KB News from Shanken News Daily

Any thoughts from this esteemed group?

Adam Lee
Clarice Wine Company


Kosta Browne Looks To Expand In Retail, Restaurant Channels

Known for its sought-after Pinot Noir and Chardonnay labels, Kosta Browne Winery has long done most of its business in the direct-to-consumer channel, which currently accounts for around 85% of its 30,000-case volume. More recently, however, the Sebastopol, California-based producer—which is majority-owned by private equity firm J.W. Childs Associates—has been ramping up its focus on the retail and on-premise space.

“When you’re selling most of your wine to a mailing list, you’re not really focused on those trade relationships,” notes Kosta Browne CEO Scott Becker. “What we’ve missed from that approach is the opportunity to think about the trade as partners, and the marketing and brand-building opportunity that it presents.” This year, Kosta Browne is targeting the trade with the latest vintage of its Sta. Rita Hills Pinot Noir and the inaugural release from its recently acquired Cerise Vineyards property in the Anderson Valley.

Kosta Browne’s 2016 Sta. Rita Hills Pinot Noir has a mailing list price of $70. The 2016 Cerise Vineyards Pinot Noir will be released this fall, retailing at approximately $145, with a mailing list price yet to be determined. “With Cerise, because we haven’t offered it before, we can do some things differently,” says Becker. “It gives us the opportunity to introduce the wine to sommeliers and retailers in a way that we never have before.”


In addition to Anderson Valley and Sta. Rita Hills, Kosta Browne’s portfolio includes wines from the Sonoma Coast, Russian River Valley, and Santa Lucia Highlands, sourced from a combination of partner, leased, and owned vineyards. Kosta Browne acquired its first vineyard in 2013—a 20-acre parcel of Keefer Ranch in Russian River Valley—followed by the addition of Cerise Vineyards in 2016. Becker says the company is “aggressively looking” to acquire additional holdings, with a focus on further expanding within the Sonoma Coast, Sta. Rita Hills, and Anderson Valley regions.

Meanwhile, Kosta Browne recently reorganized its portfolio, switching from a two-tier range with an Appellation Series and Single Vineyard Series to a four-tier lineup. The revamped lineup will include the Appellation Series (around $70 direct-to-consumer, $100 retail), while the Single Vineyard range has been renamed the Growers Series ($95 direct-to-consumer, $145 retail). The brand will also include an Estate Series ($110-$125 direct-to-consumer, retail price to be determined)—showcasing wines from owned properties like Cerise and Keefer, as well as some long-term leased vineyards—and an experimental, small-batch Observation Series ($125+ direct-to-consumer), available exclusively direct-to-consumer and at Kosta Browne’s recently opened visitors’ gallery in Sebastopol. A label refresh, designed to better differentiate the brand’s four tiers, is in the pipeline.

Kosta Browne is also investing in production, with capacity now at 40,000 cases, though Becker notes that the primary focus remains on enhancing quality rather than raising output. “The model at Kosta Browne was always to create demand first, supply second. And I think we’ll continue on that path,” he says. “Direct-to-consumer will hopefully always be our bread and butter, but moving forward we’ll be much more thoughtful about building our brand.”

Let’s see, $145 for Cerise Pinot. Glad I got to experience several different Cerise Pinots from Copain, Littorai, and Halcon (and I know there are several more). The Halcon is a wonderful wine, and currently available for (drum roll) $30.

Wow . . .

They obviously want to grow the brand and feel that they need multiple ‘avenues’ in order to do so. It’ll be interesting to see what their existing mailing list members think of this - and whether they’ll see a lot of turnover in that channel.

Cheers.

Looking forward to visiting their updated facility and tasting through the range sometime soon. The hospitality of people like Damon and Lauryn at KB has always been second to none and a highlight of any trip to California wine country.

Hmmmm…wonder what the waiting time to get on the K-B list is these days??
As they ramp up production, with the obvious focus on quality, they probably suspect the mailing-list
is insufficient to absorb the increased production.
Tom

“When you’re selling most of your wine to a mailing list, you’re not really focused on those trade relationships,

Because the point is to cut out the trade relationship and have relationships with the customers directly.

“What we’ve missed from that approach is the opportunity to think about the trade as partners, and the marketing and brand-building opportunity that it presents.”

That is probably correct. The brand-building isn’t lost by direct to consumer selling but the marketing is. Of course, if you’re selling out, why do you need the extra marketing?

I think it really depends on what you want to be. If you want to remain a smaller producer, it’s probably viable to sell direct. But if you want to be national and international and found in many restaurants and stores and supermarkets, you need the extra help. At that level, you’re not in the romantic business of wine that people on this board like to imagine; you’re in the drinks business. And a lot of those guys don’t really care one way or another about wine - it’s just another product on the shelf.

But this is exactly why they bought the company in the first place. They can build off the branding that’s already in place. The first customers established the brand as something to be desired, now they can expand on that and ramp up production while keeping prices substantially above the average supermarket wine. It’s completely logical. I don’t have a problem with it.

PE and wineries like KB just don’t mix in my opinion. Impossible to maintain the intangibles of why so many of us join lists in the first place when there is a laser focus on groups to increase revenue streams, produce efficiencies and grow profits. Not saying they are mutually exclusive, but it will require changing the attitude of existing customers and identifying and educating a large population of new ones.

I see PE groups work magic everyday…but am skeptical about applying those practices to wine.

Reading about this makes me really want to enjoy some of my favorite producers like Jaime Kutch and many others, who deliver the goods, care about their clientele without bogus pretentiousness for a fraction of the cost of KB. To each his own. PE and Vineyards don’t play well for the consumer.

I have a few very salient points to make but Greg did it better.

I agree with Greg, this all makes sense for their new owners.

I’ve been a small volume long time customer, and very happy overall. I’m down to buying probably 3-6 bottles a year of the appellation wines, and at some point that may decline further, but I don’t begrudge them charging what they can get.

Yes, it definitely sounds like they think they need to add distribution channels as they increase production. That makes sense.

What will be interesting to see is whether the two new, more expensive, mailing-list-only categories sell. It sounds like they’re trying to move the mailing list customers upmarket while selling the appellation wines through retailers and restaurants.

The changes create a product that becomes further away from the original appeal of a direct connection to vintners that are tied closely to the vines and process. That product is more “real”. And estate vineyard or not, I’m not paying $145 for a new winemaker-grower-land relationship. $145 for a 30 year winemaker = grower, same vineyard small production hands on is much more in my fairway at that price.

Adam, thanks for posting this. You had to guess that this growth plan would be controversial on this board!

I like the marketing plan, clarifying among the different offerings. I am confused about the last one though (‘Observation’) - not clear what this is, but if it’s experimental, shouldn’t it be cheaper? Unless it’s To Kalon Cab Sauv, ofc. It also seems pretty clear that with the kind of supply growth KB is building, a trade plan is a necessity.

PE buyers are spreadsheet buyers by their very nature. They demand profits and profit growth, and everything else has to take a back seat. I’m not offended by that - it’s the nature of the biz and gives wine makers a great opportunity to make money on their endeavors. Doesn’t mean I’ll buy the wine though.

A plan like this will never be popular with members of WB, who generally look for small production, lower priced options. Myself included! But I’m sad indeed to see these kinds of numbers thrown out for Cerise.

In order for KB to grow, they need to continuously have their name out there - and getting their wine into the hands of higher end restaurants and retailers certainly will assist them in making this happen.

To me, they’ve done a fantastic job of continuing ‘the buzz’ about their brand and I’m sure that we’ll see a bigger splash about this in WS itself shortly, as well as other publications most likely (didn’t the SF Chronicle run a piece about them last year?).

Cheers.

Are folks really surprised?? This was the only outcome when PE entered the equation. I stopped buying the wines a long time ago because they didn’t jive with my palate. I have no qualms with them getting the highest price the market will bear.

I think I don’t like to buy wines from private equity groups. [wow.gif]

And partly explains further the move of the Cirq Treehouse and Bootleggers wines into the the KB portfolio.

Shanken, but not stirred :slight_smile:

Two points but somewhat off topic:

As long as Littorai continues to have access to Cerise, I’m good with most anything KB wants to do. Their wines are not for me.

And what is Clarice Wine Company? Adam, are you no longer with Siduri?

Huge +1. Cost cutting and efficiencies will be maximized, and investing in alternative, less-measurable ROI brand building (the very core of most luxury brands) goes to the wayside.