In a large Dutch oven, heat over medium-low heat and add the applewood smoked bacon slices. Cook until golden and crispy, about 5-7 minutes. Remove and let drain, reserving the drippings.

Toss the diced stew beef with all-purpose flour, salt, and black pepper until coated. Increase heat to medium-high and brown the beef in the bacon fat for 5-7 minutes per side. Remove and set aside.

Reduce heat to medium, add diced yellow onion, and sauté for 2-3 minutes until translucent. Stir in minced garlic and cook for an additional minute.

Stir in tomato paste, then add 1 cup of dry red wine, scraping up browned bits. Bring to a boil and simmer for 20 minutes until absorbed. Repeat with remaining wine.

Pour in beef broth, add thyme sprigs, bay leaf, pesto, and brown sugar. Bring to a gentle simmer over low heat and cook uncovered for 1 hour.

Add celery, carrots, and potatoes, stir and cover. Cook for another 20-25 minutes until vegetables are soft.

In a separate pan, melt unsalted butter over medium heat. Add sliced mushrooms, season with kosher salt, and cook until golden brown, about 10-15 minutes.

Incorporate sautéed mushrooms into the soup, stir well. Adjust consistency with more broth if needed, and season to taste.