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Wine Industry Conference

April 28

Santa Rosa

nbbj.news/wine17

The good news for the U.S. wine business, particularly producers in the North Coast, is consumers’ tastes continue to shift toward better-quality beverages and want to dive into the details about them.

The somewhat bad news is those consumers are navigating an ever-growing sea of alternatives to please their ever-more adventurous palates.

“The American consumer has access to more wines, both domestic and imported, than any consumer anywhere in the world,” said Antonio Galloni, founder of the wine reviews site Vinous in 2013 and former lead critic at “The Wine Advocate.” “That means there is a real challenge for a winery to capture the consumer.”

Wine lovers who seek out reviews and insights on Vinous are looking for a connection to the producer, a key factor in deciding where to spend their hard-earned money, Galloni said. That could be a great tasting-room experience or some interaction with the owner of a family-run operation. The one-on-one connection to an owner may be more challenging with a large-scale business or a corporate-owned vintner.

And vintners are competing with other specialty beverage-alcohol options, such as craft spirits and craft beer. That’s challenging because spirits brands tend to have better-funded marketing and advertising programs than the wine business.

“They are competitors for mindshare in bars and restaurants,” Galloni said. “That’s more because of novelty, but it also gets down to something else: that feeling that you’re having something special and not mass market, that you can’t just go out and buy at the local store.”

RISKS AND REWARDS OF ROMANCE

One of the biggest changes in the wine business in the last 25 years is it has transitioned from mostly family-run, semi-lifestyle operations to big business, where a lot of wineries are owned by multinationals, conglomerates or holding companies.

When the original family is no longer involved with the brand or ownership shifts to a group that owns a number of vintners, care must be taken to not lose a brand’s connection to consumers, he said.

“The cost of making a bottle of wine is well-known, and it’s not very expensive, so everything above that is romance — story,” Galloni said. “When you’re a family that’s been making wine for three generations, there’s a natural story to be told.”

A longtime customer can be forged through a great experience at a winery or when ordering the wine in a restaurant.

“I see with my readers that they visit one place, and it marks them forever,” Galloni said. “That’s a beautiful thing. That’s the romance.”

Having a compelling story and effective building connections makes the difference when consumers are faced with wines of varying prices but of comparable quality and from producers down the road from each other, he said. Tasting rooms and other face-to-face opportunities for producers to interact with consumers is essential for emphasizing those distinctions.

And direct-to-consumer marketing and sales is important for the bottom line of wineries that don’t have clout in the U.S. three-tier beverage-alcohol route to market of producers, wholesalers and retailers. The slice of a North Coast vintner’s profit margin going to the wholesale channel can be as high as 30 percent, so a number of small- to mid-scale producers strive to sell at least half to three-quarters directly to consumers, retailers or restaurants, where allowed.

Wine Industry Conference

April 28

Santa Rosa

nbbj.news/wine17

“You always want to have some amount in distribution, so you don’t lose brand awareness,” Galloni said.

Silicon Valley Bank’s 2016 tasting room survey of about 850 premium wineries found that the average proportion of production sold directly to consumers is 60 percent. Of that, 47 percent of the sales are through the tasting room or visitor center, 33 percent by way of the wine club or on allocation, 8 percent online or by mail or phone, 7 percent at events, and 5 percent by other means.

Direct relationships with consumers is an advantage U.S. wineries have over those in France, he said. For example, producers in that country’s renowned Bordeaux winegrowing region largely work through brokers to sell the large quantity of wine produced, so vintners there mostly interact with negociants rather than consumers.

“There’s a disintermediation with the consumer immediately,” Galloni said. “With the California consumer, there’s the opportunity to have that kind of relationship. That’s a tremendous advantage.”

Napa’s Supéry bets on an appointment-only experience

Located on the busy Highway 29 artery through Napa Valley, St. Supéry Estate Vineyards & Winery at the beginning of this year voluntarily shifted to an appointment-only model as part of a five-year move toward higher-end, more immersive visitor experiences, according to CEO Emma Swain.

“Our visitor count has remained pretty consistent [afterward]. It’s just that having those visitors come in an even manner throughout the day, instead of all showing up at the same time. Our visitor experience has improved dramatically by not having that glob of people arrive all at once. We want to take care of them, but we only have so many people to do that.”

The consumer expectation is to start tasting soon after arriving, so making them wait can be disappointing, she said.

“People are used to making reservations for a restaurant, so why not get used to making a reservation for a winery?” Swain asked.

Looking to have customers who become “fans for life” versus just selling them a bottle of wine, St. Supéry’s main visitor experiences include:

• Aromatherapy With a Corkscrew ($70)

• Five Bordeaux Varieties and Your Five Senses ($55)

• Ampelography Master Class ($75)

• Chef’s Table ($125) and Veggies + Vino.

The programs run about 60–90 minutes. The four-wine Divine Estate tasting costs $45.

“I want people to go away with descriptors of what they like and they don’t like,” Swain said.

For example, participants in the five-Bordeaux program may decide they like cabernet sauvignon but also discover they like merlot with hints of blueberry or like cabernet franc but they don’t like petite verdot because it’s too tannic.

Or if they sample white wines like chardonnay and sauvignon blanc, do they like them aged in oak barrels or stainless-steel tanks, or like sauvignon blanc blended with semillion.

“I want them to come away with a ‘wow’ moment, not, ‘It was the most expensive, therefore, I like it,’” Swain said.

Vintners aren’t too big or two small for “high-touch” visitor experiences, she said.

“It’s more important to provide a great experience,” Swain said. “There was a recognition we made in going to appointment-only that we were going to turn people away. But it’s more valuable than seeing five more people and a certain number of them not having a good experience.”

SONOMA UPS ITS WINE-VISITOR GAME

In recent years, Rodney Strong Vineyards has been upgrading its visitor experience at the winery, located south of Healdsburg in the Russian River Valley winegrowing region.

There are a couple of spaces above the tasting room that can be booked for private food-pairing experiences.

But two years ago, the Sonoma County-focused vintner completed a terrace next to the property’s events green, where hundreds of visitors are accommodated for the each of the summer concert series. Last year, the lineup ranged from pop rock acts such as Huey Lewis & The News and The B-52s to R&B legend Smokey Robinson and jazz stalwarts Dave Koz and David Sanborn.

The green offers a place for winery visitors to have lunch overlooking the vineyards. But the terrace provides a higher-end experience for sampling the vintner’s higher-end selections such as the reserve-tier wines such as the Symmetry Meritage red blend from Alexander Valley grapes ($55 a bottle) and single-vineyard Alexander’s Crown, Brothers and Rockaway cabernet sauvignon wines ($75 each).

“You wouldn’t think a little 1,000-square-foot patio would make a big deal, but it really presents Sonoma County and the wines we make at Rodney Strong in a much different light,” said Tom Klein, proprietor. “The added benefit of being outside in the sun, feeling the Sonoma breeze with the vineyards and Russian River in the distance — it brings it home. A lot of [vintners] in the county are adding this type of experience to make it better for consumers.”

What’s driving that is the “discovery” of Sonoma County as a high-quality winemaking region?

“It’s a more relaxed atmosphere than Napa, and consumers enjoy that,” Klein said. “As they come, we’ve found the need to enhance our visitor experience and facilities to accommodate not only small groups of people but those who are very knowledgeable about wine and want that upper-end experience.”

Beyond daily winery tours, Rodney Strong last summer offered winemaking talks on the green Sunday afternoons for six weeks starting in July with growing Wine Country arrivals. Led by Klein, a winemaker or a viticultural assistant, these presentations to groups of about 40 are expected to be offered again this year. The goal is to introduce visitors to how wine is made.

“Everybody likes to hear about the inside story — what it’s really like, what you do and how you make it happen,” Klein said.

Attractions on the tour are the three winemaking facilities. The largest is for Sonoma County-tier wines, led by $17 chardonnay and $20 cabernet sauvignon and merlot. Built as a “winery within a winery” is the 20,000-square-foot Artisan Cellar, with its own staff, on-site barrel storage and small-scale focus via fermenters sized for 3–10 tons of grapes.

Relatively new to the tour and the Californian wine business is Rodney Strong’s 20,000-square-foot square stainless-steel tank winery, designed to be a more-efficient use of space, energy and water than facilities using conventional cylindrical vessels.

“In a rectangular building, round tanks waste 25 percent of the space,” Klein said. “Square tanks make infinitely more sense than round tanks.”

That winery was built two years ago for the first vintage from a remote higher-altitude vineyard in northwestern Sonoma County. Located in the 26,000-acre Cooley Ranch property straddling Sonoma and Mendocino counties two hours from the winery, the 200-acre leased vineyard is situated above the 1,200-foot fog line, allowing for hotter growing temperatures and extra tannin development — the grapes’ version of sunscreen — in cabernet sauvignon akin to what’s typically achieved from choice properties on the west-facing slopes of eastern Alexander Valley.

The “very high-end” 2014 Cooley Ranch wines are set for release this summer and fall, and those single-vineyard wines also will be a featured on the terrace and in the tasting room.

No matter the facility upgrades for a higher-end experience, the attraction still has to be in the bottle, Klein said.

“Being on the terrace or in a fancy tasting room, if the wine isn’t good, it doesn’t matter,” he said.

LESS WINE-FRIENDLY?

But it is more challenging to build wine production and hospitality facilities in Sonoma County than it was when the Klein family acquired Rodney Strong three decades ago.

“Sonoma County is an agricultural county,” Klein said. “Wineries are an extension of that agriculture. If you don’t have the wineries, you will not grow the grapes.”

Public officials in Napa and Sonoma counties have been wrestling with growing opposition to wine-related development — vineyards, wineries and hospitality centers such as tasting rooms — in rural areas for more than two decades.

Napa County started down that road five decades ago with the formation of the agricultural preserve and in 1990 with the Winery Definition Ordinance which mandated, among other items, new wineries adopt tasting-by-appointment only.

But the extent of further vineyard development and addition of more direct-to-consumer marketing functions on rural estates started coming into question in recent years with the WDO update and concerns about traffic from millions of visitors annually.

While Napa County decided on certain reforms last year, similar policy-making on rural Sonoma County wine facilities and events is continuing this year.

“These are the kinds of people you want,” Klein said about Wine Country visitors. “They spend the night. They help restaurants and hotels get full. We’re not a manufacturing industry. It’s an attractive product that brings an attractive clientele to Sonoma County. It provides an awful lot of jobs. We’re awfully short-sighted to lose track of that.”

The county doesn’t need thousands of new vintners, but prospective newcomers are being discouraged by the increasing difficulty in doing business, he said.

Galloni, Swain and Klein are set to speak at the Business Journal’s Wine Industry Conference on April 28 in Santa Rosa.

Jeff Quackenbush (jquackenbush@busjrnl.com, 707-521-4256) covers construction, commercial real estate and wine.