Tag Archives: the Wine Group

Big Wine strikes again

Big Wine

“Who do we want to buy next?”

That E&J Gallo bought J Vineyards, the highly-regarded California sparkling wine producer, last month was shocking, but it did make business sense. Gallo, for all its vastness, doesn’t make high-end bubbly and doesn’t have many successful restaurant wine brands, and J does and is. Plus, J owned 90 acres of prime Sonoma vineyards, making the deal even sweeter for Gallo.

So how to explain this week’s news that The Wine Group, second-biggest to Gallo among U.S. producers and with even less of a critical reputation, bought the fiercely independent and much beloved Benzinger Family Winery? The Wine Group has never shown any desire to make wine not sold in grocery stores, and its two biggest brands are Franzia and Almaden, the five-liter box cash cows.

Call it one more step in the Big Wine-ing of America:

The increasing consolidation in the U.S. wine business, something I wrote about at the beginning of the year. It is getting harder and harder for wineries that make less than one-half million cases to find distributors and space on store shelves. Benziger makes less than 200,000 cases a year, which wouldn’t even make it the biggest producer in Texas, and J sells only about one-third of that. Said the owner of a leading California independent: “My guess is that a winery really needs to be above 200,000 cases to really get the attention of a distributor. But maybe 500,000 is the new 200,000?” A distributor told me: “There are too many labels fighting for too few spots on the shelf or wine list. It’s crazy.”

• Family and independence, two hallmarks of the California wine business since the 1980s, aren’t enough anymore. These are just the latest sales involving long-time family wineries, which saw an opportunity to cash out to avoid succession problems, solve family disputes over winery operations, or to take advantage of Big Wine’s deep pockets. Sale prices weren’t disclosed, but one report said the J deal may have been worth as much as $90 million, which would make the Benziger price well into the hundreds of millions of dollars. Even of the sale price was half of that for each, which is probably more accurate, that’s a winning payout.

• It’s all about the land. Benziger, with sales of less than $10 million, is so small compared to the multi-billion dollar Wine Group that there is almost no way it could affect the parent’s financial performance. This makes the deal even more baffling, unless it was for the 200 or so acres of quality Sonoma vineyards that were part of the sale.

Will Big Wine run their new companies successfully? Certainly, if success is defined by profit. Otherwise, expect the new owners to do what new owners always do, despite best intentions and protests to the contrary — cut costs, eliminate unnecessary products (so say good bye to J’s lovely pinot gris), and “rationalize” operations. Gallo and The Wine Group won’t ruin J and Benziger the way Sears destroyed mail-order clothing retailer Lands’ End, but they won’t be the same wineries they were before the sale. That’s something we’ll have to learn to live with, because consolidation is going to be with us for a very long time.

More about Big Wine:
How to buy wine at the grocery store
Downton Abbey claret — wine merchandising for dummies
Big wine tightened its grip on the U.S. wine market in 2013

Winebits 328: Scottish wine, wine marketing, lawsuits

Winebits 328: Scottish wine, wine marketing, lawsuits

Scottish wine for a Scottish dish, haggis

Talk about terroir: A Scottish winemaker — yes, that’s correct — says climate change has made it possible to make wine in his country. Christopher Trotter, a chef and food writer, wants to grow six acres of grapes in eastern Scotland, and says that the warmest weather in centuries will make it possible. One caveat: It’s still cooler than most of the world’s wine regions, so he has to use grapes that are cold hardy and that don’t necessarily make great wine. The article, from the Bloomberg news service, is also an excellent look at how warmer temperatures around the world will affect the wine business.

A glass of Chloe, please: The Wine Group, which gave the world Cupcake, is making another marketing play, this time with a brand called Chloe. As Robert Joseph writes, the company’s approach has nothing to do with wine per se, but with how it is sold to the public. Chloe is being marketed like jewelry or perfume, costing about one-third more than the $10 to $12 Cupcake. This is The Wine Group’s particular genius, and which is rarely seen in wine, that it can position its brands as lifestyle products and get a premium for what will almost certainly be a very ordinary bottle of Italian pinot grigio (given the quality of its other wines). But, as many have noted, the people who buy these kinds of wines aren’t buying them for what’s in the bottle.

Bring out the lawyers: The Wine Curmudgeon has always enjoyed watching companies sue each other over labels and brand names, and this one is particularly enjoyable. Beverage Digest reports that Diageo, the world’s largest drinks company, says family-owned Heaven Hill is trampling on its intellectual property in Canada with a product called Admiral Nelson spiced rum, which too closely resembles Diageo’s Captain Morgan spiced rum. How many billable hours will this require? The article discusses — seriously, I suppose — that one issue in the lawsuit will be how similar the character of Nelson, the greatest hero in British naval history, is to Morgan, who was a pirate. Sadly, wigs are no longer worn in Canadian courts, or this would be even more fun to watch.

Winebits 169: Fetzer sale, Yellow Tail lawsuit, women and wine lists

Chilean winery buys Fetzer: Concha y Toro, a Chilean producer whose products range from grocery store wine to the the pricey stuff, will buy Fetzer Vineyards from Brown-Forman, best known for booze brands like Jack Daniels and Southern Comfort. Brown-Forman will get $238 million for Fetzer and a couple of other wine labels as it flees as quickly as it can from the wine business. The Louisville-based drinks giant is yet another multi-national that saw that wine was a little more difficult to manage than it thought, following Constellation and Diageo. At least Brown-Forman was moderately successful with Fetzer, where sales increased from 2 million to 3 million case in the 20 years that it owned the brand. And it apparently turned a profit on the sale, which is more than Constellation did when it sold its Australian brands.

What's a kangaroo? Depends on who you ask. The Wall Street Journal reports that the company that owns Australian wine behemoth Yellow Tail is suing U.S. wine behemoth The Wine Group over the animal on the latter's Little Roo wines. Yellow Tail says the kangaroo on the Little Roo label looks too much like the wallaby on the Yellow Tail label, and is suing The Wine Group in federal court for trademark infringement. As noted elsewhere on the blog, does anyone really care about this stuff except the high pockets lawyers who are paying for their second homes with these lawsuits?

Treat women better, please: This, from Lauren Shockey, a restaurant critic at the legendary Village Voice: "[S]everal recent dinners have irked me enough to rant about the way I'm treated when it comes to ordering wine. In short, sommeliers and waiters think that just because I'm a young woman, I'm incapable or don't possess enough knowledge to a) navigate a wine list b) order the wine and c) taste the wine. Which is downright insulting." And Shockey is absolutely correct. Too many waiters and sommeliers treat young women this way, which does seem kind of odd since women buy more wine than men. But, if it makes Shockey feel any better, too many of them treat the Wine Curmudgeon as if he is incapable of ordering wine, as well. I think this has as much to do with the general lack of wine skill that most restaurants expect from their employees.

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