As part of shift of the company toward more premium products and a long-held passion by the proprietor, Purple Wine Co. and Sonoma Wine Co. of western Sonoma County has installed a distillery to produce high-end spirits.

The maker of branded and custom wines, renamed Purple Wine + Spirits, carved out a 5,000-square-foot space in its expansive winery in the community of Graton to create a separate business, Graton Distillery Co.

The distillery is inside of a wine operation that has 170 employees and makes 800,000 cases annually. The first spirits product, a craft gin, is currently being distributed to select locations in the Bay Area. Broader distribution and more labels are planned.

A distillery project was something Purple proprietor Derek Benham has been seeking for years.

“I love spirits, and I love gin, in particular,” said Benham.

He rediscovered gin a few years ago while touring Europe. The gin culture of Spain intrigued him — well-made gin is mixed with ceremony and care into cocktails such as martinis and gin and tonic. High-quality American gin-makers have emerged, but a common problem he’s seen domestically is in presentation at the lounge: too-small ice that leads to too much dilution and improper mixology.

The addition of higher-priced spirits is part of a planned shift for Purple and will help the company get more distribution to trade accounts that are looking for craft beverages, Benham said. The spirits and other projects got a capital boost with the mid-2012 sale of the 1 million-plus-case-a-year Mark West pinot noir label to Constellation Brands for $160 million.

Building on its Cogenra Solar hot water and electricity installation, Purple recently has gone more green, adding a Tesla stationary battery system to store solar power and a nitrogen generator to pull inert gas from the surrounding air.

Few North Coast wineries have their own distilleries for branded products. For example, of the three dozen federal distillery licenses in Sonoma County, almost all are full-fledged distilleries or alcohol-adjustment service providers. Yet more hybrids could be on the horizon.

Consistent with that shift toward $15- to $25-a-bottle wines, the company introduced in the past year the national brands Raeburn, a Russian River Valley chardonnay; pinot noir-focused Calista and Flint & Steel sauvignon blanc.

About a year ago, Purple Wine consolidated with the Sonoma Wine contract-services company, which provides custom-crush capabilities at the Graton, Russian River Valley and American Canyon wineries, and with a new distillery venture to form Purple Wine + Spirits. Also a year ago, the distillery inside the Graton facility started operating.

Benham is set to be on the diversification panel at the Business Journal’s Wine Industry Conference on April 28.

The Journal interviewed David Franke, executive vice president of sales and marketing, about the company’s continued upscaling of its wine, recent launch of the spirits venture and how the distillery fits into a coordinated beverage alcohol strategy.

On targeting $15-$25 price points for new brands.

DAVID FRANKE: Based on the overwhelming data trends, that’s where consumers are going now, and that’s where we think we can provide more interesting and appropriate value. It’s hard when you get below $10 to be particularly creative with what you’re offering, because of the cost structures and the investment. Consumers are interested in trying new things and spending in the mid- to high-teens in price points.

On the contract brands side of the business.

FRANKE: We continue to have business for control and private [wine] labels for retailers, but there is a little more interest from hotels and restaurants to have exclusive brands. That trend continues to develop in retail.

On the new spirits venture.

FRANKE: We have been working on that for a couple years, and we officially released [the first spirits brand, D. George Benham’s Sonoma Dry Gin,] in Northern California the second week of February. That division is called Graton Distilling Company.

We wanted to give it a clear identity. We spent a lot of time talking to distributors and trade, as we do when we’re considering packaging changes or line extensions, and we heard a number of consistent themes related to spirits. A lot of people getting into the craft spirits arena aren’t well-capitalized. They may have an interesting idea and can make a good product, but when it comes time to scale it up, they can’t do that.

Secondly, a lot of people getting into this category are coming from outside the industry and they don’t understand the regulatory environment and the three-tier [beverage alcohol distribution] system.

Then, consistently the wine companies that have been expanding into spirits have tended to treat spirits the same way they do wine. They put it in the same sample bag to the same salesperson.

We try not to do that. We believe that while spirits works through the three-tier system and goes through the same federal agencies, the brand development, the sales activities tend to be different. There are discrete buyers for wine that are not the same as for spirits within distributor management. There tends to be a separate sales team.

So when we got close to launching, we wanted to make sure we had a different identity so we made sure people could see we were respecting the craft spirits space and taking this seriously.

How differently does it operate from the wine operation?

FRANKE: We have two salespeople for California. As we expand to different markets, we will add more dedicated salespeople. We have a sales manager with a good deal of experience in the craft spirits space. We have a brand ambassador able to work with bartenders on cocktail recipes and able to host visitors to the distillery.

They know about our wines and can talk about them, but they are focused on selling spirits. The people who are managing the wine sales in California know about the spirits and the pricing and distribution strategy, but they are not tasked with selling any spirits.

In production, the only real overlap comes to bottling. The same staff that does wine bottling works on spirits bottling. It’s a very distinctive bottle that requires a lot of custom work. We have a great production facility and crew for wine, and it’s great to know we can hand it off and get the work that needs to be done to get — at this point — the gin into the bottle and to the consumer.

Production is being done by distiller Jeff Duckhorn. We’re a full distillery, not just a blender as some in the craft spirits category are. He trained under Matt McCann and the two worked on setting up the distillery.

What is the target retail price? What outlets are carrying it out there?

FRANKE: The gin has a targeted retail price of $40, and there are some local retailers that are selling it for as low as $29.99.

In [our] back yard, we’re at [locations such as] Bottle Barn, Oliver’s [Market], Pacific Market, The Bounty Hunter. We’re focusing on specialty retail that understands how to sell craft spirits. Putting this on the shelf next to Tanqueray or Beefeater isn’t going to do us or the retailer any good, if their customers don’t understand it. As an example, the spirits manager at Bottle Barn has wanted to know all the details about the production of the gin and the blending of all the particular botanical components. Based on the sales volume, he seems to be telling the customers about that. I don’t think they’re coming in and picking up a bottle without that information or communication.

And there are local bartenders who have taken to it. They like the style of gin and are building cocktails around it. A couple are Jackson’s Bar [in Santa Rosa] and Jamison’s Roaring Donkey in Petaluma. The gin is in a New World style, so it’s not as much juniper-driven or like Bombay Sapphire [gin]. It’s more mixable, as the bartenders have told us.

When is the next release scheduled from the distillery?

FRANKE: We will be releasing Vodka Vodka in June. We wanted to call it Vodka-Flavored Vodka as a poke at all the flavors out there, but we learned that “vodka” is not an approved flavor for vodka, according to the [U.S. Tax & Trade Bureau].

In September, we’re releasing Redwood Empire American Whiskey. Then a year from now, we’ll be releasing what we’re calling Triple-R — Russian River Rye Whiskey. We’re experimenting with brandy, something to that connects not just to the facility but to the area, with an apple brandy. We’re thinking thinking about using the bee hives on the property to do something more creative than the honey-flavored whiskeys the major spirits brands have put out.

Jeff Duckhorn is experimenting with wheat whiskey and vermouth. The response from the local spirits trade — both the retail and the bar owners and consultant — have been involved. They were part of blending and competitive tastings on the gin, and we’re doing the same thing on the vodka and whiskey.

Lisa Ehrlich [head of branding and innovation] has identified that people really passionate about using craft spirits are almost like cooks with different ingredients. Not only do you need one bitter or one vermouth, but you need three or four, depending on what you’re mixing it with and what you want the flavor to be. It’s been fun to have these people come into the distillery and talk to us about if they are making this kind of a cocktail it would be fun to have that.

We’d love to do some small things that may only be available to people in the back yard, but they can be part of the process. At our scale, we have the flexibility to do it.

Has the ramping up of the spirit side of the business changed the conversation with distributors, and now that you’re starting to add higher-priced wine brands?

FRANKE: I don’t know that it has made it easier. Because we have a track record with the trade and distributors, sometimes they are willing to give us the benefit of the doubt. We do understand the support requirements when talking to a distributor. We know we need to be engaged with the salespeople, providing sales materials and samples.

People outside the industry really don’t have a grasp of that. There is a tendency to think, I’ve made it, I’ve sold it, it’s in your warehouse, so now it’s your job to go sell this. Our approach is that these are our brands and we have to manage the positioning and the communication, whether it’s wine or spirits.

Because we’re only in California, we’re only with one distributor, Young’s Market Co. We interviewed different distributors. We’re building a brand that if you just put it on the shelf in a grocery store it may not sell through because no one will know anything about it. We want people who can explain why you may want this and what it’s comparable to.

What is the cross-pollination between marketing to wine and spirits consumers?

FRANKE: The big buzz is millennials and how to market and communicate to them. The rules of marketing have changed, partly because of generational changes but also technology. I see plenty of boomers standing in stores with their smartphones looking up information on products.

Millennials tend to be less brand-loyal. Older boomers: I once had a man tell me that once he turned 18 he had to make the three most important decisions of his life: what kind of car he was going to drive, what kind of cigarette he was going to smoke, what kind of whiskey he was going to drink. There is a whole generation who were identified by that brand, and that is what they had.

That is not the modern consumer. They are experimenting, gathering information from all kinds of sources. As much interested in discovery as repetitiveness. In the wine space, consumers tend to shop in six or seven brands. To say we are going to own a consumer is lying to yourself as a marketer or as a brand business manager. The reality is, we want to be part of their consideration set. When they come in and they’re shopping for chardonnay and we have one of five in that rotation. Keeping it in that rotation is the challenge.

I liken it to the restaurant business. Most people don’t simply go to one restaurant every time they go out. They have two or four options, based on proximity or style of food or price point. When something opens in that category, they’ll tend to go try it. It may or may not bump out something in their consideration set before.

From a marketing standpoint, keeping your message out there and being relevant comes to that point of purchase is the challenge. Getting those recommendations from tradespeople in the restaurant and retail store is a challenge, because everyone is looking for what’s new, what’s different.

From a brand-building standpoint, getting sold once is not that difficult. Most buyers if you have an interesting proposition, they’ll put you on the shelf. Getting the repeat order or consumer purchase is difficult, because people are looking for what’s new.

On the gin, we believe we’ve carved out a unique flavor profile. We have a unique package. The feedback we’re receiving thus far, particularly from bartenders and mixologist is this fits a broad variety of drinks and gives them something they can use in different ways. We’re hoping that will help keep it out there.

When Jackson’s cocktail Bend It Like Benham’s runs its course, our hope the bar manager there has another great idea that includes Benham’s gin.

What’s the scale of the distilling operation?

FRANKE: Right now, we’re very tiny. We made 400 cases of gin. To do that, a crew hand-zested 200 pounds Meyer lemons and Buddha’s hands [citrons]. Robert Hawkins, our existing distiller, figured out a way to streamline zesting but not figured out with the Buddha’s hand.

We plan to make 2,000 cases of vodka and 2,000 cases of gin. We’re making not a lot of whiskey, and when we release it next year there will be only only a few hundred cases to sell.

We would like to grow to 20,000-ish cases four or five years now, when get the gin production streamlined.