Impact Napa Conference 2014: Dennis Groth, Groth Vineyards & Winery

Silicon Valley executive Dennis Groth and his wife, Judy, purchased the 121-acre Oakville Vineyard in 1981 and have built Groth Vineyards & Winery into a producer of 70,000--80,000 cases of wine annually.

They own 165 acres of vines, which produce half the winery's Napa Valley cabernet sauvignon, sauvignon blanc and chardonnay wines, which retail for $20--$125 a bottle. The winery buys the remainder of the supply from Napa Valley growers.

Mr. Groth is set to be part of a panel at the Impact Napa Conference on Thursday discussing the balance between wine-related tourism and limitations on marketing activities in Napa Valley's rural areas. He spoke with the Journal about his wine company's choice to curtail what happens at the estate for the sake of residents.What kind of sales channel blend does Groth have?

MR. GROTH: The vast majority of our business in the three-tier distribution system. We sell 95 percent to 96 percent through distributors including in California. We do not do direct-to-trade. We have a sales force with one on East Coast, one the West Coast, someone in the Midwest, a director of sales in California, and my daughter is vice president of sales and marketing.

Much of the business is traveling and visiting retailers and restaurants to make good customers. Most of the sales and marketing we do is outside the valley. I react negatively to a winery that wants to sell all its wine to customers who come to valley to buy full retail. I think there would be an impact from that. Not every winery should be able to do that.What impacts have you seen so far?

MR. GROTH: I do not blame it all on tourism-related wineries, because this valley has been a place to visit for a long time. Even if it operated like regions of the world that have almost no direct sales, it would still have an impact, because people like to come to Wine Country.

But a lot of tourism can have an impact on the valley. Traffic certainly gets harder, and agriculture at some point is viewed as a bunch of farmers who are growing vines, spraying sulfur, picking at night and doing all the things farmers do. We can have problems with people who are living in hotels and staying in cities, because they think they can come here and have a tranquil life. But if they come up here and it's not that way, we can have problems.

When John Williams was applying for the Frog's Leap use permit on Rutherford Cross, a lawyer from San Francisco opposed it, saying his wife and he come up on weekends and like a quiet life but here come gondolas with all these grapes and make life miserable. There is a challenge between farming operations and people not used to living with them.How does Groth approach direct sales?

MR. GROTH: We have a retail room like other wineries in valley. It's by-appointment-only. Our philosophy is a little different from other wineries. Part of our perspective is that we live on the property. When you live on the property and the winery is next door, you become sensitive to the noise traffic makes. My wife sometimes complains that the refrigerator compressors at the winery make too much noise when they go on in the middle of the night, and what would the neighbors hear.

Our retail room is not open on Sundays because we think should there should be one day when it's quiet. We limit how much we do with nighttime events. We can't do weddings anyway, but we never wanted to do them because that's not our business.

Our mission statement is to make the best wine we can every vintage, and if do that, the rest will take care of itself. If you came to our retail room, you can taste the wine and buy it. There are a few posters my daughter prepared for our reserve release date. But you can't buy clothing, cookingware or anything other than wine.

We're not a retail operation, so we don't look like a store. A lot of people say they want to sell a larger proportion of production direct-to-consumer because they can get full retail. When you make 80,000 cases, you will not sell it all direct-to-consumer. The exception is Sattui, which directs its whole operation to that and does it inside the city of St. Helena, so I don't care.

I want to find my wine in a fine restaurant in New York and in fine stores. It's a different kind of operation.Is promoting existing limits on wineries and proposing new ones stifling competition?

MR. GROTH: If you wanted to protect yourself from competition, you should not have been in the wine business. When I came into wine business, Napa had about 100 wineries, and now there are about 500. There were fewer than 700 in California in 1982, and now there are something like 3,000, with many thousands in the U.S. In Italy and France, there are many thousands of wine brands. That's not a problem, because the consumer has lots of choices.

I do not think it's a valid argument, because there already is a lot of competition. People spend a lot of time worrying about motivation and should focus on the issue: Are we going to impact the experience the people have when they come to Napa Valley? I see people stopping at the "Welcome to Napa Valley" sign at south end to have their pictures taken. What I don't want to ever happen is they don't want to go to Napa Valley because it will be like Disneyland.

When the wine train first came here, Time magazine did an article that said Napa valley was becoming like Disneyland because it would have an amusement ride up and down the valley. Napa Valley Vintners had a committee that worked on limiting it and where it could stop. I do not want to see us become like Disneyland.What's the balance between tourism and direct sales?

MR. GROTH: One person I've talked to who wants to establish a new operation with a focus on direct-to-consumer said that when started I started this winery I could get distributors to pay attention, but today with all the brands out there it is impossible, so we need to get visitors to valley, get their attention and that's how we will survive.

Even in 1982 when we produced our first brand it was not easy get distributors to carry the brand. We wanted to hire a national marketing company, but they asked how serious we were and if we own our own land and could produce in sufficient quantity to attract distributors' attention. We were turned down by two national marketing agencies until Wilson Daniels took us up, but they wanted commitment and contribution to the sales force and the winemaker to get out and do tours. Even then you had to work at it.

Maybe, it's harder with more people trying to get distributors' attention. Some guys who want to produce 20,000 to 30,000 cases and think they will sell it direct at retail are not realistic. They will make a lot of wine, invest a lot of money and need to make a lot of noise to get customers off the highway and crossroads. They're going to have a lot of advertising and marketing, and I think it will be hard on the valley. A lot of people will disagree with me.

This is a wonderful valley. When I came here, there were few good restaurants you could dine at. That's not true anymore. There is a sophisticated mix of customers coming there. I do not want to do away of that. I want to make sure that when they  come here they will have a good experience.

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