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California Wineries Rate the Future

Winery managers give marketing advice in impromptu panel at Wine Industry Financial Symposium

by Jim Gordon
Wine Industry Financial Symposium
Winery general managers Steve Spadarotto, Bill Leigon, Russell Joy and Peter Mondavi (from left) explained their plans for increasing business through marketing Tuesday at the Wine Industry Financial Symposium in Napa.
Napa, Calif.—A panel discussion organized at the last minute due to the cancellation of a keynote speaker yielded some thoughtful marketing insights for vintners at the Wine Industry Financial Symposium on Tuesday. David Dearie, the CEO of Treasury Wine Estates for two years, withdrew as a speaker after his ouster was made known Sunday, so symposium founders David Freed and Kathy Archer called on four experienced winery GMs to share their plans for the future.

The four panelists, from small to medium-sized wineries, shared many of the same concerns expressed in other talks during the proceedings at the Napa Valley Marriott on Monday and Tuesday, such as a temporary oversupply of grapes and undersupply of tank space in wineries during this harvest season, as well as the long-term prospect of an undersupply of California grapes to fill the most popular brands bottled by California wineries.

“We, like many here, are principally concerned with supply, and continuing to improve quality,” said Steve Spadarotto, vice president and general manager of Stag’s Leap Wine Cellars in Napa, Calif. He said the future appeared a little ominous, “with the big wine companies buying up land and excluding the rest of us.” Yet when asked by moderator Robert Smiley, director of the Graduate School of Management at the University of California, Davis, to rate his outlook for the future of the wine industry on a scale of 1 to 10, with 10 being highest, Spadarotto rated it a nine. The other panelists chose eight or nine also.

Reaching young consumers
On the marketing side, Stag’s Leap Wine Cellars is different from most wineries, Spadarotto said, since it has been famous in wine circles since the Judgment of Paris Tasting in 1976. The winery’s goal is to sustain and improve its historical image of high quality, yet it needs to reach young consumers with that message, too, he said. Using social media like Facebook and Twitter is an important part of Stag’s Leap’s approach, and the winery has hired young people to manage it, he said. “I am surprised at the brand’s recognition, particularly with younger people. Their knowledge level is astonishingly high about the Judgment of Paris, for instance. We believe that if you stay true to your quality focus,” that is the best strategy for the long term.

Bill Leigon, a veteran of J. Lohr and Hahn wineries, steered the growth of Rex Goliath and Cycles Gladiator into major popular brands. Now president of Jamieson Ranch Vineyards in Napa, Calif., he rated the future an eight or nine but said he felt two subtle concerns. One is that wineries are afraid of talking about the technology they use, even though technology has been an important part of the California wine industry’s success for decades. He recalled that J. Lohr was one of the first users of reverse osmosis and other tools to improve wine quality in the mid-1980s. “All of these things help us make better wine,” he said, admitting, “We are bred to hide technology. When I first started in the business someone warned me that in the wine industry we eat our young.”

Leigon’s second subtle concern is that California has done such a great job of promoting varietal wines that everyone knows Chardonnay and Cabernet Sauvignon but they don’t know the California wine-growing regions. He recalled a French vintner telling him in the 1980s that he was so grateful that California had popularized the names of all the French grapes, because it helped build France’s reputation in America.

Branding regions
At several points during the conference speakers referred to the current $12 million per acre valuation of vineyard land in the Burgundy appellation of Batard-Montrachet. Leigon said, “What’s so bad about brand Batard Montrachet? If we didn’t varietally label our wines, look at what we’d have. We’d have brand Napa, brand Sonoma. What are we doing about that?”

Now marketing a new wine brand, Leigon said Jamieson is competing for limited shelf space without a history such as Stag’s Leap’s. The winery is approaching millennials as if it were a musical artist. He said millennials understand that an artist’s music is always evolving, dynamic, and they value that.

Several speakers joked about the proliferation of “pop brands” from the major wineries that have found sales success in very short time spans. Peter Mondavi of Charles Krug Winery, an 18th century pioneer in Napa Valley, said his family company is going the other way. It sold 27 SKUs in 1968, he noted, and today it has just reduced its line from eight to seven wines. “We want to solidify our position in a niche market,” he said.

Russell Joy, president of Patz & Hall Wine Co. of Napa, Calif., said when he looks to the future he realizes that in five to 10 years everyone will be five to 10 years older, and asked what wineries are doing to mentor their younger people to take over. A producer of Chardonnay and Pinot Noir from multiple single-vineyard sources, Patz & Hall is now 25 years old.

Joy says that today’s sales and marketing landscape has evolved dramatically from 10 years ago. Then, he said, a vintner could invite local sommeliers to a tasting when visiting their market and 20 would arrive. Now, he said, it is two. “We need to change the way we lure buyers.” Patz & Hall’s approach is to convey authenticity by sticking with the game plan. “It will always be Chardonnay and Pinot Noir,” he said.

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Wine Industry Metrics
Off-Premise Sales » Month   12 Months  
April 2015 $627 million
$8,028 million
April 2014 $595 million $7,623 million
Direct-to-Consumer Shipments » Month   12 Months  
April 2015 $184 million
$1,890 million
April 2014 $157 million $1,649 million
Winery Job Index » Month   12 Months  
April 2015 406
April 2014 302 212
MORE » Released on 05.15.2015


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