North Bay Business Journal

Monday, April 21, 2014, 6:30 am

Wine Industry Conference Q&A: Tom Bonomi, Classic Wines: Investing in brand, consumer connections


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    Tom Bonomi is president and chief executive officer of Classic Wines, LLC, a portfolio of wine brands and supporting vineyards for TPG co-founder Bill Price.

    They started Classic Wines in 2007, just after Mr. Price, retired from Texas-based private-equity investment powerhouse Texas Pacific Group. Mr. Bonomi had been a managing director for St. Helena-based investment bank Global Wine Partners.

    Tom Bonomi

    Mr. Price has said he seeks hand-crafted brands sold directly to consumers and saw potential for increasing connections between brands and consumers.

    TPG and Mr. Price formed The Vincraft Group as a vehicle for TPG’s wine industry investments that would have a shorter-term hold than for Classic Wines. Vincraft owns Kosta Browne Winery, though the founders retain a small interest, and Gary Farrell Winery.

    Larkspur-based Classic Wines owns Three Sticks, a brand Mr. Price started with the 2002 vintage, and Lutum, launched with vintage 2011. The group has interests in Kistler Vineyards in western Sonoma County and Buccella in Yountville.

    Classic wines has 250 planted acres in six vineyard properties. Mr. Price purchased 150-acre Durrell Vineyard in the Sonoma Valley, Los Carneros and Sonoma Coast appellations in 1998 and 138-acre Gap’s Crown vineyard on the Sonoma Coast in December 2012. In development are vineyards on Dupont Road near Sebastopol, set for the first vintage this year; 111 Wilson Rd., two years from first vintage; One Sky Vineyard on Sonoma Mountain Road, also two years til ready; and new property near Sebastopol, set for planting in four years.

    Mr. Bonomi is set to be part of a panel discussion at the Business Journal‘s 14th annual Wine Industry Conference on April 22 on brand positioning in a global marketplace. He spoke with the Business Journal about the strategy of active partnership with brand founders in building direct-to-consumer sales.

    How much have the portfolio brands changed?

    TOM BONOMI: There have been several changes with different brands. The intent has been to enhance with vineyards.

    Gap’s Crown is a very big vineyard. It sells fruit to Kistler and leases 37 acres of the 138 planted acres to Kosta Browne. Gary Farrell gets some,  too.

    Durrell fruit goes to Kistler and Gary Farrell, but the majority is sold for unaffiliated brands.

    The other vineyards are properties we bought were with the expectation that they would supply a majority of production for Kistler. They area all pinot noir vineyards, though there’s a little chardonnay at Dupont.

    Kistler’s case production to date has not changed dramatically since we’ve been involved. We made a concerted effort to grow pinot noir, which has been modest.

    When we first got involved, Kistler was primarily direct to consumer [with list signup and payment done by mail], and people had to buy 12 or more bottles … and if they didn’t they were out. Now consumers can purchase wine online with a credit card and can buy a six-pack of wine that’s preselected. We tried to make it more accessible and easier to buy.

    We also opened Trenton Roadhouse on Trenton-Healdsburg Road for hospitality. Kistler didn’t host folks at the winery before. Longtime mailing list members now can come and taste the wine and see the vineyards. It’s also a great vehicle to attract people to the mailing lists.

    Kistler didn’t participate in auctions or do anything public. We find they are great ways to meet people who have been buying wine for a long time and like to meet people at the winery. They want to get on the mailing list and buy wine.

    Buccella’s case production has grown a little since we’ve been involved. We added another SKU, a Mixed Blacks release made from Rhone varieties. We added a second label, Mica, to sell declassified wines from Buccella. We’re building a tasting room there, set to open this summer, to make it more accessible. Bucella did host people, but it was not set up to do that.

    Kosta Browne now has a winery, located at The Barlow in Sebastopol. They have a hospitality team and a site for hosting. There is now a lot more accessibility there. They’re making chardonnay now, in addition to pinot noir. We purchased a couple vineyards, so they are getting more gravitas in nailing down grape sources. Kosta Browne has a large list and lot on the waiting list. We hired a general manager and built out the management team.

    For Gary Farrell, we hired a new winemaker three years ago and there is a new hospitality team, but there has not been much change, other than bolstered grape sourcing from Gap’s Crown and Durrell.

    How is Classic Wines increasing connections between brands and consumers?

    MR. BONOMI: Tasting rooms are really an important component to that. There’s now one for Kistler and Kosta Browne. Buccella is getting one. Three Sticks is getting a hospitality center and offices in an old adobe house being seismically retrofitted and renovated at 143 W. Main St. in Sonoma right behind El Dorado Hotel.

    They are the sharpest arrow in the quiver for interacting with consumers and cultivating loyalty. We’re really seeing great results at Kosta Browne and Kistler.

    I do think auctions or hosting events in certain markets is important. Those are effective uses of time for wine. We’re trying to be more accessible.

    How has direct-to-consumer been changing for wine, compared with other consumer products?

    MR. BONOMI: Many industries compete in a global economy. … We think we have good technology and management to manage the direct-to-consumer business and help expand and grow our brands. At the end of the day, we’re very reliant on people, so relationships with distributors and our internal team are the levers we pull on to compete as well as we can.

    It definitely has improved a lot in the wine industry. It’s an easier nut to sell and ship wine to consumers in different states. I do think a larger proportion of the wine-buying public buys wine online now, even though is still a small number.

    To date, online wine sales pretty fragmented. There isn’t one big dominant player.

    It will be interesting to see what Amazon does with wine. None of our brands sell wine by Amazon, so I don’t’ have insight on that. Amazon has changed the model for selling wine several times. It could have a profound effect on the wine industry if it becomes the go-to place for buying wine.

    Where does direct-to-consumer need to go in the future?

    MR. BONOMI: One of hindrances is that the wine business, on balance, doesn’t have an abundance of people with talent or experience for managing direct-to-consumer. I’m on the board of Sonoma State University Wine Business Institute, and we’re talking about creating a direct-to-consumer certificate program.

    Direct-to-consumer in the wine business has no place to grow than up. Regulation is becoming more accommodating. Consumers are getting used to buying everything else online.

    What’s your approach to M&A?

    MR. BONOMI: We’ve been more focused on organic growth in building the mailing lists and developing top-tier fruit sources that channel into the different brands. We’ve bought vineyard property almost one every year and think that’s an effective way to build brand. We’re always open to new opportunities.

    What’s somewhat unique for us is our partnering orientation. We work with founders who want some liquidity, help managing their businesses and a succession plan, and want to remain involved. We continue to look for those opportunities.

    Some, three months after they buy a brand, can change things pretty dramatically. In cases where we’re not the owner and the owner is still there, we help manage, bolster and improve the business in collaboration with them.

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