Private Assets – A look at private label wine
December 19, 2016 | by Jack Robertiello
Every operator has had this experience: You visit a competitor and try a great Cabernet, or attend a reception and love the Chardonnay they serve, but no matter how hard you try, you can’t get that wine to serve in your operation. Welcome to the contemporary world of private label wine, where savvy operators looking to increase profitability through crafting exclusive, quality wine brands have options superior to any time before.
CustomVine Executive Team. From left: Katie Martin, Operations Manager; Kevin Boyer, President and CEO; and Punky Mahle, Executive Vice President of Procurement
Every operator has had this experience: You visit a competitor and try a great Cabernet, or attend a reception and love the Chardonnay they serve, but no matter how hard you try, you can’t get that wine to serve in your operation. Welcome to the contemporary world of private label wine, where savvy operators looking to increase profitability through crafting exclusive, quality wine brands have options superior to any time before.
The traditional private label business is a simple enough matter on the surface. Middlemen work with wineries that don’t have the volume, finances or interest in selling their wines in the multi-state U.S. market. The middlemen connect the wineries with retailers of all kinds who can buy certain volumes of wines with specific flavor profiles, to sell under their own brand.
The market is still relatively small in the U.S. – there are no solid figures, though estimates put it at around five to eight percent – but the field in Europe is said to account for about half the market. There is growth here led by companies like CustomVine, which works closely with operators to find the right wine for the right price; and no doubt, you’ve already seen their wares. One of CustomVine’s clients, the Morton’s Steakhouse and Oceanaire chains owned by Landry’s, has numerous private label wines on their list and is about to introduce the concept at Mastro’s. “This is not a new thing, but it is part of our DNA now,” says Tylor Field III, Divisional Vice President for Wine and Spirits for Landry’s. “Private label accounts for 25 percent of our by-the-glass sales, and we’ve been able to do a couple of bottle-only placements when we find a great lot of something like Cabernet from Rutherford and can bring it to market at an extraordinary price point.”
A CustomVine client blending session.
Restaurant chains are important but other venues, including resorts and wine clubs, have turned to private label packagers, too. Philip James, the founder and CEO of Penrose Hill, the company that runs Firstleaf, the Time, Inc. wine club, says the process offers great opportunities for end users who sell a guaranteed volume of wine. “There are many great wineries with great juice that just don’t come into the market very often because they either lack the efficiencies or know-how to effectively serve a broad range of clients. Being able to be active in the blending is quite a plus, more like the European ‘négociant’ model. But the number one thing is you can build your own brand. If you’re selling someone else’s wine, it might have pedigree and ratings, but at the end of the day, it’s someone else’s wine. This method confers better value to customers – they’re not paying for as many people in the supply chain.”
As CustomVine’s President Kevin Boyer puts it, operators who are unclear about how private label works soon realize, after tasting the quality of the wine available, that the wine itself can be superior to many popular brands. While a sea of quality wine exists, not all of it is destined to be sold through traditional methods. Numerous wineries are happy to sell a large lot of wine, often even their best wines, because having a guaranteed home for a vintage before it even goes into bottle is quite attractive, although most prefer to remain anonymous when they do.
Boyer points out that companies like his do the heavy lifting in the sourcing and packaging of the wines, leaving operators with only two active areas of participation: deciding on what wine to buy; and branding through the imagery and packaging. All other details – discussions with producers, bottling, production, etc. – are managed by companies like CustomVine.
Traditional private label is often considered a winery taking an existing wine and relabeling it for use by one of their customers, says Boyer. Firms like CustomVine, however, are, well … more customized: They go direct to winery sources to create a wine brand that works for both wineries and operators. “We work directly with well over 500 winery and vineyard partners in 14 countries around the world,” says Boyer. “Everything from the most awarded and respected boutique vineyards and winemakers, to some of the largest quality growers and wineries in the world. These are producers that are amazing at growing grapes and making wine, but not ideally set up to deliver on the key aspects needed to provide for national on- and off-premise accounts. They might not have a national sales team, might be missing key distribution partners in each state needed, or quite simply might not be skilled in all of the logistics, marketing and branding efforts required.” CustomVine works with them, providing those skills and matching their wines with eager operators.
This process isn’t for everyone. Boyer points out that a minimum order is around 500 cases, making it a difficult sell for restaurants not moving a large volume of one type of wine already. But for chains wanting to reduce costs while branding a particular varietal wine exclusively for their customers, it’s a great opportunity. “What’s important is the quality of what they can source,” says James. “As a wine club, we must control our costs, and so we need someone connected enough to find good enough wine at the right price/quality ratio.” It’s crucial for a firm like Firstleaf, because 80 percent of what they send members is custom created wine.
The process is faster than one might imagine. Boyer says a customer can realistically get a wine in 30 to 45 days, although most take about 120 days from production to consumer. “We’ve also had projects that start a year and a half in advance because they have a thought and concept in mind, looking for a specific type of wine, and want to make plans to roll it out.” Of course, these deals typically go far above the minimum. CustomVine’s largest deal has involved 25,000 cases, though the average is about 1,500 cases per each vintage. (Most of the wines CustomVine manages are from the high volume varietals: Cabernet, Chardonnay, Pinot Noir, Merlot and Sauvignon Blanc, with some recent activity among red and white blends.)
Prices can be quite reasonable. “It all depends,” says Boyer. “If you say ‘I only want 500 cases and want a $5 Napa Cab,’ that’s not possible. Our goal is to find the best quality at all quantities and price levels within reason.” But in general, prices can range from $5 per bottle wholesale for an international, by-the-glass level wine, to $40 for a prestigious single-vineyard Napa Cabernet.
Controlling price is a big boon to national account chains as well, says Field. “It doesn’t already exist in the market so you can target a price within the three tier system.”
When an operator decides they want their own brand, Boyer, formerly the Vice President of Beverage for Ruth’s Chris Steak, walks them through the process. He explains what is possible, where they source wine, and what it will take for an operator to get what they want. Then he tries to get an idea of their needs. “Is this just to increase margin? If so, fine. Or is it to increase the quality-to-price ratio, or are they simply looking for an exclusive brand they own? We spend time figuring out what they do and what they’re looking for,” says Boyer. Nailing down the specifics of the wine desired – varietal, region, taste profile, tannic structure, etc. – through a needs assessment is crucial, so firms like Boyer’s can offer buyers a chance to sample a few wines that may fit their needs.
Boyer points out that this is more matchmaking than winemaking and many buyers who purchase large volumes, like Field, participate in the final blending. “We are as minimal intervention as we can possibly be. If we’ve done our job right, we’re hopefully close to that finished product the client is looking for when we taste our first round of samples with them. If they want more oak or butter, or find the wine isn’t weighty enough, we don’t just manipulate the wines; instead, we’ll go back and get something different either from the same winery or even a new one based on the client feedback.” Tweaks, though, are possible; another month or so in oak or slight adjustments are no problem, he says.
Next, a timeline is created. “We have clients who say, ‘I’m looking for a really good Cabernet for the fourth quarter and I need it in 60 days – what are my options?’ That’s pretty straightforward. But then we have clients who want to build a long term program, who perhaps want to increase the quality of their Pinot Noir and have it be exclusive to them, something they will really put their weight behind and want to find a vineyard they could work with for the next few years. That could take six months to find the specific vineyard alone.”
Tools of the trade for creating your own label.
It’s crucial that private label partners deliver on what they offer, says James. “As soon as we pull the trigger, they are fully operational. The wines come from a variety of places and there are a lot of moving pieces – transportation, bottling, label registration and design. Operationally, there is a huge amount of moving parts and there’s a real need to be buttoned up in terms of efficiency.”
And Field points out that managing customer expectations and response is important for potential buyers. “We obviously have 30 years of history bringing great wine to our guests and they have a lot of faith in us. With smaller companies, I’m not sure the response would be the same. But the big thing is the staff really likes that they have some things they can sell that they can say are proprietary. There’s a sense of pride in getting behind a wine that we make.”
Boyer got interested in private label while at Ruth’s Chris Steak House in the early 2000s. As a national buyer with units in many states, he found that beyond the big brands with massive national support, there was a hole that was hard to fill. “Like most buyers at the time, I frequently gave opportunities to smaller, boutique brands we knew were stretching the bounds of their logistics and distribution capabilities, in order to add unique and special items to the list. For every one of those wines that succeeded in executing on the program, there were unfortunately three that couldn’t get to every state in our network, had frequent out-of-stock issues and couldn’t support local trainings for our locations.” He tried a few custom wine projects but found it difficult to make the right matches. Lack of communication was a big issue, as was getting good support. So in 2013 he started CustomVine, looking to become a middleman par excellence, connecting great small wine producers with the restaurant and retail groups, essentially letting the producers stick to making wine and the end clients to selling wine, and not bogging down either side with complications like brand design, logistics, distribution management, selecting bottle shape, capsule colors and final design.
Corkscrew.
Many of the private label wines sold in restaurants actually have packages superior in many ways to popular premium wines. Operators can utilize years of information about customer preferences to hone in on the specific wines and imagery that resonate with the consumer base they serve. With CustomVine, operators can either select from a library of already-created labels and brands to use exclusively as their own, or, depending on their creative vision, they can work with a team of designers to incorporate a concept’s logo and color scheme in the design.
Private label is likely to loom even larger, as Millennial consumers, known for not developing brand loyalty, keep looking for the new and unique. “That’s a shifting paradigm, and as we have to come with new things to the market, this fits the trend of new and different and exciting brands of wine,” says Field. And when the next new thing is needed, firms like CustomVine are the ones to find just the right wine to fit that paradigm.
