19 September 2007
WINE INDUSTRY BUSINESS JOURNAL
Sonoma Wine Co. returns to retail brands
Monday, September 17, 2007
BY JEFF QUACKENBUSH
GRATON ? Six years after getting out of creating wine brands for retailers and restaurateurs with the high-profile sale of the Blackstone brand, Derek Benham is back at it in a big way.
The proprietor of custom vintner Sonoma Wine Co. and its sister brand-maker Purple Wine Co. in the past three years has moved more than 30 such labels to market.
Out of 3 million cases of wine both companies aim to make next year, about 900,000 cases will be for company brands made by Purple Wine Co. ? Mark West, Avalon and Rock Rabbit ? and roughly 100,000 cases will be for "control brands" such as Shiloh Road, Foxtail and Graton Cellars, according to Lisa Giglio, director of brand management for Sonoma Wine Co. The rest of the production is for custom-winemaking clients.
The difference between the two groups of brands is who owns them and where they are sold. Purple Wine's brands fit the traditional model of a winery creating and producing its own brands then moving them to consumers through distributors.
Following a greater trend in retail globally toward higher profit margins as chains consolidate, more private wine labels are being produced. Somewhere from 1.5 percent to 5 percent of wines sold in the U.S. are private labels, and sales growth increased 30 percent last year, according to ACNielsen and Novato-based private-label developer WineryExchange. Private labels account for 16 percent of U.S. retail sales and roughly half of European retail sales.
Private labels encompass:
? House brands, which bear the name of the restaurant or store, often known as the "house wine"
? Merchant brands, which are developed for a retailer, such as Diablo Creek for Safeway and the Canvas brand Michael Mondavi's Folio Fine Wine Partners made for Hyatt
? Control brands, over which a store exercises varying degrees of say on design, content and distribution per contract. The key example is Bronco Wine Co.'s Charles Shaw for Trader Joe's.
"For us it's a great way to incubate ideas," Ms. Giglio said.
That's how Mr. Benham and his brother Courtney came up with the Blackstone merlot brand and worked out a control-label deal in California with the Cost Plus chain. The brothers sold the brand through distribution in other states, and buzz for the brand attracted the attention of New York-based Constellation Brands, which acquired the label and the Benhams' Codera Wine Group brand factory in 2001.
Three years ago, Derek Benham passed his control-brand-creation torch to Ms. Giglio to develop on a pay-as-you-go budget.
The Shiloh Road brand, sold in Concord-based Beverages & More's chain of stores, came to her after seeing the exit sign while traveling through Windsor in Sonoma County. Sales of the $15-a-bottle Sonoma Coast chardonnay and Napa Valley cabernet sauvignon brand have been doubling each of the two years the wine has been on the market.
Even when BevMo puts it on special, as it is now at $11, the profit margins are good, she noted. Private labels allow such retailers to get margins of 50 percent versus 30 percent or much less from wines that require distributor sales efforts.
Control brands allow retailers to try many options. Sonoma Wine has rolled out nine brands for one retailer in the past 12 month and likely will replace a few of them in the next 18 months.
On the horizon is the challenge of greater focus on winegrowing regions of origin in branding. That trend likely will collide with a dwindling long-term supply of bulk wine from specific regions, according to Ms. Giglio. For example, the company has been importing bulk pinot noir wine from Corsica because of high demand for the variety.
17 September 2007
Fabulous news for red wine fans like me!!!!!
13 September 2007
Yeah, it doesn't make a ton of sense to me either!
7 September 2007
Yes, I agree what a weird combo! Good article though....http://money.cnn.com/2007/09/05/news/companies/Two_Buck_Chuck.biz2/index2.htm
6 September 2007
As school is back in session for most "kids" out there, including myself ( I am in the MBA program at Sonoma State Universary), it is time to get back in test-taking mode. Here are some wonderfully fun wine quizzes to keep you busy! :) Good luck!