The five largest California wineries shipped more than two thirds of all US wine in 2012, according to industry estimates. John Gillespie, principal of Wine Opinions, a research and consulting firm, points out that this gives the Big Five enormous power.” They have the power to create a national brand and take it to market. If it doesn’t work, they can go back and ‘tinker in the lab’ and try again,” he said.
Brand extension and brand development have become the name of the wine game in the US, as Gillespie points out. Donna Hood Crecca, senior director at Technomic, a research and consulting firm for food and related products, said that about 240 new wine brands went on the market last year in the US, more than half from domestic producers.
“Domestic table wines offer something for every taste preference, lifestyle and budget,” she said. “Today’s consumer understands that American wine producers offer everything from eclectic high-end selections to premium boxed wines to fun, flavoured specialty wines. Constellation alone introduced 33 new wines.” She says that wine consumers, especially Millennials, gravitate toward more approachable and drinkable wines suitable for a range of dining and social occasions. As a result, speciality wines such as sangrias and chocolate wines have seen great success. “Wine is now part of a casual lifestyle, and domestic wine marketers are looking to satisfy that growing demand with intriguing products.”
Steve Burns, a principal at O’donnell lane, a California-based marketing and consulting firm, added that the Big 5 also imported a large selection of wines from both Old World and New World producers. “They are presenting a global portfolio to American consumers,” he said. “Beyond that, I think that by dealing with imports it has made the large California The top five US companies biggest and most powerful wine companies in the world. wines capable of making even better wines. It has also encouraged a spirit of global competition in the wine industry which benefits the industry as a whole.”
Certainly much industry growth is being driven by innovations in wine styles and packaging and a willingness to look beyond traditional wine categories. Packaging has become especially important as producers target the younger consumer. Box wine, which has been declared dead several times in the US, is enjoying a surge in popularity, especially in the three-litre wine cask category.
In sum, the US wine market today is marked by a great diversity in wine styles, and the largest companies are driving that trend.
Constellation Brands Inc
The late Marvin sands was widely respected as a shrewd and visionary business man, but it is doubtful if even he could have predicted that Canandaigua Winery, founded in 1945, would one day be the largest wine company in the world in terms of sales.
Canandaigua, from its base in the Finger Lakes region of new York state, morphed into Constellation Brands in 2000. it has grown largely through a series of acquisitions and brand extensions; there are around 100 brands in Constellationʼs portfolio, including beer and spirits. Constellation had an impressive sales record in 2012, adding 3.1m cases of packaged wines, a gain of 10%, according to The Gomberg-Fredrikson report. This was the largest volume increase in the Us market.
According to the nielsen Company, which tracks sales in food stores, Constellation’s largest brand – Woodbridge by Robert Mondavi – grew by about 9%. Other Constellation Brands that posted strong gains in food stores included Rex Goliath and Blackbox. These gains continued in the first quarter. “I am particularly pleased with our results as we continue to gain market share,” said Rob Sands, president and CEO. sands singled out several new wine products, including simply naked, a full range of unoaked California varietals first introduced in 2011.
Constellation has organised its wine holdings into three divisions: VineOne, Centerra Wine Company and icon estates. VineOne is by far the largest, and includes Clos du Bois, Woodbridge by robert Mondavi, Robert Mondavi Private selection, Blackstone and Ravenswood. Many of Constellation’s newer brands, both domestic and imported, are also bundled into the VineOne division. Brands include: Hayman & Hill, Red Guitar, Barossa Valley estate, Leasingham and Diseno.
Icon estates’ brands include Franciscan Oakville estate, Mount Veeder Winery, simi Winery, and Estancia estates and Ravenswood wineries in California; Columbia Winery in Washington state; Ruffino Estates of Italy; Drylands in Marlborough, New Zealand; Tintara in McLaren Vale, Australia; and Veramonte in Chile’s Casablanca Valley.
Centerra Wine Company is focused on specialty, fighting varietal and value brands, both imported and domestic. Brands in this division include Arbor Mist, Cook’s, Paul Masson Grande Amber Brandy, Richard’s Wild Irish Rose, Vendange, Banrock Station and Inglenook.
Industry analysts say that Constellation’s great strength, beyond its sheer size, is its global diversity. This gives the company an edge when market trends change; it’s not dependent on any one producing region, so the company doesn’t have to convince the consumer to drink any particular wine. if Australia is gaining market share, Constellation can offer wines from those regions as well as it stellar range of California and Pacific northwest wines. if Australia is down, then its Chilean portfolio may come to the fore.
It’s a well-known story in the wine business. Shortly after Prohibition ended in the US, Ernest and Julio Gallo borrowed $6,000.00 from Ernest’s mother-in-law and launched their winery. The story goes that the brothers learned to make wine by reading pamphlets published by the University of California in the Modesto public library. It’s a good story and offers early evidence that the Gallo brothers were master marketers.
But, like many good stories, it doesn’t stand up well to fact-checking. In fact, their father and their uncle owned vineyards and shipped wine grapes to home winemakers during Prohibition. There is little doubt that the Gallo family knew a few things about making wine before reading those pamphlets. It is also likely that their father’s experience in selling grapes across the US demonstrated to the ambitious brothers the value of building a good distribution network, which had much to do with the later success of Gallo.For several decades Gallo was known chiefly for inexpensive jug wines such as Carlo Rossi, and flavoured wines like Thunderbird and Boone’s Farm. These wines became known as ‘street’ wines as a nod to where they were usually consumed. However, by the 1980s, Gallo had become the largest buyer of Napa wine grapes, and by the end of that decade Gallo was the largest vineyard owner in Sonoma County. The ‘street’ had come to California’s North Coast, and Gallo was selling Gallo of Sonoma Cabernet at over $20.00 a bottle. In 2011, Gallo introduced the Signature Series, with a Cabernet Sauvignon and a Chardonnay selling for about $40.00 a bottle. The winemaker is Gina Gallo, Julio’s granddaughter.
Gallo’s purchase of an iconic Napa winery, Louis M. Martini, in 2002 shook up the region a bit. Gallo spent a good deal of money bringing the winemaking side up to date and retained most of Martini’s top vineyards. Winemaker Michael Martini praised the Gallo approach. “They have freed me to be a better winemaker,” he said, “and given me the tools to do it. Before Gallo I had to make wine and travel the country to help sell it. No more. Now I just make the wine and Gallo leaves me alone.”
Gallo continues to add new vineyards to support its premium wines, buying vineyards over the past year in Monterey, Paso Robles and Lake County. The company has also established a presence in Washington with the purchases of Covey Run and Columbia wineries. Over the past eight decades, Gallo has gone from strength to strength. Roger Nabedian, senior vice president and general manager of the company said Gallo is in good position for growth to continue. “The highest growth categories have been Moscato, Red Blends, and Italian Prosecco. We have been fortunate to participate in these categories through our Barefoot, Apothic and La Marca brands.”
Nabedian confirmed that Barefoot Cellars had been Gallo’s “most successful” brand for several years. “Barefoot, continues to grow as we focus on product innovation, providing consumers with both table wine and sparkling wine, as well as products focused on unique wine styles,” he said. “In the premium space we have seen strong success with Apothic Red, our recent entry into the red blend category, as well as Edna Valley Vineyard and Louis M. Martini, which have traditional histories.”
The Wine Group
The Wine Group (TWG) was originally formed to buy Franzia and other winery assets from Coca-Cola. Since that time the company has grown through a series of timely acquisitions. TWG has several production centres in California and one in New York, where the popular kosher wine Mogen David is produced. The largest facility is in Livermore on the site of the historic Concannon winery, originally built in 1883. TWG acquired the winery in 2002. In 2004, the company bought leading bulk wine processor Golden State Vintners, boosting production capacity.
TWG has an extensive line of super-bargain wines, such as Corbett Canyon, Glen Ellen, Foxhorn, Mogen David, Lejon (a domestic vermouth) and Tribuno. Franzia, a perennial leader in box wine sales, offers five-L boxes of premium varietals, often priced under $10.00. Even Two Buck Chuck can’t match that.
TWG is also active in the premium end of the box wine market, with the entire line of Corbett Canyon varietals offered in 3-L wine ‘casks’ at around $12.00. Corbett Canyon waS originally a California central coast winery, which TWG now uses as an import label for wines, mostly from Chile. FishEye, another cask wine, is an Australian import. The cask wines are promoted as a lightweight package for parties, picnics, hiking and other outdoor activities. The value offered is significant, with most of the cask wines priced in the $20.00 range for three litres.
In 2006, TWG created the Underdog Wine Merchants division to produce and market premium varietal wines aimed at the ‘Millennial young adult’ consumer. The brand portfolio includes a number of imported brands as well as California wines. Cupcake Vineyards, one of the Underdog brands, is a star performer for TWG in the key $10.00 to $12.00 niche. Introduced in 2008, the brand sold 3m cases in 2012, an increase of 25% over 2011 sales, according to Impact Databank. If the sales trends hold through the rest of this year, Cupcake stands to be the top selling US wine priced over $10.00. (The success of Cupcake Vineyards inspired The Wine Group to launch Cupcake-flavoured vodkas last year.)
Despite the success of Cupcake and other brands, The Wine Group’s estimated shipments fell 3% in 2012, from 61.2m cases in 2011 to 59.5m, according to The Gomberg- Fredrikson Report. TWG’s chief marketing officer Jeff Dubiel said the decline was of “no concern”. He said most of the decline was driven by the sale of the Inglenook brand to Francis Ford Coppola. “We expect to continue to build on our success with big brands like Franzia as well as our premium and superpremium brands,” he said. He added that the company’s strength rested in its appeal to baby boomers and Millennials.
Trinchero Family Estates
John and Mario Trinchero, brothers from an Italian winemaking family, bought the ninenteenth-century Sutter Home Winery in 1948. The winery had been abandoned during Prohibition and never reopened. For several years the Trinchero family sold jug wines to the few tourists who then visited Napa Valley.
Then they discovered Zinfandel, specifically Amador County Zinfandel from the Sierra Nevada foothills. Of course, Zinfandel already had a long history in California, but the Trincheros pushed it hard and Sutter Home built its name on a spicy style of Amador Zinfandel.
In 1972, they introduced White Zinfandel. The pink wine, which came with a generous pinch of sugar, suited the palates of a new wave of US consumers who had grown up drinking sweet soft drinks. By 1987, Sutter Home White Zinfandel was the largest-selling premium wine in the country. Sutter Home has grown steadily, both by acquisition and by increased production. The family owns about 7,000 acres of vines, including a 250 acre estate in Napa.
Though the company’s growth surge began with inexpensive White Zinfandel, Trinchero is also growing the premium side of the business, with an emphasis on Trinchero Napa Valley Family Estates wines, which includes a $50.00 Napa Cabernet Sauvignon. The recent purchases of Folie a Deux winery in Napa adds to the premium punch.
Trinchero, like just about everyone else in the California wine business, is paying attention to the younger consumer. Its Bandit line of varietals sold in 750ml Tetra Paks has been so well received that Trinchero is planning a redesign of the Sutter Home label, with the primary goal of attracting more hip, young consumers, according to Bob Torkelson, Trinchero’s president and chief operating officer.
“It’s about remaining relevant,” said Torkelson. “Sutter Home is continuing to reinvent itself to remain relevant to younger people.”
No doubt the sizzling Moscato market has influenced that marketing approach. In 2012, overall Moscato sales were up 27%. Trinchero makes five different Moscatos and is counting on the new ‘hip’ labelling to boost sales and awareness in the young audience, especially Hispanics and African-Americans.
How effective will the label redesign be? Wine consultant Eileen Fredrikson of Woodside’s Gomberg, Fredrikson & Associates said Sutter Home offers quality at low prices, which brings in “uninvolved consumers – people who just want a wine that is consistently good; a brand they can trust,” without worrying about wine industry jargon and complexities. She believes that Sutter Home probably looked at their competitors and decided that its own product looked “a little too quiet” for the target audience.
Bronco Wine Company
Fred Franzia founded Bronco Wine in 1973 after the Franzia family wine business was bought by Coca-Cola. The soft drinks giant later sold the Franzia name to The Wine Group. The Franzia name is still used on a line of box wines sold by The Wine Group, though the wines have nothing to do with Bronco.
Franzia’s grandfather immigrated to California from Italy in 1893 and the family has been in the wine business as growers or producers ever since. Fred Franzia, who is the nephew of the late Ernest Gallo, has a deserved reputation as a maverick who champions cheap wine and sneers at the idea of terroir, and who used to carry a gun to meetings of the Wine Institute. He fought and lost a long legal battle with the Napa Valley Vintners Association over the issue of labeling wine from elsewhere with the Napa appellation. He was also convicted and fined for misrepresenting less-expensive grape varieties as Zinfandel and Cabernet Sauvignon.
All that aside, he is a masterful marketer who has been responsible for creating dozens of wine brands of acceptable quality at bargain- basement prices. The most well known is doubtless the legendary Two Buck Chuck created for the Charles Shaw label in 2002. The line of varietal wines was sold through the Trader Joe’s food store chain for $1.99 – which is why it got the nickname ‘Two Buck Chuck’. Although the price has risen recently, the name has stuck.
Harvey Posert, an industry marketing consultant based in Napa, said that Bronco’s extreme value brands are solidly based on some 430,000 acres of vines, which Bronco either owns or controls. “This represents about 10% of total California vineyard acreage,” said Posert. This huge holding, which is all in the Central Valley of California, enables Franzia to maintain rock-bottom prices. It also means that Bronco is very active in bulk wine sales, for both the domestic and export markets.
Besides Bronco’s range of wine brands, the company is also an innovator in packaging. Bronco has recently launched a line of singleserve 187ml wines bottled in lightweight PET containers. In keeping with Bronco’s overall approach, the packaging is used for a number of brands, including Crane Lake, Red Truck, Coastal Ridge, Hacienda, Harlow Ridge and ForestVille. Franzia has always been a very vocal critic of what he considers high wine prices in restaurants and he sees the singleserve wines as a way to place more affordable wines in on-sale locations. Besides the vineyards, Bronco’s strength lies in state-of-the-art wine processing plans at several California locations, with a crush capacity of just under 400,000 tons annually. Wine critics like to fault Bronco on the basis that low prices must equal low quality. However, at the widely respected Orange County Fair Wine Competition held in California in July, the Charles Shaw Cabernet Sauvignon, Merlot and White Zinfandel all won gold medals. The three gold medal winners are priced from $2.49 to $3.49.