Vintners Seeking Return of Days of Wine and Roses

On a recent sun-splashed Saturday, 1,500 well-heeled wine lovers crowded under a tent at St. Helena’s Meadowood Resort for the annual Napa Valley Wine Auction.

When totals at the charity fund-raiser threatened to fall short of the 1989 record, auction chair Michael Mondavi and his legendary father, Robert, goaded bidders by selling the shirts and vests off their backs, boosting the take to nearly $855,000.

Likewise, vintners throughout Northern California’s famed Napa and Sonoma wine regions are finding that they must go the extra marketing mile these days as health concerns, recession, higher taxes and anti-alcohol sentiments squash sales. In the first quarter of 1991, when a new federal excise tax kicked in, California wine shipments sank 8%.

Even amid the auction festivities, more trouble surfaced as the industry’s federal regulatory agency reported that it had found potentially dangerous levels of lead in some domestic and foreign wines. With backup data from the Bureau of Alcohol, Tobacco and Firearms due in coming weeks, some industry observers foresee a tough public relations battle ahead.

It all adds up to a rising tide of nervousness that belies the vintners’ serene agrarian setting.

The industry “is in terrible disarray,” said Steve Boone, a former wine buyer for Safeway who founded the Liquor Barn chain. “It’s gone from double-digit growth to double-digit declines (at some wineries). Even the biggest ones are having trouble.”

With winemakers crying in their Chardonnay, consumers are seeing some unusual tactics from a group that once bottled its products, held an occasional highfalutin tasting and “sat back waiting for the phone to ring,” as one executive put it. Elitism is no longer in vogue.

Sutter Home, a 4.5-million-case winery that built a booming business on its serendipitous discovery of white zinfandel, is targeting barbecue-loving Middle America with a Build a Better Burger recipe contest.

Restaurants, to address the growing trend toward moderation amid concerns about drunk driving, are featuring more branded wines by the glass. They are also offering a new 500-milliliter bottle--billed as an ideal accompaniment for dinner for two--positioned between a half-bottle and the standard 750-milliliter container.

Small vineyards are joining forces to boost their marketing clout or are looking overseas to build sales. And wineries and volunteer health professionals have formed AWARE, a nonprofit organization based in San Francisco aimed at persuading the public that drinking wine in moderation can actually be good for you.

“The industry is maturing,” said Mike Fisher, a partner in Motto, Kryla & Fisher, an accounting and consulting firm in Healdsburg. “It’s coming out of the cottage industry it used to be. Now, it’s really marketing, selling image and prestige.”

Stress on Premiums

One big problem for vintners is that the number of California wineries has doubled in the past decade--to about 450. At the same time, the number of distributors has shriveled to a handful and retailers have undergone a massive consolidation. That means that more products are battling for the attention of fewer outlets. Even big, established wineries are being forced to make price concessions to secure shelf space.

The increase in competition “makes one of the most difficult tasks getting noticed,” said Jean-Michel Valette, a principal in the consumer group at Hambrecht & Quist, a San Francisco brokerage.

At Sutter Home, housed in a Victorian mansion south of St. Helena, the emphasis is on “selling premium wine to the average guy,” said Alex Morgan, director of marketing. Its first campaign three years ago, a series of radio spots, used the slogan “When you’re not sure of the people, be sure of the wine.”

Last summer, the winery held its first Build a Better Burger contest, featuring popularly priced Chardonnay, Cabernet Sauvignon and other varietals, costing $3.99 to $5.50, in supermarket displays along with food. Finalists from 8,600 entrants, who devised such concoctions as salmon Loxburgers and Mu Shu Burgers, were flown to the winery for a grill-off. Sutter Home’s sales jumped 33% from the previous summer.

This year’s promotion has expanded to 44 states from 20 last year. The key to success, Morgan said, is getting the wine into the food aisles, to encourage purchases by customers who might not venture into the liquor department.

“Traditional (wine) programs have focused on food as art, with arugula, kiwi, saffron and four pieces of cilantro on the compass points,” Morgan said. “We decided that wasn’t America. We’re saying to Americans that wine can be part of a normal, everyday lifestyle.”

Low-Cost Approach

Similarly, Glen Ellen, in Sonoma County, a leader in the early 1980s in marketing low-priced quality wines--dubbed “fighting” varietals--emphasizes approachability and value.

“Rather than promoting the mystique of wine, we’re doing everything we can to make it accessible,” said Mary Poppic-Reeves, director of marketing. The winery’s varietals are priced several dollars less than many other competitors’ premium wines, and the bottles have informational “neck hangers” with tips on how to store wines and what to serve with various foods.

The winery has also introduced four-packs of 187-milliliter, single-serving wines with screw caps, for moderate drinkers or newcomers to wine who might be intimidated by a cork.

Tiny Rombauer Vineyards in St. Helena opted four years ago to join forces with three other Napa Valley wineries. A three-person sales group deals directly with restaurants and retailers.

“We felt we wanted to get as close to the customer as we can,” said Koerner Rombauer, proprietor of the 10,000-case winery. Otherwise, he said, small wineries get lost in the shuffle, with as many as 200 competitors vying for a distributor’s attention.

With huge inventories of some ultra-premium ($14 and up) and premium ($4 to $7) wines piling up, Rombauer decided to cut production this year from 15,000 cases.

“We have felt the effect,” he said. “People are drinking less. Why push more product on the market and have to lower your prices?”

Affordable Arena

Faced with higher grape costs, Round Hill Winery in St. Helena nonetheless has held down price increases to keep its $6-to-$11 wines “affordable but not cheap,” according to Jim Cahill, executive marketing director. On Jan. 1, Round Hill added $2 per case to cover part of the new excise tax mandated by Congress. But the winery “ate 50 cents of the tax,” Cahill said, adding: “We thought that would win us friends, and it has.” But as a result, he said, profit margins “have shrunk a little bit.”

German-born Manfred Esser, president of Cuvaison Winery in Calistoga, said he began anticipating trouble a few years ago when legislators first proposed putting health warning labels on wine bottles, a regulation now in force. So he began a strong export program, focusing on Germany, where the 80 million inhabitants drink three times as much wine as Americans. Exports now account for 20% of the winery’s sales of its ultra-premium Chardonnays, Cabernets and Merlots.

To address concerns about over-drinking in restaurants, Jordan Winery, Buena Vista and others have gotten behind a shift toward 500-milliliter bottles, recently approved by the Bureau of Alcohol, Tobacco and Firearms. The wineries hope that the new size will boost flagging sales.

“The wine industry right now is continuing to run around looking for the next white zinfandel,” said Larry Williams, Jordan’s director of marketing. “The 500 could be it.”

Meanwhile, vintners have been rattled by reports that the BATF has found high levels of lead in random tests of 500 wine samples. Although Terry Cates, chief of the bureau’s industry compliance division in Washington, said test results won’t be released for a few more days, vintners have already gone into high gear in hopes of averting a public relations disaster. Some are conducting their own tests.

The actions demonstrate the industry’s new awareness that it needs to respond to both economic and social concerns.

“There’s an undercurrent of changing attitudes,” said Jon Fredrikson, a San Francisco-based wine industry economist. “It makes growth tough.”

A Revolutionary Decade in Wines California premium wines, notably varieats such as Cabernet Sauvignon and Chadonnay producedin the Napa and Sonoma wine regions, showed phenomenal growth from 1980 to 1990, at the expense of jug wines and imports. Table Wine Shipments 1980 California jugs: 65% Other: 6% California premiums: 4% Imports: 25% 1990 California jugs: 55% Other: 4% California premiums: 25% Imports: 16% Shifting Tastes The value of premium wine sales from California wineries to wholesalers began to surpassthat of jug wines after 1987 as wine drinkers sought better quality. Sales of jug wines,meanwhile, began a decline that continues today. Overall U.S. sales of California table wines (excluding wine coolers and sparkling and dessert wines) in 1990 represented an estimated $4.1 billion at retail.