SJV wine growers called to bankroll promotion

Wine grape growers in the San Joaquin Valley have plenty to be proud of but need to open their checkbooks to gain consumer attention for the wines made from their grapes, says Jeff O’Neill, chief executive officer of O’Neill Vintners and Distillers.

Speaking at a recent wine grape symposium held in Fresno, he said the SJV wine industry, burdened with severe competition from imported wines, has a great challenge and a great opportunity to tout grape varieties – perhaps French Colombard, Ruby Cabernet, or Merlot - that grow best in the valley’s climate and make wines that compete well on the international market.

O’Neill’s company, formerly the Christian Brothers Brandy distillery, processes its products at Parlier and is the largest distiller of brandy in California. He is credited with the economic turnaround of the Golden State Vintners vineyard and winery holdings before they were sold to The Wine Group for $115 million in 2004.

“Give consumers a reason to buy your wines,” he said in urging growers to pony up realistic amounts for promotion. In reference to a voluntary, $1 per acre effort by growers up and down the state to raise $500,000 to promote California wines, he said that with vineyards valued at about $8,000 to $10,000 an acre, $1 an acre “is not enough money to make a difference.”

Using a figure of about 200,000 acres of vineyards in SJV counties alone, O’Neill said the value would be somewhere between $1.6 billion and $2 billion.

‘Absurd’ amount

“And you want to throw $200,000 at it? That is one of the most absurd things I could imagine. Think about the investment you have in your land. Don’t think about $1 an acre. Think about $20 an acre, or some percentage of your tonnage.”

Conceding that his challenge would likely raise hackles among “wildly independent” SJV grape growers, he said Napa and Sonoma growers have spent more than 30 years promoting their reputation and are reaping the benefits.

O’Neill said that 20 years ago he attempted to organize SJV growers to draw attention to wines of their region, “but for whatever reasons they did not get with their neighbors to promote their wines.”

“The world today is really about marketing and sales,” he said. “Consider your investment and spend more against it. I think we could see the results of that in spades, with grape prices, recognition, and brand differentiation.”

Also speaking at the symposium, sponsored jointly by the Central California Winegrowers, the California Association of Winegrape Growers, and Allied Grape Growers, was Ron McManis, a Ripon grower-vintner who described four “focus points” integrated in his family operation.

Growers, he suggested, should spend more time on marketing their product and less time on their tractors.

“From a grower perspective, we are a market-driven company rather than a production-driven company. On the winery side, we are margin-driven, not volume-driven. We knew we could not compete with the big guys. We wanted to create a niche for ourselves,” he said.

He said the principles carried his winery production from 300,000 gallons in 1998 to 4 million gallons today.

Use of brokers

First is use of brokers, both to sell his grapes and to buy wine for the winery. “We are in constant communication over a 12-month period,” he said, adding that many growers only use brokers to solve a selling problem at the last minute.

Second, he focuses on growing wine and not vines. “We focus on quality with a viticulturist on our staff and consultants to advise us about other growing areas. We keep wine lots separate and turn the inventory.”

Third, he works closely with his banker, “as a partner and not as a parent.” At times, he said, growers may be reluctant to fully disclose their practices to their banker. “Every two months, we meet with our banker so he knows exactly what we are doing.”

Also helpful in the finances is their five-year plan, updated each year, to provide a road map for all parties.

“The fourth thing is becoming a service-minded grower. You need to work with your winery’s capacity to ferment for the highest quality, and you need to communicate with your winery exactly what you need to showcase the quality of your grapes.”

McManis also said his business is highly conscious of its image, which he enhances with clean, uniformly painted vehicles and farming implements.

A.G. Kawamura, secretary of the California Department of Food and Agriculture, encouraged SJV wine growers to differentiate their product, as they turn their attention to global marketing instead of production.

The Orange County grower said California agriculture must make choices for its destiny “rather than letting the future happen to us.”

“For those of us who grew up with production driving their marketing, it has not been a very good game plan,” he said, adding that his company boosted production of celery with investment in drip irrigation but still lost money because the crop was treated as a commodity in competition with growers in other parts of the state where production costs were less.

Kawamura said California agriculture is ahead of other states in addressing concerns of the environment, profitability, and social attitudes, and that is how California growers can differentiate their products.

Skillful marketing

In several crops, he added, a perceived oversupply has been transformed into profitability with skillful, strategic marketing to countries anxious to have California wines and other products.

Panelist Greg Livengood of Joseph Ciatti Co., a San Rafael, Calif., wine and grape products broker, said SJV wines contribute heavily to California wine exports, especially bulk shipments.

The major wines sent abroad are Zinfandel, White Zinfandel, Ruby Cabernet, and French Colombard, and California wineries have promoted these abroad, both in established markets in Europe and expanding outlets in Asia.

“The SJV is still the heart of the California industry,” Livengood said. “We get a premium for our wines because Europeans believe California equals quality, but somewhere there’s a disconnect when people here don’t believe our wines are as good as imports. Somehow we as a group have to figure out how to change that perception.”

In his talk, Bill Nakata, vice president of ASV Wines of McFarland, Calif., said his company provides bulk and bottled SJV wines and often works with retailers to determine the pricing of the wines.

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