Napa Valley-based Far Niente Wine Estates produces its namesake flagship Oakville cabernet sauvignon and chardonnay wine brand, as well as late-harvest Dolce, Nickel & Nickel with 20 single-vineyard labels, Russian River Valley pinot noir brand En Route, and Rutherford cab-based Bella Union.
The business has its own farming company, Vinescape. All together, about 150,000 cases are produced annually from the five wineries.
In 2016, San Francisco-based private-equity firm GI Partners invested in Far Niente, just before selling Duckhorn Wine Company.
After years at the helm of Francis Ford Coppola Winery, Steven W. Spadarotto came to Far Niente Wine Estates as CEO last year. Ahead of his panel discussion at the Business Journal's Wine Industry Conference on Thursday, he talks with us about the challenges in raising wine bottle prices amid rising grape and vineyard prices, the blessing of the record 2018 harvest and how brand strength helps smooth out economic turbulence.
What are trends you see developing in luxury wine?
There seems to be a lot of doom and gloom out there about the millennials and the Z generation not being as into wines as the boomer generation was. In our case, we had a phenomenal year last year — in the broad market. But in DTC (direct-to-consumer sales), we saw significant double-digit growth.
I know that sounds kind of surprising. Some of that attests to, frankly, the strength of the brands, particularly Far Niente and Nickel & Nickel. They performed very well for us. We grew significantly last year in all channels, even after having taken some significant price increases.
Historically, this portfolio of wineries suffered only because of lack of supply, to some degree. As we were able to come into supply, we find that the lift we need to sell is there.
A CEO would be concerned with our ability to take price. Napa Valley cabernet (grape prices) in particular has been going up astronomically for so many years. Which, obviously, puts pressure on (vintner)’s margins, and the ability to take price is always challenging, particularly in the broad market.
In DTC, we don’t see the resistance to price increase as we do in three-tier (distribution, from producer to wholesaler to retailer).
Why is that?
We’re in the middle of some consumer research as we speak. And that’s one of the many questions we’re asking ourselves. The experience that your consumers have when they’re on site is critical to that. It’s just more difficult than three tier, (where) you have different avenues to sell to.
If you can take reasonable price in a reasonable time frame and it doesn’t negatively affect the velocity of sales in your point of distribution, you probably then can demonstrate stronger brand strength. We focus on that; we question that. You always want to test that, because it can change very quickly on you. …
Everybody that buys fruit feels the pressure on their margins, and feels the inclination to try to take price. It’s just difficult to do. And you have to be very, very careful about it.
There are some doom and gloom stories from people who play at the lower price points. The distributors we all deal with have their algorithms now for managing distributor inventories, and that’s become very difficult for some of the larger brands.
Wine business insights
Wine business insights
These key players on the California North and Central coast and in Oregon talk about what’s coming for the industry and layout of the marketplace now.
David Duncan, proprietor, chairman and CEO, Silver Oaks Cellars
Corey Beck, CEO and winemaking chief, Francis Ford Coppola Winery
Bob Torkelson, president and CEO, Trinchero Family Estates
Alex Ryan, president and CEO, Duckhorn Wine Company
Dan Baker, executive vice president, Korbel
Michelle Benvenuto, executive director, Winegrowers of Napa County
Ron Denner, Denner Vineyards
Cam Baker, proprietor, Larkmead Vineyards
Tom Bonomi, president and CEO, Price Family Vineyards & Winery
Steven W. Spadarotto, Far Niente Wine Estates
Sarah House, director and senior economist, Wells Fargo
They are set to speak at North Bay Business Journal’s Wine Industry Conference in Santa Rosa on April 18.