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Why do some wineries make it while others don’t?

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What gives a winery staying power? Some make it and succeed; others fall by the wayside. In these perilous times, when wine companies are going out of business faster than you can keep track of, and family wineries with decades of history are passed along to corporate traders like so many sacks of beans, there may be lessons to be learned from the past.

I have an old “Yearbook of the Wine Industry” published by Wines & Vines in 1944. In the California section are listed hundreds of wineries. Their names read like the sad carvings on cemetery tombstones: so many now departed. Where did Arcuri and Mount Diamond go? Scatena Bros., then in Healdsburg, and Santa Nella, in Guerneville, are ghosts. Padre, which made “Champagne,” Don Juan, which described its wines as “sun-rayed and mellow,” Madera, which bottled 6,000 cases per day, Mattevista, Di Giorgio, Arvin, Monarch, Valliant, Lejon, Croix Royale (“Say Croy Royal”, their advertisement reads)–once thriving, now all gone, to wherever wine companies go when they die.

Of course, there were survivors, in those yellowed pages, now nearly 70 years old: Korbel’s label has hardly changed, Sebastiani is still right there in old Sonoma (albeit no longer owned by a Sebastiani), Chateau Montelena is still in Calistoga, and Charles Krug remains there on Highway 29, in St. Helena, still owned by Mondavis (in that ’44 Yearbook, the general manager was Robert). In the Yearbook too are Beringer, Beaulieu, Louis Martini, Wente, all of them good, dependable names. But otherwise, the Yearbook is a Book of the Dead.

Ten years later, there was a famous restaurant in San Francisco, Orestes, whose cuisine, I believe, was Italian. It exists no longer; I can find no trace of it on the Web, but I have its wine list. It is probably from the mid-1950s, although hard to say exactly, because for Latour, Lafite and Margaux (all $10), no vintage is listed, nor even for Yquem ($12, presumably a half bottle). More to the point are the California brands. Fifty-five years ago Paul Masson, Almaden, Cresta Blanca and Christian Brothers were as upscale as California got. Where are they now? Gone with the wind, either evaporated off the face of the Earth or devolved into jug brands, on the bottom shelf of the store.

Yet on that wine list too are survivors, names familiar from the Yearbook: Sebastiani, Charles Krug, Beringer, Martini, Beaulieu, Wente, and two smallish outfits, one headquartered in Modesto, called Gallo, and one, Franzia Brothers, in Ripon. How did these escape the fate of so many of their brethren? What is the secret of survival for a family winery, amidst the Darwinian forces that threaten to tear companies to extinction?

Hard work, no doubt, diligently performed. Fairness to employees, and a proper sense of reward. A refined sense of the market, almost a foreknowledge of what the consumer wants before he or she knows it. Good accounting: many a company that went belly up thought it was doing just fine, before reality struck. A persevering, some would say ruthless passion to succeed, passed on from grandfather to father to son and daughter, a sense that something approaching family honor is at stake. And distribution, of course: the survivors managed (or manipulated) to get themselves into the channels that supply the vast U.S. market, something today’s small wineries struggle with.

I look at the current roster of California brands–thousands of them, with more coming along every day–and wonder whose names will be missing from the Yearbooks of the future. Already, in my 22 years of wine writing, famous brands have disappeared. Who remembers Vichon, Yverdon, Murietta, Louis K. Mihaly, Estrella River, Shown & Sons, Smothers, Sotoyome, Paulsen, Felton Empire, Richard Carey? All gave me and countless others pleasure, in their time; all succumbed to their fates. None had what it takes to make it.

  1. Steve,

    Great question. Please make sure I am on your mailing list when you figure out the answer. Wait, no. I think I’d rather not know because I suspect it has to do with something along the line of a boring thing like ‘fiscal responsibility’. I can tell you for sure that I have no business being a winery owner since I’d rather just share a wine with folk I enjoy talking to than sell it (my tasting room staff shoo me away when I stand behind the tasting counter at the winery). Many of us slightly shiver when we hear the term “Wine Business”, as if the second word is dirty, and we pay for that dearly. On the other hand, that is where the interesting stories are… folk who are stupid enough to follow their dreams and passions regardless of fiscal consequences. A very rich man once told me: “I’d rather have luck than talent any day”. Hallelujah.

    Maybe the real question is whether wineries and brands are supposed to make it in the long term. I am not so sure the answer is “Yes”. It could be that all we are is just a tiny reflection of our time. The land I sit on as I write this used to grow hops, then prunes and walnuts; now it is all in grapes and in 25 years it may be in pommegranates or (if I’m lucky) a subdivision of ticky-tacky Tuscan-like homes.

  2. Oded I hope Longboard will someday be run by your grandchildren!

  3. “Who remembers Vichon, Yverdon, Murietta, Louis K. Mihaly, Estrella River, Shown & Sons, Smothers, Sotoyome, Paulsen, Felton Empire, Richard Carey?”
    Well, Steve…there’s some names I’ve not heard in a long while. Lynncrest, Veedercrest, MartinBros, YorkMountain, Clos du Lac, BeauVal, Kenworthy, Tepesquet, ThunderMountain, Pichetti, Novitiate, Colgin-Schrader, Cassayre-Forni, Pesenti, Fralich, Wine & The People, Woodbury, LaCremaVinera, VillaStHelena, Garretson, CharlesShaw….it’s a fun game for us old-folks to play.
    Many of those ghost wineries were started by people who had a burning passion to make great wine. Something they felt they had different from the old guard. And so many times, that passion gets extinguished and the winery dies. Sometimes thru death and no children to step in. Sometimes that passion dies from the realities of the marketplace and having to sell that stuff you so enjoy making.
    I have seen it any number of times over the yrs. Somebody starts out making some great wines, they are very passionate about their craft. And I’ll meet them 10-20 yrs down the road and I can tell that that passion for winemaking in them has died…for whatever reason. But it’s that passionate person behind the wine that is so important. That’s one thing about Ridge. When I first met PaulDraper in ’73, I was struck by his passion for his craft….full of ideas of what he wanted to try, new vnyds to discover. When I see him again more recently, the beard is a bit greyer now and thinner on top…..but that same enthusiasm and passion still burns inside him. Others like that come to mind…AdamTolmach, BobLindquist, JimClendennen, SteveEdmunds, KentRosenblum.
    Winemaking is no different than neutron transport, novel writing, inventing widgets, playing guitar…whatever. Once you lose that passion…it’s a downhill slide.
    Tom

  4. Veedercrest is still around. Ron Fenolio revived the brand and he along with winemaker Chad Alexander is making some of the best valued, truly yummy and lowest priced vineyard designate Cabernets around. In this economy, it is a welcome thing.

  5. I would like to know how long it took for these brands/wineries to be wished into the cornfield? 5 years, ten years? Not to put salt on a wound of the previous owners, but what mistakes led them to their demise? It would be an interesting study and a good warning to others who dare to tread where many have fallen.

  6. Yes some of those names are remembered.

    What happened? Several things in a relatively short time.

    The popularity of the lower end and jug wines dwindled fast in the face of the combined factors. Wineries learned more about which winegrapes made better wine in which area, which is big reason for land values to go up. Some wineries bought out others and then inturn were corporatized or conglomerized. The squeeze was on the bottom and middle lines. I have been to the Old Paul Masson winery. What is grown there now? Not jug wines!

    Also the earliar wine pioneers were perhaps a little too old fashioned and wanted out, if no one in there family could run the business.

    Also in order to compete in a national market a small winery would have to expand. If it could not expand it had to remain the same size in an ever increasing competitive market. They might do as Seghesio did, cut out the white wines and make quality reds, and hopefully they will become a branded name, or get abundant support from the wine/wine related/ food related media.

    There are several wineries that built their following and fame on good high quality chards and cabs. When the demand went up they raised prices. When the demand went up more they bought other vinyards and the price went up again. Then a saturation point occurs and the wines don’t sell as quickly as they were, during the land buying phase. Some one makes them an offer….

  7. Passion & Pragmatism.

    You have to have the passion for grapes and wine to sustain you through the floods, frosts, droughts, untimely rains, and heat spikes.

    But you also must possess a pragmatism that borders on pessimism: as most people know, winegrowing and the wine business in general is a tough way to eke out a living.

    If you’re not rich (Harlan), did not inherit vineyards (Martinelli), or did not buy great land when it was relatively cheap (Kistler), there is hardly a faster way to burn through your savings than owning and operating a winery. And even for the Harlans, Martinellis, and Kistlers, it is still an arduous slog just to keep the business afloat, let alone move forward.

    So in order for most wineries to sustain their business, I think they have to be exceedingly pragmatic; in terms of yield expectations, always think low and hope for average (but have extra barrels on standby in case you get lucky); in terms of net profits, always underestimate your direct sales vis-a-vis distributor sales; in terms of operations, always try to do as much of the work yourself, in-house, if possible. In terms of grape purchase agreements, always try to build in safety mechanisms that will protect you when yields are much lower than the projections upon which the deal terms were struck. Don’t take on excessive debt based upon mere projections that have no historical relevance. Don’t take on too many fruit sources if you can’t follow through, payment- or quality-wise; you don’t want to piss off the farmers. Build your brand slowly, cautiously, one hand-sell at a time. Work with like-minded distributors. Have a business model that is different than your competitors but can be described in 10 words. And never forget that the customer is always right.

    John

  8. Yverdon exists today as Terra Valentine.

  9. Steve probably thinks it is Bush’s fault…

  10. Fascinating discussion, kicked off by a really interesting post. Thanks to all.

  11. Can’t speak to the brands you mentioned, but generally speaking the thing that makes or breaks most brands now is whether or not they are good at marketing their products and brands. That’s not just for wine, but there’s little reason to think wine wouldn’t be influenced in similar ways by those forces – in fact, with so many SKUs out there and such a long tail, the competition is tough and anything that gets a brand name noticed is going to help that brand stay afloat…

  12. “Veedercrest is still around”
    Karen,
    I believe the old Veedercrest, located in an abandoned Shell Oil Van de Graff accelerator bldg in scenic Emeryville, was shut down by AlBaxter quite a while ago and was out of business. Like Charles Shaw….well…maybe not exactly like Charles Shaw…the label was revived in a different guise from Al’s original concept.
    Tom

  13. Tim Smith says:

    WOW! Taking about bringing back memories….being a old veteran in the industry, a lot of wineries that made excellent wines didn’t see the need to develop their market plan, how to go to market, and keep up with latest trends.

    Then the consolidation of the Grocery industry, and different channels of distribution changed, it became pay to plan, regardless of the quaility of the wines.

    Wholesalers, Brokers, and Distributors who once had personal and business relationships with wineries, and felt they were part of the family, went away because of ownership changes, and it became a matter of the bottom line, especially the larger business partners. I always think of the Benziger Family as a perfect example of feeling you were a real partner, and the remaining family members treat you like their Mother and Father did.

    But the good news is that smaller wineries especially those in the Pacific Northwest are growing because the newer generation of wine buyers, care about quaility, history, and trying new labels, and styles….so who knows maybe another round of changes are coming back our way.

  14. Joseph Filippi says:

    Fun stuff reading this. Well I am oldschool and 4th generation at 56 years old. The 5th is here with me and the sixth is on the way. Taking a step back and looking at how the 3rd generation did things I’ll have to admit they missed the boat back then and did not change with the times. I count myself blessed that I saw it and it wasn’t too late to make the change to higher quality and working within the niche that kept us here, as well as diversifying whenever opportunity came. One thing I would say to any newcomer which was passed down to me, is grow slow, work hard, and don’t borrow too much. If you run out of wine don’t sweat it. There is plenty out there to be purchased. Wait there are three other things, the best 3 friends of a winery, clean clean clean !

  15. Thanks to all of you who have chimed in with much affection for the Veedercrest brand. Yes it is the same brand as Al Baxter used to run in the Shell Oil accelerator building in Emeryville. I was one of the three general partners of Veedercrest, along with Al Baxter and the Ring family. Al made wonderful wines. It was my pleasure to join Al when the wines were still made in his basement in the Oakland hills (destroyed by fire). Following both Ed Ring’s and Al Baxter’s death I thought it would be a suitable tribute if I brought back the brand in their memory and trying to treat grapes with same respect that Al Baxter would. I hope you will try the wines from the Veedercrest revival, I think you will enjoy. Please take a look at our web page http://www.veedercrestwines.com and read about Al Baxter’s original meeting with Andre Tchelitcheff which was the start of our Veedercrest adventures. Enjoy!

  16. Frankly, I’m surprised there isn’t a higher failure rate from what I’ve seen of winery business practices. That aside, whether they succeed or not seems to boil down to an ability to be realistic. Sounds simple but wine is a luxury market built on the achievements of individual people, and people have egos (myself included). So much so in wine that it reminds me of my youth working in film. I feel I am my winery; my wine is a reflection of my choices, tastes, and personality. My business the culmination of my life’s work. Should I experience great success (pretty please, God), and then encounter a market change, would I be able or willing to change my production, marketing, and/or business style to the times? Passion is as much a double edged sword as pride and tradition just as dangerous in this business.

  17. I think the wineries who value their people make it more often then not. Too many companies now just rely on the product and with such amaizng wines being sold today, its not enough.

  18. Our family was in wine production back in Genoa, Italy. During the early days of the California gold rush, Great Grandfather Angelo Sciaccaluga was in Genoa, coming to Calaveras county with a fever – not gold fever, but wine fever. He settled in the gold rush town of Vallecito (which was home to other Genovese Italians) east of the Napa Valley, and was ‘officially’ the first wine producer in the Calaveras region, as he paid the county’s first alcohol tax.

    It is interesting to ponder, we were always under the impression it was phyloxera(sp?) in the grapes and the early roots of prohibition that did the Sciaccaluga family wine and spirits business in, adding to this the end of the gold rush, there just weren’t the customers here to support the venture. Though, upon your writing, perhaps there weren’t any family members interested in carrying on the family tradition or none of them had the passion.

    Now the Calaveras region is coming back to its wine producing roots and being ‘re-discovered’ for its wines and array of outdoor adventure. Until our generation revived it, re-establishing the family vineyards in ’98 and wines in 2004, there weren’t any of the original gold rush families here to bring it back. The new wine producers have landed here in a wine village so to speak, to put up their shingle, make wine, network, cross promote and create a unique opportunity for wine lovers. Our family is fortunate to have this community ‘re-settled’ here in Murphys, with so many passionate producers to cheer each other on and help when help is needed.

    It truly is a business of passion – ours especially so being estate grown; as winemaker Gary of Smith Wooten of Napa says, you can make bad wine out of great grapes, but you cannot make great wine out of bad ones! Which is why he gets in his plane and comes to Vallecito to check on his designated varietals in our Tanner family vineyards, making sure those little grapes are Petit Verdot and Syrah worthy for his label.

    Dick and Ron Tanner are passionate about growing their vines and their family wine heritage. Proud to be following in Grandpa Angelo’s footsteps…they custom grow their grapes to align with their winegrape buyers, farming by the acre and marketing their grapes by the usual ton lot. For a small family wine producer, they are keeping with the times and growing slowly. You can grow grapes anywhere, but you can’t change your site – with rocky soils and sloped terrain, it is a copycat of some of the best growing profiles in Europe.

    We may or may not be here in fifty years, but we’ve been here 150 years – if staying power has any bearing, perhaps our family has a chance in this willy nilly wine business.

  19. Donn Rutkoff says:

    Stevey baby, one thing that helps brands to survive, is to have big families. The more kids a winemaker has, the more likely at least one of them will carry on the family business. No university study needed. But can I apply for a research grant anyway to study this?

  20. Robert M. says:

    Interesting that you should include Wente in the list of survivors as they might not be there for long. Someone I know working on the winery side (not the non-gregarious golf course/restaurant side) often gripes about how Wente has been making moves that hint at a sell-off to Gallo. He says that Wente has hired several Gallo employees to fill upper management positions – even creating VP positions where none existed before (top-heavy, anyone?). They also have had several rounds of layoffs (I don’t think it included the VPs they hired), and have radically shifted from a family-owned atmosphere to one of corporate take-over. If you’re not in upper management, you are treated as mere dirt beneath a fingernail. Doesn’t sound too promising to me.

  21. Steve, I’m inclined to think along the lines of Oded, who responded above. I’m not sure a lot of the wineries, at least the smaller ones, WANT to survive. In my case, my winery, Willis Hall in Washington, is a creation essentially forced on me by my government because I’m not allowed to create my art in any significant amount without having to sell the stuff. My government is addicted to my taxes, you see, and they force me to feed their habit. Heck, given my druthers, I’d make wine and just give it away. I make wine because I’m passionate about creating my art, and I hasten to assure you that I am NOT passionate about selling it. The business of business bores the hell outta me and greatly detracts from the joy I find in my craft. I’m not doing all this so that my winery lives beyond me. When the time comes for me to stop making wine, for whatever reason, I’ll just stop making wine. If someone wants to buy my winery (business – ugh!), then I’ll sell it, because I’ll know that someone else has a passion for creating wine as art and I can provide a basis for him/her to do that. All things are ephemeral – wine, art, life. It’s only a matter of how ephemeral any given thing is. I neither need nor want to live forever. I’m happy when I create my art, and to me, that’s all that counts. If I happen to bring some measure of pleasure to others who experience my art, then I’m just that much more happy. And the great wheel keeps on a-turnin’…

  22. John Bell, thanks. I know a lot of winemakers in your shoes–all they want is to make wine, and not have to get involved in the business of selling it. I personally find it very hard to try and sell anything. It’s embarrassing and uncomfortable. I hear you.

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