Video: Can You Scale Up Fine Wine? Part One
On Tuesday December 5th, Areni Global hosted an Insight Series webinar about scaling up fine wine. Our expert panelists had so much to share that we’ve decided to run a second session in January. Part one, which we analyse below, focused on why scaling up is needed. Part two, on Tuesday January 30th, will look at the steps to get there. You can sign up here.
It’s a common saying in business that, for a variety of reasons, you either grow or die. In fine wine, the subject of growth is a particularly complex one. It brings several challenges, not least the need to maintain exceptional quality. Commercial issues, such as the need to maintain price and brand strength will also be on the minds of producers.
Scale is a particular type of growth. We define it as “doing something at the size required to solve the problem”. There are a number of reasons why a fine wine producer might want to scale. Panelists divulged several in our latest webinar.
Panelists
- Joao Gomes Da Silva, Chief Commercial Officer, Sogrape, Portugal
- Vianney Gravereaux, Sales and Marketing Director, Ornellaia & Masseto, Italy
- Ivan Massonnat, Owner, Belargus, France
- Dan Petroski, Winemaker, Massican, USA
So, what are the challenges of being small? And why scale up fine wine? Here are our top five takeaways. To access the full conversation, watch the video or listen to the podcast below.
1. To achieve ambitions for the brand – and its owner
Perhaps the most obvious reason for scaling is financial.
“My brand is an accessible luxury”, says Dan Petroski, whose bottles typically retail at around $35. “It’s hard to make a wine that is profitable at that price point from Napa or Sonoma”, he says, explaining that the new partnership with Gallo will give him access to a broader range of vineyard sites across California.
Petroski also touched on some of the logistical challenges of being small, such as working with small distributors who might not have large sales teams and can’t always pay you on time. On the other hand, Gallo’s ability to help a brand tell stories and scale is “second to none”.
Ultimately, growing with their support will allow Massican to reach more consumers, and achieve financial success.
2. To disrupt the market
Ivan Massonnat started with a tiny plot of land in the Loire Valley. Scaling up his project, Belargus, meant slowly acquiring high-quality vineyard sites so that he could follow Burgundy-inspired winemaking in the Loire.
“My idea was to disrupt the market: Aim for super ambitious viticulture and winemaking inspired by Burgundy, with single plots and long ageing – pushing all the levels of quality, but offering a full range of terroirs”, he said.
This small-scale growth has allowed him to produce a collection of single-plot, dry Chenin Blancs.
3. To increase quality, and confirm positioning among top wines
Increasing the sizes of the Masseto and Ornellaia vineyards allowed for greater quality, explained Vianney Gravereaux. This is because it provided increased opportunities for grape selection.
In the case of Masseto, for example, the team realized that four adjoining hectares had the same terroir as the original vineyard. After 20 years, the new vines had achieved maturity. Masseto’s second wine, Massetino, debuted with the 2017 vintage. The team now has more options for selecting high-quality grapes for both cuvees.
Overall, however, opportunities for scaling are limited in Bolgheri which is around the same size as Pauillac in Bordeaux. “Everything plantable is planted”, says Gravereaux.
Growth, therefore, can mean something different: price, and distribution quality. Growth by price, which naturally occurs as demand outstrips very limited supply, is important as it reflects their position among the best wines in the world.
Fine-tuning distribution means finding the best partners in each market, who can put the wines into the hands of buyers who will appreciate them the most.
4. To meet demands of climate change
Adapting to the demands of climate change, and for greater environmental sustainability, is more likely to impact margins for fine wine than FMCG, said Joao Gomes Da Silva. There are various reasons for this.
Shipping in bulk – more efficient than in bottle – brings significant environmental and financial benefits. Bottling at origin – the norm for fine wine – is far more expensive. In the vineyard, it is more straightforward to adapt vineyards for FMCG brands. Installing irrigation in areas that did not previously need it, for example, is more straightforward on the flat land typically used for these wines. And when a region or vineyard no longer becomes viable, it is possible to source grapes from elsewhere.
This is rarely possible for fine wine. “The money required to ensure quality and consistency is daunting”, he concludes.
Petroski also mentioned that partnering with such a large and well-resourced organization as Gallo will give him access to powerful tools for improve environmental sustainability.
5. To engage new consumers
It’s a simple equation: If you have more wine, you can reach more people. It is also true that cost-efficiencies mean that you can reach more people at a more affordable price point.
“Part of my objective was to break the glass ceiling of the Loire”, said Massonnat, whose top wines retail at around €100. But he also produces an entry level bottling that is on the shelves for €20.
“Making the entry level is a political statement”, he said. It proves that it is possible to produce a biodynamic wine from low-yielding vines, aged for 12-18 months with a wax cap at an affordable price point.
This allows a wider consumer base to access handcrafted wine. It is also important to him reputationally: “I wanted to avoid the reputation of making wine for the 1%”, he said.
Gomes Da Silva also addressed the issue of reaching a wide audience: “If you become too exclusive, you become detached from the world. You need to address a wide enough audience to have a business that drives forward”, he says.
Watch the recording
Listen to the Podcast
Read the Analysis
This webinar is part of a series of exploration on the notion of growth in the context of fine wine. The full analysis of this exploration Can Fine Wine be Scaled? is available to Areni members and partners. Log in to your account or join us today to gain access to the full article.
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