Going private: building profits with private labels

Wines & Vines, Sept, 2003 by Jane Firstenfeld

"What's happening all over the country is that retailers are getting larger, and store names are becoming brands. It's easier for (the chains) to sell store brands," Razzino observes. "You can't buy them anywhere else, the profit margins are high and they can control their purchase prices. A lot of brands are out there that consumers wouldn't even know were private labels."

Veteran On The Volume Side

When you think private labels, most likely an outfit like Golden State Vintners comes to mind. For some 20 years, this Napa producer has built brands for major national and international retailers, including Safeway, Albertson's, Trader Joe's and Wal-Mart. According to director of marketing Steve Lindsay, Golden State concentrates on highvolume accounts.

"We are completely vertically integrated, with 15,000 acres of vineyards throughout California that we own or lease, seven facilities including five wineries plus a bottling plant and barrel storage. We do the labels, brand development, coming up with a brand and package design, compliance. We produce and deliver the finished package," Lindsay explains.

"Private label is growing, retailers, on-sale and off-sale are all pursuing private label. They want a brand they can promote. With a winemaking staff of 20, it's not just strawberry, chocolate or vanilla--we're developing custom blends for each customer. We're making it to order--it's like renting a kitchen. We'll fine tune and hone it to meet a target audience.... We physically see it through. Especially for large international retailers, we have scale, consistency and quality."

In addition to its private label business, Golden State caters to the wine industry, which can outsource custom programs "from grape to bottle." "Our main pitch to other wineries is, 'spend your precious resources on sales and marketing,'" Lindsay says. Golden State attended the PLTS last year, and, says Lindsay, "were very pleased. We actually had a lot of traffic, good leads and attention from retailers. The key customers were there."

A Niche For The Small Producer

Like Sonoma Hills and Golden State, Signature Wines, Hayward, Calif., exhibited at PLTS last year, and plans to repeat this year. "It was hugely beneficial," says Kelli Negro, Signature's vice president of marketing. "Last year, we spent a lot of our time doing education. This year, I think we'll actually be selling on the floor."

Unlike the others, though, Signature provides private label clients with wines from a wide variety of sources, including smaller, artisan wineries. Founded in 1998, Signature experienced dramatic growth in 2002, with sales up 70% from the previous year. The company has developed partnerships with major labels like Robert Mondavi, KendallJackson, Ravenswood, Schramsberg, Franciscan Estates and Chateau Ste. Michelle, but also works with smaller wineries, serving retail, hotels and restaurants and alumni associations with individual private label programs.

Negro cites Fritz Winery, Cloverdale, Sonoma County, as an example of a smaller producer that is thriving in the private label arena. Fritz produces about 17,000 cases per year. "We partner with them, and sell their wines in the hospitality market. We bring their wines to corporate decision-makers at hotel chains and alumni associations. At tastings, their Chardonnay is the No. 1 choice for alumni groups," Negro explains. Currently some 20-plus alumni groups market Signature's partner wines to their memberships, receiving a percentage of sales. Orders are delivered in as little as a four-pack up to a case on individual orders.