Focus on quality and deliver it in every price point to build brands with styles that will resonate with consumers both here and abroad.
That's the prescription offered by Jose F. Fernandez, president and chief executive officer of Constellation Wines U.S., for the survival and success of wines made from grapes grown in Central California.
As a stand-alone company, Constellation Wines U.S., with its annual sales exceeding 43 million cases and brands such as Paul Masson, Almaden, Inglenook, Robert Mondavi, and other notable properties, is the second largest winery operation in the U.S. after Gallo, whose sales are about 70 million cases.
The parent company, Constellation Wines, however, is the world's largest winemaker with international holdings producing 80 million cases at a value of $4.5 billion in 2004.
During a recent wine industry symposium in Fresno, Fernandez said California should take note of the success of Australian wines, such as the popular Yellowtail brand, that “have struck a nerve with American consumers.”
Those wines are produced from grapes, particularly reds, grown in the southeastern portions of the country that have a climate similar to Central California's.
Must shed image
To achieve such success, San Joaquin Valley counties must shed the “jug wine” image and concentrate on producing wines in the $9 and above per bottle category to build strong brands.
“We need to produce great wines to be competitive in our own market and overseas to survive. Can Central California compete? My hunch is yes,” he said, adding that his company's confidence, and investment, in the region's potential is apparent in its writing a $1.3 billion check in the recent Mondavi acquisition.
Driving the attention to brands, said the 25-year wine industry veteran, is global consolidation. It's not only wineries consolidating. Wineries need to forge large-scale programs to pace the growth of massive retailers like Wal-Mart and Costco. “As our customer base consolidates, we need to have stronger companies and stronger brands.”
While the challenges to come up with stronger brands are formidable, he also sees clear opportunities, provided quality and value are produced. While quality can mean many different things, he said he believes it is mostly style, based primarily on appealing taste. Value can then be claimed by exploiting all available technology to trim costs of production.
“More than anything else, we need to develop a mind-set for global growth, that exports are not just something to sell the extra wine you may have. We cannot survive with low-cost products. We need to build a cadre of wines that will compete around the world.”
The acceptance of Mondavi, Gallo, Fetzer, and Blossom Hill brands abroad show that California “is beginning to get it” in accurately tapping into consumer tastes. Fernandez also noted much of building quality and style rests with wineries fostering close ties and promoting common goals with growers.
The expansiveness of his company, he continued, offers opportunities to transfer information on vineyard practices. These exchanges apply scientific data rather than aesthetics in determining quality.
Data pertinent to the role of color development in quality, for example, has been exchanged between Constellation's operations domestic and foreign operations. Near-infra-red measurement of grapes at weigh stations in Australia has been a basis for incentives to growers for grapes with high color.
The Australian industry, he said, while only about one-third the size of the U.S. industry, spent cumulatively during 1978 to 2000 $35 million more on research and development than the U.S. “They made progress early-on in understanding the science of how to deliver quality.”
And, he added, “technology in the world has become extremely porous, and it takes about five minutes for an innovation developed in California to turn up in Australia, and vice versa.”
The task for California, then, is how to employ research that will give it a competitive edge and also to tailor practices to various microclimates in the state.
Growers and vintners also have to be attuned to maintaining the sustainability of their industry. Much is being done already, but as a resident of Monterey County, Fernandez said he knows first-hand that land values there are under heavy pressure from urbanization. The “jury is out” on the question of whether in 20 years growing wine grapes on the coast will be a wise use of land.
“We need to work with a public policy point-of-view, an environmental point-of-view, and an economic point-of-view to make sure we can economically grow wine grapes in Monterey County.”
Fernandez also recommends the industry set down a road map to chart its future. What adjustments are needed in the vineyard to create the style of wines that will sell? He used the example of the Lodi-Woodbridge district in “finding its voice” with not only new vineyards and advanced technology but promotion of its quality.
The symposium, attended by growers, vintners, and service industry representatives, was jointly sponsored by the Central California Winegrowers, the California Winegrape Growers Association, and the Wine Industry Symposium Group.