Two local companies are finding a sweet spot at the center of the wine industry
In his laws of motion, Newton famously wrote, “For every action, there is an equal and opposite reaction.” In the wine industry, Newton’s third law is evidenced by increasing consolidation by the largest companies and the proliferation of new, tiny wineries and wine brands.
And as the larger companies take successful brands to even more outlets and increase production, it’s a natural reaction that some consumers—the most serious wine lovers, who want wines that are “their” unique and special discoveries—will begin to look for new labels to uncork. Boutique wineries, though small, can throw their relatively light weight around, thanks to rarity and premium prices. On the opposite end, large companies want to be everywhere consumers purchase wine and use their substantial size, portfolio variety and economies of scale to secure large accounts like supermarket chains and club stores.
Despite this current trend of the big getting bigger and the small getting smaller, two local wine companies are taking a unique approach by walking a line right down the middle. Jackson Family Wines, well known for its Kendall-Jackson brand (which celebrated its 25th anniversary just last year) and Ascentia Wine Estates, formally launched last spring, are both are private companies focusing on wines in the premium and super-premium price categories.
Family oriented
For Jackson Family Wines, keeping the business in the family has been a key factor to success. “Quality wines require a very long-term vision, and we’re moving toward luxury; we’re not really focused on volume,” says president Clay Gregory. “It’s great that we’re not publicly held—we don’t have to issue a quarterly report, and we’re not constantly pressured to have a good return on our assets.” What’s more, Gregory continues, many beverage industry analysts don’t have a great understanding of the unique nature of the wine industry and therefore often unrealistically measure the performance of wine companies against other beverages.
If the name Jackson Family Wines immediately brings the Kendall-Jackson label to mind, that’s because the company was built on the K-J brand, and it’s still the lead horse in the company’s portfolio (which now includes 34 distinct wineries). Specifically, the Kendall-Jackson Vintner’s Reserve, launched in 1982, has the distinction of being America’s most popular Chardonnay. And according to George Rose, vice president of public relations for Kendall-Jackson, the success and consistently increasing demand for that wine actually led K-J founder/owner Jess Jackson to choose a path of severely measured growth. “We could easily be a 10 million-case brand just based on our popularity, but Mr. Jackson decided he didn’t want to go in that direction,” he says. “Rather than chase volume, he wanted to build dollars, value and the quality of the brand. So today, we’re at 3.5 million cases of wine—pretty much where K-J was five years ago.”
Rose says 2003 was a turning point for the brand: “Kendall-Jackson simply wasn’t new anymore, and it was in decline because of the incredible competition in the supermarkets. Mr. Jackson made the decision that going forward that way wasn’t going to be the future of his business.”
The first and crucial step was Jackson’s decision to use only grapes from vineyards the company owned or directly controlled. The move to estate sourcing, says Rose, “represents the very essence of the renaissance at K-J.” At the same time it was relaunching its Chardonnay with smaller production, a slightly higher price point and estate grown grapes, the K-J brand also began to offer a new tier, called the Highland Estates wines, which are even more focused on sourcing, highlighting single vineyards from diverse appellations throughout California.
Growth at Jackson Family Wines continues via both acquisition and the creation of new wineries. Jackson remains involved in the mass market, value-priced category through these brands. Two years ago, he created a company called White Rocket to manage them. White Rocket produces brands that, most often, come from non-estate vineyards, while for Jackson Family Wines, the vineyard leads the process. “In our organization, the vineyard is key,” says Rose. “Mr. Jackson will tell you he’s a farmer, first and foremost.”
Accent on character
Stonestreet Winery was created by Jackson to showcase individual vineyards—in this case, low-yielding Cabernet Sauvignon (among others) from its Alexander Mountain estate. Stonestreet wines command premium prices, ranging from $23 to $120 and, like several other Jackson Family Wines wineries, have a production of just 11,000 cases. Other wineries in the portfolio include Vérité, from Sonoma, which retails for $250, and Cardinale, from Napa, at $175; both brands are tiny, at just 5,000 cases each, but represent the highest luxury in the portfolio.
In terms of vineyard- and appellation-focused brands, Rose says the next winery (or wineries) will likely come from the Knights Valley AVA. Yet even as the Jackson Family Wines roster continues to grow, says Gregory, the company maintains an individual focus on each separate brand. “What high-end consumers want are wineries with personality and character. Our wineries really operate like independent wineries. We have one finance department and one human resources department, but all of the things that touch consumers—from wine style to packaging and websites—are managed independently.” The wineries don’t even share customer databases or wine club information.
The personalized approach is certainly working for La Crema, a brand Jackson purchased out of bankruptcy in 2003, which is experiencing great success across-the-board, from restaurants and wine shops to supermarkets. “It’s the most dynamic winery [with bottle prices] above $15, in terms of growth, right now in the country,” says Gregory.
In addition to a long-term, vineyard-centric and individual approach that focuses on premium wines, Jackson Family Wines has made one more operational step to help ensure it retains control of its wineries. Because though wine companies continue to consolidate, the most extreme consolidation—with the greatest effect on wineries and brands—has come from consolidation at the wholesale level. Wineries or wine companies sell to distributors in individual states, who then sell to licensed shops, restaurants and bars. These distributors are the second tier of a three-tiered system that’s still legally mandated almost everywhere. Jackson Family Wines has established its own wholesale company, Regal Wine Company, to distribute its full line (and a selection of outside brands) in all major U.S. markets.
Now working toward its third decade, Kendall-Jackson and the Jackson Family Wines group are a well-established cornerstone of the California wine market.
Starting on solid ground
Newly formed fine wine company Ascentia Wine Estates may be the new kid on the block in terms of corporate ownership, but the local wineries in its portfolio each have a strong individual heritage—and they’ve already been managed, marketed and sold together for several years.
Officially announced last June, Ascentia Wine Estates was formed by GESD Capital Partners of San Francisco (the lead equity partner); William and Peter Deutsch, owners of leading wine importer W.J. Deutsch & Sons; and Jim DeBonis and Peter Ekman, who together have more than 30 years’ wine industry experience. Ascentia CEO DeBonis worked with the company’s portfolio of five local wineries and brands—Geyser Peak, Atlas Peak, Buena Vista Carneros, Garry Farrell and XYZin—under previous management at Allied Domecq and then Beam Wine Estates. “What makes Ascentia a bit unique is, it’s kind of counter to what’s been happening in the industry. We’ve brought wineries and brands back into the private world,” says DeBonis.
Like Gregory at Jackson Family Wines, DeBonis believes quality wines require a long-term vision. In many ways, this belief was the motivation for forming Ascentia. The five local brands that make up a large part of the company underwent multiple changes of ownership in recent years, starting with allied Domeq and followed by Beam Wine Estates, then Constellation and now Ascentia. “The portfolio was full of brands that were growing or that had just been repositioned and were taking off, and I realized that if I was going to be able to finish what we started, I’d have to acquire these brands,” he says.
The company, which now includes eight wineries producing approximately 1 million total cases per year, has close to 270 employees, many of whom have been retained or hired-back to work on the brands they know well. “That’s the thing: We may be a startup, but in many ways, we’re not,” says DeBonis, referencing the direct experience his team has with Ascentia’s California brands. The word “shepherd” is used often at Ascentia to describe the company’s hands-on relationship with its wineries.
The company seems driven by a shared feeling of unfinished business—a belief in the not-yet-fully-realized potential of its brands—and a sense of commitment. Director of public relations Tony Lombardi, who worked on several Ascentia brands under their previous ownership for almost a decade, says, “What a great opportunity to shepherd these eight brands and really form a local flavor. It’s great to come back to Healdsburg, where it’s driving distance to five of the wineries and brands, their vineyards and their winemaking teams,” says Lombardi.
“Coming back” is quite literal in this case, because Ascentia now occupies the exact office, at 375 Healdsburg Avenue, from which the brands were formerly managed. Even receptionist Preble Franklin is once again welcoming visitors and manning the phones. “Yep, it’s kind of like déjà-vu all over again,” jokes Lombardi, who admits the changes in ownership have been challenging.
“It’s been a roller coaster ride,” he says. Lombardi is one many Ascentia employees who are just happy to get back to the business of building their brands. It took six months from the time Beam was acquired by Constellation to get Ascentia organized. But though there were some departures during those uncertain times, many key staffers remained. “I’m very grateful the winemakers stayed, so we could hit the ground running,” says Lombardi, naming Buena Vista as a winery he’s particularly excited to continue working with closely, because he was a part of the team that helped relaunch the winery in 2003. “The reinvention of that brand, where we initially invested under the Allied group and then continued under Beam and Fortune Brands, was a significant investment, starting with replanting the vineyards for clonal variety and different rootstocks and even getting a new winemaker [Jeff Stewart]. We also upgraded the actual facility, getting 65 new open-top fermenters to improve the quality of the wines.
“We had great success with Buena Vista’s 150th anniversary as California’s first winery, and I talked about the reinvention of the brand, the new winemaker, new wines and the estate focus. It’s a great story and a great opportunity to pick it up again.”
Both DeBonis and Lombardi say keeping up the momentum at Atlas Peak is another top priority for the company. “At Atlas Peak, we walked away from a declining category in Sangiovese to give it a Cabernet Sauvignon focus at high elevations. All of these changes were occurring, but the wines weren’t ready until 2003,” says Lombardi. Under winemaker Darren Proscal, Atlas Peak crafts five bottlings sourced from four vineyards in the Napa Valley: Atlas Peak, Mount Veeder, Spring Mountain District and Howell Mountain. The current wines, from the 2004 vintage, are only the second release under the new Napa Cabernet and high-elevation focus. So far, consumer reaction has been positive.
Along with the well-known California brands, the formation of Ascentia also included three wineries that represent new appellations and new varietals for the team. The acquisition of Columbia Winery and Covey Run, in Washington state, as well as Ste. Chapelle in Idaho, gives the company strength in the Riesling category, which, according to the company’s own statistics, is up 18 percent over last year. Ascentia now provides more than 15 percent of the total U.S. Riesling production.
Great wines take time, but as time passes, change is inevitable—in the barrel, the bottle and at the wineries themselves. At Kendall-Jackson, the process is well established. Through ownership of premium vineyards, the wines will continue to flow, though possibly from newly defined individual vineyard sources or wineries. At Ascentia, they’re carrying the torch for some familiar brands while raising a toast to new the as well. Both companies are keeping a steady focus on their core missions while adjusting to the trends and pressures of the changing marketplace.
