’ve gleaned over a century and a half to get through this harvest. Crown gall and pest levels we haven’t seen before. Thank the lord “Farm” is a misnomer and we actually have multiple vineyards in Mendocino and Lake counties growing a handful of varieties—the differentiation certainly helps. But with Cannon Bridge growing all its own grapes now, and our biggest customers buying more Central Valley crop, our customer base is changing. We may have to sell down market this year, and lose a lot of margin. It’s like the 1970s all over again.

To survive this trend, I think we’re going to need to expand our geographic footprint. But how can we afford to buy more land or even rent it? Dad pulled so much money out of Cannon Springs Farm to make low interest rate loans to Cannon Bridge Winery. Between the sweetheart interest rate and the fact that Dad structured the deal so that Peter got 80% of the stock in the winery when Dad died, it was a lousy deal for the Farm. “Work to own,” Dad used to say. Well, what the heck did he think I was doing? And Grace? And Matthew?

Grace Lear

Today is one of those days I loathe—I had to meet with everyone on my staff here at Clear Lake to do reviews, go over the benefit plans, and try to soft-sell the problem that there weren’t any bonuses last year…again. I’ve told Mom that we need to figure out better compensation packages for our employees, but she says her hands are tied—“Grandpa Pete divided the stock; our family got the bad end of the deal.” And now that my cousin, Mia, is working with us while she takes a gap year before college, Mom adds that we’re certainly not transferring more to Peter’s side of the family. ”It’s been a terrible year,” she’ll say. “And we probably won’t make much money given the way the harvest is shaping up and the fact that Uncle Peter’s winery, Cannon Bridge, has gone back on his promise and won’t buy our grapes.” I’ve pointed out that my division, which grows in Lake County, is doing pretty well. But that doesn’t really line up with Mom’s view of things. Easier to keep my head down and just grow good grapes. And help Matthew.

My brother Matthew runs the Potter Valley division of Cannon Springs Farm, in Mendocino County. He’s definitely got more challenges than I do, because two of his varieties are either out of favor or dying from crown gall. He’s doing the tough job of tearing down and retraining the damaged trunks, but it will be years before the new vines produce. And what is he going to do with all that Muscat production that Uncle Peter told him he’d buy—but then walked away from? I think Mom had this idea that Uncle Peter would always buy grapes for Cannon Bridge Winery from Cannon Springs, but it turns out she was wrong. Seems whatever his side of the family wants or needs, they get. He and Jacob together own half our business, but they only act to benefit their own.

Family Business Analysis:

Thoughts on Family Dynamics – Governance – Strategy

Welcome to Disengaging, a regular series in our online magazine, MoreAtStake.com. Disengaging tells the story of the Cannon family and their businesses: Cannon Springs Farm, which grows wine grapes in Lake County and Mendocino County; and Cannon Bridge Winery, which makes wine in Mendocino County. You can find a family tree and brief history of the businesses and the family, here.  If you’re not already a subscriber to MoreAtStake.com, please sign up here—it’s free, and we won’t sell your information.

As we meet Peter Cannon and his sister, Joyce Cannon Portman, we find that all is not well in wine country. Peter is concerned about his own business, Cannon Bridge Winery, and about the family business, Cannon Springs Farm, which Joyce has run since the death of their father, Pete Sr. Peter’s and Joyce’s comments both reveal an undercurrent of sniping and blame, driven by Joyce’s sense that Cannon Bridge Winery is succeeding at Cannon Springs Farm’s expense. The family still sees itself as one unit, but there are cracks beginning to show between Peter’s family and Joyce’s. Peter’s adopted daughter Mia is working for Cannon Springs during her gap year, and is finding her aunt a challenge to deal with.

For the Cannons, family disagreements are magnified by the financial problems that Cannon Springs Farm is experiencing, and by Pete Sr.’s will, which left his shares of the two businesses unequally between Peter, Joyce, and their respective children. Every episode of Disengaging includes commentary about family dynamics, governance, and business strategy, illustrating how these different aspects of day-to-day business dealings interact to heighten conflict in the Cannons’ family-business system. We can see here that what seems like a personal dispute between Joyce and Peter—“I am mad at you because you aren’t buying our grapes”—may be as much about Joyce’s ongoing frustration over the perceived unfairness of Pete Sr.’s will, or the business risk Pete Sr. took on when he decided to mortgage Cannon Springs Farm to fund Cannon Bridge Winery back in the 1980s, as it is about the grapes. In family businesses, attitudes and assumptions about business governance and strategy mix with personal issues over time, affecting the family circle as well as the ownership and business circles.  (For a short primer on the Three Circle Model and how it can help explain conflict in family business systems, check out our video here).

We hope you’ll join us for future episodes, as we watch and talk about how the Cannon family navigates their unique challenges—challenges that will nonetheless seem very familiar to family business owners and their advisors.