sales & marketing

The Five Top Scenarios to Consider When Launching a Second Long a tradition in Europe, producing second labels has proven to be a profitable way to increase volume and expand a winery’s portfolio. Wineries can take steps to launch their own second label by learning from these effective winery examples.

Michael S. Lasky

ALTHOUGH THERE ARE A multitude of reasons why a winery might consider creating a second label, when we examine the most common justi- Decoy: How Duckhorn ’ Second Label fications, the list is essentially reduced to just five: Became a Primary Brand • To make wine at a different price point than a flagship wine to expand More than 35 years ago, Napa Valley’s Duckhorn Vineyards saw a need to es- the portfolio and increase volume with an “everyday wine” tablish a second label for wines that were still considered excellent—but not a • To use grapes that do not match the quality, either higher or lower, than perfect fit for its topline releases. As Carol Reber, the chief marketing officer, usually used for the flagship wine told WBM, “In some cases, this had to do with stylistic differences, and in • To support a private label exclusive to one retailer other vintages it reflected an excess of a particular or that our Duckhorn Vineyards’ wines could not accommodate. From the outset, • To help a winery launch a wine/blend or varietal distinctly different from anything the winery has previously been known for the quality of the vineyards and wines that went into our Decoy bottlings was terrific; and because they were less expensive than our Duckhorn Vineyards’ • To produce a larger production wine not ordinarily associated with a wines, it made fantastic wine for less formal occasions.” small production winery

Wine Business Monthly spoke with wineries that have launched second label wines, some of which have become so successful that they grew into their own separate businesses/brands. We wanted to find out what circumstances led the wineries to consider adding another branch to their portfolios, as well as the logistics that led up to the eventual launch. We also asked designers their thoughts on the best ways to differentiate from the flagship wines or whether to maintain an association with the primary brand. The dilemma for wineries and designers was best summed up by Ed Rice, managing director of Affinity Creative: “Cannibalization can occur if the secondary label is not clearly differentiated. That said, some connective brand issue is needed or else what’s the point of having a second label versus launching a different brand.” (See sidebar: The Balancing Art of Second Label Design.) Here are five case studies of successful second label launches. Each illus- trates one of the most common scenarios for a new label launch. By the time the 2008 recession hit, the Decoy blend had devel- oped a loyal and enthusiastic following, with direct-to-consumer customers and retail accounts eager to continue purchasing “stellar wines from top producers but at more affordable prices,” according to Reber.

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“It became quite clear,” Reber continued, “that expanding the Decoy wine shop for our customers by off ering a broad choice of varieties, appella- lineup and even establishing Decoy as a winery in its own right was the tions and price points to thoughtfully align with their taste and pocketbook,” perfect solution to the growing sales and expanding its portfolio to vari- Reber added. etals Duckhorn had not previously produced. While there was some initial Because of the signifi cantly larger case production that Decoy wines concern about Decoy’s potential to impact sales of our Duckhorn Vineyards’ became, it quickly outgrew the original Napa site. Now the second label brand wines, we decided to take the plunge.” is produced in a state-of-the-art winemaking facility in Hopland, California. At the current SRP of $25, Decoy red wines are priced signifi cantly lower Th e grapes for Decoy are sourced throughout California, so the Hopland than the Duckhorn Vineyards’ reds, many of which top $100. Th ey are also location in Mendocino and its proximity to a major highway provide greater intended for diff erent occasions. “Th is is part of the strength and the success effi ciency and lower costs. of our Duckhorn portfolio,” said Reber. “We strive to be a one-stop luxury Th e success of Decoy is now spawning its very own second label, Decoy Limited, a higher tier of limited-production wines with a slightly higher price tag than the original line. Again, it is meant to satisfy consumer demand for curated wines at the right price point, which in this case is about $5 higher than the original Decoy prices.

From vine to wine, completely online A to Z Wines: Creating a Second Label to Diff erentiate Special Grape Lots While Oregon’s A to Z Wineworks produces wines from a broad selection of Turn Your Passion varieties, its reputation is founded on its Pinot Noir blend. “A to Z has worked with some 100 vineyards in Oregon over the years, so we’ve had the opportu- nity to evaluate the characteristics Into a Successful of the grapes from every region of the state,” said Deb Hatcher, one Career of the winery’s founders. “Be it the tannin or acidity profi les, the Get the scientific knowledge, practical insight soil type, the elevations, the mi- and confidence to master the art of winemaking. cro-climates, we know the aspects • Learn from the best winemakers in the industry of all of them to help us deter- mine the consistency of our Pinot • Gain real-world knowledge that can be used immediately Noir blend year in and year out.” Expand your network • In 2017, Hatcher said the Invest in your passion today. winery saw an opportunity to cpe.ucdavis.edu/winemakingcert pick out the best fruit from vine- yards it had worked with over the years. From those lots, they could produce a wine that captured the “essence of Oregonian Pinot.” Th is boutique-level wine was produced in much smaller quan- tities and sells at a higher price than the $20 fl agship Pinot; it was second labeled “Th e Essence of Oregon” to diff erentiate it from the original A to Z Wineworks’ portfolio. One pedigree of Th e Essence of Oregon Pinot Noir that remains the same as the other A to Z Wineworks’ bottles is its screw cap. Th e winery has consis- LET’S BE CLEAR tently bottled with screw caps early on from the start of its business in 2002. THE ANSWER IS MICROVANTAGE

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90 March 2021 WBM The Five Top Scenarios to Consider When Launching a Second Wine Label the business side of wine Gruet: Second Label Wines Created Exclusively for a Single Retailer When a winery has the capacity to produce additional case- loads beyond their own specifi c needs, they safely answer to the increase your siren call of retailers seeking direct-to-consumer a privately labeled but simi- sales larly styled wine. An illustrative example of specifi c second label production is Precept Wines’ Gruet, the renowned New Mexico producer of Méthode Champenoise sparkling wines, which was contracted to do just that exclusively for one retailer. When the West Coast-based wine and spirits mega-chain BevMo! contracted with Gruet to create for their stores an exclu- sive second (private) label of sparkling wines, Gruet accom- modated with a Brut and a Brut Your passion is making wine. Ours is helping you sell it. microworks technologies, inc., napa california Rosé, ones similar to Gruet’s winesoftware.com | [email protected] | 707.224.9620 established products but with a new moniker, Cuvée 89. Although BevMo! carries Gruet’s branded sparklers, the retailer wanted similar wine that could be off ered in their “buy one, get a second at 5 cents” promotion. Winery, Bergevin Lane Vineyards, Bergstrom Winery, Bianchi Winery and Tasting Room, Black Hills Estate Winery, Black Stallion Estate Winery, Blackbird Vineyards, Bogle As Brad Mayer, Precept Wines’ vice pres- Vineyards, Bouchaine Vineyards, Buccella, Burgess Cellars, C Donatiello Winery, Cain ident of public relationships, partnerships Vineyard and Winery,The Wine Cakebread Industry’s Cellars, Leading Cameron Online Hughes Job Wine Site Co., Castello di Amo rosa, Caymus Vineyards,I found Chalk Hill Estate my Vineyards job & Winery, Chanceat Creek Vineyards and experience, explained to WBM in an (Bock), Chappellet Winery, Charles Krug Winery, Chateau Bianca, Chateau Diana, Cha email, “In addition to Bevmo!’s Gruet Cuvée teau Montelena Winery, Cline Cellars, Clos Du Bois, Clos Lachance Winery, Clos Pegase 89, the winery also produces a more widely Winery, Constant-Diamond Mountain Vineyard, Constellation Wines, Constellation Wines U.S., Continuum Estate, Conway Family Wines, Copain Wines, Coquelicot Wines, Corl distributed second label called Domaine iss Estates, Cornerstone Cellars, Cru Vin Dogs Wine Group, Crushpad, Cuvaison Estate Saint Vincent, which comes in a Brut and Wines, Darioush Winery, Dashe Cellars, David Bruce Winery, De Loach Vineyards, Del Dotto Vineyards, Delicato Vineyards - Custom Resource Group, Derby Wine Estates, Dia Brut Rosé style. Th is second label is also winejobs geo Chateau & Estate Wines, Dierberg/Star Lane Vineyard, Domaine Carneros, Ltd., Do made méthode champenoise, according to maine Chandon, Domaine Serene Vineyards & Winery, Don Sebastiani & Sons, Dono Dal Cielo Vineyard, Dry Creek Vineyard, Duckhorn Wine Co.,. comDutton-Goldfield Winery, E & J strict quality standards for this type of spar- Gallo Winery, Ehlers Estate, Enkidu Wine, Fantesca Estate & Winery, Far Niente Winery, kling wine. Th e key adjustment for these Ferrari-CaranoMore Vineyards wineries & Winery, Fetzer use Vineyards, winejobs Fleury Estate Winery,.com Flora Springs wines is less time en tirage, leading to a crisper, more fruit-forward style. Winery & Vineyards, Foley Family Wines, Francis Ford Coppola Presents, Frank Family Vineyards,than Freixenet anySonoma other Caves, Fritz online Winery, Frog’s job Leap site. Winery, Galante Family Th is label has seen success in many markets, especially as on premise by theWinery, Glenora Wine Cellars, Goosecross Cellars, Grgich Hills Estate, Groth Vineyards glass pour or ideal in mimosas and other cocktails.” & Winery, Gundlach Bundschu Winery, Hagafen Cellars, Hahn Family Wines, Hall Wines, Hanna Winery, Hedges Family Estate, Heitz Wine Cellars, Hess Collection Winery, Hud To maintain the second label wines completely separate from Gruet’s son Vineyards, Ironstone Vineyards, J F J Bronco Winery, J Lohr Vineyards & Wines, J fl agship wines, neither of these products is featured on the Gruet website.Vineyards & Winery, Jack Neal & Son Vineyard Mgmt, Jarvis, Jordan Vineyard & Winery, Joseph Phelps Vineyards, Justin Vineyards & Winery, Keller Estate, Kendall-Jackson, Ken Instead, they can be purchased on the BevMo! website and third-party neth Volk Vineyards, Kenzo Estate, King Estate Winery, Knights Bridge Winery, Korbel websites or by special inquiry at the company’s tasting rooms, noted Mayer. Champagne Cellars, Krupp Brothers Estates/Stagecoach Vineyards, Kunde Family Estate, La Crema, Laird Family Estate, Lambert Bridge Winery, Lancaster Estate, LangeTwins Winery & Vineyards, Ledson Winery & Vineyards, Lewis Cellars, Littorai Wines, Long Meadow Ranch Winery, Lucas & Lewellen Vineyards, Lynmar Winery, Marimar Estate Vineyards & Winery, Martinelli Winery, Medlock Ames, Mendocino Wine Co./Parducci Wine Cellars, Merriam Vineyards, Merryvale Vineyards, Michael-David Winery, Monterey Wine Co., Mumm Napa, My Wines Direct, Napa Wine Co., Number 9, Nelson Family Vine yards, Nicholson Ranch, Nickel & Nickel, Niner Wine Estates, Oak Ridge Winery, O’Neill Vintners & Distillers, Opus One, Owl Ridge Wines, Patz & Hall Wine Company, Paul Hobbs, Peju Province Winery, Pezzi King Vineyards, Pine Ridge Vineyards, Plumpjack Winery, PrairieCreated Berry Winery,& Managed Precept by Wine Brands, Premier Pacific Vineyards, Quintessa Vineyards, Quixote Winery, R B Wine Associates - Rack & Riddle Custom Crush Wine Services, RaymondWINE BUSINESS Vineyards, Regusci MONTHLY Winery, Reynolds Family Winery, Ridge Vine yards, Robert Hall Winery, Robert Oatley Vineyards, Robert Sinskey Vineyards, Robledo Family Winery, Rodney Strong Wine Estates, Roederer Estate, Rombauer Vineyards, Rosenthal - The Malibu Estate, Round Pond Estate, Rubissow Family Wines, Rutherford Hill Winery, Rutherford Ranch Winery, S V P Winery, Saddleback Cellars, Saintsbury,

WBM March 2021 91 The Five Top Scenarios to Consider When Launching a Second Wine Label

Ménage á Trois: Anatomy: Second Labels Can Maintain Distance A Second Label for the $100+ Bottle Winemaker from Established Wines Who Wanted an Aff ordable Napa Cabernet Folie à Deux was founded in 1981 Philippe Langer, the winemaker and proprietor of Napa-based boutique by a pair of psychiatrists, who Hesperian Winery, produces highly acclaimed, age-worthy Napa Cabs, dubbed the winery name aft er which are currently priced from $80 to $150. But Langer also wanted to make the psychiatric term for a fantasy Napa Cabs that could be “a part of everyday life.” or delusion shared by two people. Because an everyday wine has a completely diff erent profi le and produc- Today, most consumers are com- tion scale, Langer thought it best to keep the new wine as a second label or pletely unaware that Ménage à brand. He named it Anatomy. “I called it Anatomy because we sometimes Trois originated in the mid-1990s use anatomical descriptors—body, legs, backbone, palate, nose, mouthfeel, as a second label, as the owners weight, fl eshy—to describe wines,” wanted to launch a lower priced Langer explained. Red Blend from three red variet- “Just making it aff ordable is not ies, which were distinctly diff er- enough,” Langer conceded. “Th e ent from anything produced at wine must be tasty too; otherwise, the luxury winery at the time. consumers won’t buy it again. According to the wine’s To achieve these goals, I acquire package designer, Ed Rice, grapes destined for Anatomy from managing director of design some of the vineyards where I fi rm Affi nity Creative, “Frankly, get the grapes for my Hesperian it was a bit of a risk. However, brand. It allows me to get the they wanted some linkage to the quality of fruit I’m looking for parent brand, thus the symbol of and to control costs. At times I the twin ‘dancers’—which also also purchase lower-priced fruit happen to have the appearance of from farmers that I trust, that a Rorschach test, a subtle nod to the profession of the former owners.” work sustainably and that produce Since then, as red blends became a top, under-$10 bottle consumer go-to, high-quality grapes.” the growth of Ménage à Trois’ 15,000-case business increased signifi cantly Added Langer: “Th e aim for aft er the brand was purchased and added to the Trinchero Family Estates’ Anatomy is a wine that’s soft portfolio in 2004. It is now a multi-million-case force in the industry, enough that you should be able to drink it with pleasure at release. However, achieving iconic status as one of the top-selling wine brands in the U.S., because of my extractions, the wine will be good for at least 10 years. It is a Ménage à Trois is not only credited with creating the Red Blend category but high-quality wine, but I did not want to make another collector wine that was further extended it with new fl avor profi les, including Midnight and Silk. consumed only on special occasions.” Further underscoring its distance from its origin, the Ménage à Trois brand Another purposeful diff erence is Hesperian wines are almost completely is currently comprised of 21 wine and blends and is considered a DTC whereas Anatomy is almost entirely distributed through the three- freestanding brand. Th is is an example where the second label/brand has tier system. And this was the reasoning to produce with a diff erent label advanced impressively to fi rst place status. divorced from the original one. Th is second label was designed by the design fi rm CF Napa.

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92 March 2021 WBM The Five Top Scenarios to Consider When Launching a Second Wine Label

Balancing the Art and Marketing Affinity Creative’s Ed Rice summed up the second label paradigm. “A way to think about second labels is to consider how fashion designers have a of Second Label Design couture line and a ready to wear line,” he said. “The RTW customer wants David Scheumann, owner and creative principal of CF Napa Brand Design, a little of the cachet and status of the couture name, and feels they’re getting explained that the conversation we have with clients who are considering some of the style and quality of the couture label, but also understands it’s not a second label starts with, “Do you want to be a branded house or a house the same product for less money.” of brands?” Scheumann’s studio was also responsible for the designs for the But he advises that even then, wineries with second label plans must still Duckhorn/Decoy duality. guard the elements that make their primary label successful by not borrowing He points to his work with the Robert Mondavi Winery and its second much from them. “A category example with lessons to learn is Beringer’s posi- brand Woodbridge, which is presented as Woodbridge by Robert Mondavi, a tioning. Previous management teams cannibalized their Napa tier with lower- brand name that trades on the high-end priced offerings under the identical name. In more recent times, they created reputation of Mondavi Napa wines the ‘Main and Vine’ moniker to try to pull the former Beringer California to give status to the low-priced, high Classics away from the Napa offerings. I am not sure if this is working for volume wines made in bulk in Lodi, them as there’s still a close tie to Beringer. And once a brand begins to fall California. But the labels were totally from grace, it’s hard to restore its standing,” Rice pointed out. different for the two brands. Ultimately, he notes, it’s all about your business, brand goals and philos- For Duckhorn, Schuemann rede- ophy. “Does a brand owner want to preserve their prestige or sacrifice some signed and repurposed the decoy duck of that cachet to drive volume at a different price point and go towards a more on Decoy labels. Decoy’s image of the mass market? Does the brand owner want to offer an ‘everyday’ wine to their wooden, hunting decoy duck only loyalists? Or is it possible to capture a different [lower budget] consumer provides an image alluding to the original by using the halo of the high-end mother brand, which eventually might parent winery while providing status to serve as the gateway for the everyday consumer to eventually trade up to that the lower-priced second label/brand. higher tier?” WBM This allowed Decoy to stand completely independent from Duckhorn. (For a step-by-step breakdown of the original design process for Decoy, check out CF Napa’s case study.) “Often the second label design depends on how close the client strategi- cally wants to tie it to their main label. Usually, the discussion is how far apart Agricultural Finance in price they will be. So if it’s going to be radically different, then you’ve got to be careful you don’t devalue your core brand by doing kind of a secondary that looks too much like your core. The strategy we try to do a lot of times is think about what are the other elements that surround the brand, maybe part of the story, and build off of that. Like a Decoy, where it was built around a duck but it was a different kind of duck, right? Then again, sometimes that could be playing with colors, sometimes that can be a tie-in to the story or some other equity element that’s brought forward,” Schuemann offered. “I’ve seen some pretty disastrous examples of where wineries use too much of their own equities and end up undercutting their core brand because the consumer gets confused, where they think they’re actually getting the primary label for just a better price. They found it on discount. They think it just dropped in price and dropped in quality. It doesn’t mean the bottle has to look totally different, but I think you got to make it radically different enough CustomYour Lender Structured of Choice for where people realize this is not the same tier,” he cautioned. However, labels aren’t the only elements that must be carefully designed to AgriculturalAgricultural Capital Loans highlight the difference between different price points. The entire package •• AgriculturalAgricultural real real estate estate lender lender for more for more than 100than years 100 years must be considered, noted Schuemann. 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