XChateau Wine Podcast

Having helped grow Duckhorn from $5M to $500M in revenue and the sales team from 1 to >100 people, Pete Przbylinksi, former Chief Sales Officer of The Duckhorn Portfolio for nearly 30 years, has a deep understanding of managing US wholesale markets.  In this two-part episode, Pete dives into every aspect of managing a wholesale sales team, including incentive structures and collaborating with distributors.Detailed Show Notes: Duckhorn went from 50k cases / ~$5M in revenue / 14-15 employees (1995) to ~$500M revenue (2024)The Duckhorn PortfolioDuck themed: Duckhorn Vineyards (1978), Decoy (2nd label originally), Paraduxx (1994), Goldeneye, Migration, CanvasbackAcquisitions: Calera (2017), Kosta Browne (2018), Sonoma Cutrer (2024)Keys to Duckhorn’s successBrand equity - focused on Merlot, which was hot in 1980s-1990s and catapulted wineryKey assets - #1 people, #2 brand equityThe French Paradox (1991) created big demand for red wineTable stakes are good scores, showing up in the market, hosting guestsSales team grew from 1 person to >100 (~85 in the field)No perfect way to calculate ROI for sales people1st method: too many cases & distributors to manage, needed more people2nd method: quantified expected incremental sales from more people (data was full of holes)Final method: managed to target of 8-10% sales opex / revenue, because a KPI for SLT and BoardSales team rolesRegional Managers, over a series of states (50-60% of time working w/ distributors, the rest out in the market or internal analysis and reporting)District Managers, geographically concentrated, go into accounts you want to be inNational Accounts, on and off-premise; a challenge to determine which accounts are national vs regional, ended up doing it case by case and assigning accountsDistributor consolidation led to wineries needed to do the work they cannot doE.g. - identifying underrepresented accounts and coming up with action plan by regionIdentifying top salespeopleLook at overall contribution margin for the regionShare of business in market (using IRI, distributor reports, account base)Gross Profit%, identifies amount of trade spend usedHow responsive they are, their handle on the market, their decision making#1 method: do they bring new ideas to the tableIncentivizing salespeopleBonuses must be meaningful (25-35% is meaningful), higher for higher levelsLook at contribution margin relative to budgetUsed a curve (<90% budget - no bonus, above budget - scale increased, which helps end of year motivation)District Managers may have market specific goals (e.g. - increasing depletions, PODs for particular products) that are short term (3-6 months)Overall, incentives are difficult to manage, data can lag; make it objectiveRecognition is helpful, e.g. - unexpected gifts like a signed 3L from the CEODistributor collaboration best practicesShow them a plan and explain why it makes sense (e.g. - buyers are lined up) and get mutual agreementKeep it simple, the info needs to be passed on to othersIdentify what you’re prepared to do in the marketplace (e.g. - market visits, funding BTG programs, incentives, etc…)Do monthly check-ins and more formal quarterly reviews to see progress against plan and to adjust tactics and strategiesOptimal size of sales territoriesDepends on # of distributors in region (e.g. - TN had 8 distributors = 8 days/mo of meetings)Try to align with target sales opex / revenue ratios (~8-12%)

Building a new wine category is not something that is easy to plan.  It often is more like a startup, where belief in the product and market is just as critical as a defined strategy.  That's how Luisa Amorim, CEO of Amorim Family Estates, launched Mirabilis into being an iconic still white wine of the Douro Valley.  She outlines priority markets, views on scores and social media, and her belief in word of mouth marketing.  Detailed Show Notes: Luisa’s background: hospitality, marketing; started in the family business at 23; spent 3 years in a global rotation programAmorim Family Estates3 regions in Portugal (Douro, Dao, Alentejo)Each property has its own winery and team and does hospitality with a culture and food componentDivision of bigger Amorim cork company and familyMirabilis (part of Quinta Nova)Produced white wine from the beginning (2000)First an unoaked white, then a reserve, then Mirabilis (Latin for “marvelous”)White was not popular in Portugal at the time, production processes were not set up for whitesTook 2 years of experimentation, 1st vintage 2011 (2,000 bottles)Whites still have pricing barriers vs redsDouro white differentiation: close to Atlantic, schist soils, native grapes, and blendingIntroducing Douro whites: older people were harder to get on board, younger were more open to explorationNeed to have belief in product and its viability over having a detailed marketing planMarketing focus has been on teaching Portuguese wines (including culture and traditions)Geographic focus for MirabilisPortugal 1st - need to be well respected in the home countrySwitzerland, Benelux (lots of Michelin Star restaurants)Not Scandinavia (targeting higher end of the market)Brazil (speak Portuguese)USA, Canada5 people, based in Portugal, work internationally; travel 3-5x/year to each marketWhile design and packaging, price positioning are important, the sales team and their relationships are critical in the wine industryHaving a good wine is more important than press or reviews, people are paying less attention to reviewsConsumers now look at peers and friends for recommendations and they need to trust the wine producerSocial media - “should be doing more” - hiring younger people into marketingWine marketing needs to capture the “soul” of the wineMake things simpler, less technical talkMore provocative, “sexy” vs saying the same thing all wineries sayHas not done any paid advertisingRelies on word of mouth (people taste, buy, and talk) and partnerships

With 30 generations in the wine business, the Frescobaldis have a long-term view of the wine business.  This mindset has enabled Ornellaia to become a global icon.  Lamberto Frescobaldi, President of Frescobaldi, discusses how Ornellaia established and maintained its status as a global icon. Detailed Show Notes: Background: grew up in the Italian countryside, studied at UC Davis, learned the wines of the world working at Corti Bros in SacramentoFrescobaldi family30 generations in wineNow in Tuscany, Northern Italy, Oregon, & SicilyFocused only on wineOrnellaia overviewCabernet Sauvignon, Petit Verdot, Merlot basedBolgheri not historically known as a wine region, not good for SangioveseSassicaia, Orenellaia, & Masseto put Bolgheri on the mapFrom year 1, quality was consistently goodFounded by Antinoris, Mondavis invited Frescobaldis to partner (Feb 2002), when Mondavi sold to Constellation (2004), Frescobaldi bought out Ornellaia (April 1, 2005)Frescolbaldis have long-term view, have owned Castiglioni since 1052Distribution is mostly allocated due to limited quantitiesConsistent in giving allocations to people who bought the year beforeGrew distribution globally to maintain scarcityFocused on top restaurants first, get in the right accounts3rd party validation (wine critics, famous artists, top restaurants) key to building reputationVendemmia d’ArtistaGreat artists interpret the wineEach vintage given a name (e.g. - power, elegance)Partnership w/ the Guggenheim globally introduces wine to art collectorsArtist label on large formats and 1 bottle of each 6 bottle caseOrnellaia Blanco1st planting by Antinori was Sauvignon BlancCooler, north facing site, small amount producedAged same amount of time as red, not aromatic, but complexMonitors secondary market to help learn about wine’s age ability, if prices dropping, implies inability to ageNot sure if people buy Ornellaia from seeing it on social media, but allows winery to connect directly to customersNegative macro market conditions and trade wars not impacting Ornellaia much, 3rd wine (Le Volte) more susceptible, but haven’t seen impact yet

With over 40 years of managing some of the top names in wine (Opus One, Mondavi, Baron Philippe de Rothschild), David Pearson, President of Joseph Phelps, has developed a distinct point of view on how to build a globally iconic brand. Ultimately, it comes down to relationships and the effort required to maintain them. From focus and prioritization to spending upwards of 65% of time on the road, David hopes more wineries will follow in his footsteps to build the category of Napa and American wines globally.  Detailed Show Notes: David’s background: started as a winemaker (Europe, SoCal), sensory evaluation for Hublein (now Diageo), post-MBA marketing job with Baron Philippe de Rothschild, Mondavi in France (see Mondovino movie), managed Byron, then CEO of Opus One, now President of Joseph PhelpsThe goal is to create personal relationships and care about mutual success and partnership with accounts“Focus is the hard part” - at Opus, initially London, Hong Kong, Japan; then emerging markets, Mainland China, Dubai; Phelps also prioritized KoreaSingapore distributor told him, “We’ll see you in 5 years, the French come every year.”Track people who buy wine and meet w/ them - 80/20 rule, focus on the top 20% of trade accountsAfter the top 20%, do second tier of accounts, then collectorsTravelled ~65% at Opus OneBudgets ~20-30% of marketing expenses for building relationshipsOpus One 1st 10 years - went to Asia, Canada, Europe every year, then put someone in Tokyo and Hong KongSends ~400-500 handwritten holiday cards to partners with specifics about their last visitTravel team includes a winemaker if they like it and are good at communicating, and a marketing team to better understand the marketPlease don’t make it feel anonymous, but give the meetings and message personalityAt Phelps, focused on Insignia and current vintage, show older wines to show aging potentialThe goal is to expand export to ~30-40% in 10 years vs. 12-13% of Insignia todayBrands need to think deeper about what’s unique and also where they are goingGet alignment between the story, the wine in the market, and where you’re goingThe winery owner had three objections to export: sell all the wine to US customers, don’t want to take any away from them don’t know who to sell to don’t want to spend the time and money to go thereLarger volume wines have different commercial relationships, same elements (knowing your partners, need to build), but margins tend to get squeezedBelieves that if the category is successful (e.g., Napa), everyone will be more successfulNegociants (La Place) respond to existing market demand well and are efficient distributors, but it is not in their DNA to build brandsPhelps uses the LVMH distribution network to build the brand and deliver directly to the core accountsMeasures quality of relationships w/ initial feeling, but then seeing the wines go to the market, need to see forward momentumTracks Liv-ex pricing a lot, seen upticks in InsigniaOther marketing elements: relationships happen over multiple channels now, need to do more social media, and be part of the discussionThe pricing goal is to have trade and consumer connect the innate value of the wine to the priceThe current neo-prohibitionist environment recalls the 80s and the “Mondavi defense” of wine as a potential solution

Pairing their need for a complex substitute for wine, for both pregnancy and professional network, Maggie Frerejean-Taittinger and friend Constance Jablonski enlisted Maggie’s husband, Champagne and Cognac winemaker Rodolphe to found French Bloom.  With four years of R&D prior to launch and constant refinement since, French Bloom aims to redefine the alcohol free premium sparkling wine space.  Maggie & Rodolphe delve into the creation of French Bloom, exploring its core markets, target customers, and the factors that have drawn them in.  Detailed Show Notes: French Bloom overview500k bottles (2024)Created a premium NA sparkling categoryFocused on sparkling to create complexity, can play with layersLVMH minority investor4 years of R&D to get the desired qualityDe-alc process loses 60% aroma (was 90% in 2021), removes the backbone of the wineBuilt NA wine like Cognac, needs an undrinkable base wineFocused on the South of France (warmer, higher alcohol and body) for stronger wines, more body, Languedoc (more organic 40% vs 3-4% in Champagne)Limoux is the best place for NA sparkling, 300m high, Chardonnay and Pinot Noir, a temple of natural wineBase wine is a bit oxidative, very acidified (used to add lemon juice, now naturally from wine), oaky (new oak, foudre), no sulfites, more tanninCreate blends of different reserve winesExtra Brut (0% abv, 0 sugar) has a base of 30% reserve wine from 2 years, aged in new oak barrels to give more structureBetter to make adjustments before de-alc vs afterUse voile to protect wine from oxidation (like Jura)Flash pasteurization is used b/c no abv, sulfites to protect the wineNA marketWine, beer, spirits - $10B (2020), $20B (2025), believes $30B (2030)Premium NA sparkling - $0.5B (2025), could double next 5 yearsHoly grail is quality NA still wine, not there yetBest distributors are wine / Champagne distributors, Thailand/Belgium have NA-focused distributorsFrench Bloom customersBiggest markets are Champagne markets (France, US #2, UK, Japan, Australia, Belgium, Germany)Younger (25-45), skew female, appreciates both alc and NA sparkling wineSells 20% DTC globally2024 NielsenIQ study on NA purchase behavior - #1 driver - for conscious hosting (aligns w/ French Bloom’s ethos of not excluding anybody); #2 health & wellness; #3 drivingMarketing is digital first, leveraging Constance as a tastemaker and key opinion leaderMore partnerships - Coachella, French Open, just signed F1 (10-year partnership, 1st ever official NA sparkling wine, Moet Chandon on podium; F1 new fans are 75% female, 50% Gen Z from Netflix series)Most effective marketing has been the founding story and authentic storytelling (i.e., Maggie’s pregnancy, Constance’s need for moderation while networking)Marketing through top-tier restaurants, hotels, and shops (e.g., Michelin-starred; became the #1 wine sold at Erewhon in 1 week)Michelin-starred restaurants have 50% non-drinkers at lunch, 20% at dinnerNo sugar, no additives, organic messaging plays well in California, less on the East CoastUses the term “alcohol free” vs. “non-alcoholic”NA trends around NA wine & food pairing, including “moderate pairing” (wine & NA wine/drinks as part of pairing); mirrored cocktails (3 versions ofthe same cocktail - NA, low, full)

Selling the very rare, collectible wines of the world, Adam Bilbey, SVP, Global Head of Wine & Spirits for Christie’s, has a unique view into the state of the wine collector. Adam maps the thought processes and changes in attitude of buyers and sellers of rare wine globally, and he is seeing “green shoots” in the market by mid-2025.  Detailed Show Notes: Adam’s background - started w/ Berry Bros out of high school (2000) at Heathrow Airport shop, moved to Hong Kong in 2010 w/ Berry Bros, Sotheby’s in 2015, Christie’s in 2021Christie’s is known for fine art, and wine is part of the luxury group (jewelry, handbags, cars), which is 20% of sales, and wine is 10-20% of luxury sales2025 wine auction marketChristie’s up 2x YOY Aug YTD, big single-owner sales (e.g., Bill Koch)Challenging market mid 2022-2024, newer vintage prices dropping more, more supply availableIn a downturn, buyers’ price expectations fall faster than sellers’“Green shoots” in 2025, pricing bottoming outBurgundy has taken share from Bordeaux last 5-6 years, Champagne came up and leveled off, Italy is strong in the US but not in Asia, Burgundy is strong in Asia, but leveled offInterest in more mature vintages, particularly Bordeaux, is still valued thereFocus on provenance, people won’t bid on poor provenance anymore2-tier pricing, people paying for a premium for a great collection, single-owner sales, they like the story of who owned the winesWith a more global market than ever, people buy from anywhereThe US has a broader selectionEveryone buys from the UKAsia tends to need more focus (e.g., Burgundy)Liv-ex shows -10% pricing last year, -20% last 2 years; auction prices move gradually, often lots don’t sellMore Millennials and Gen Z customers (45% 2025 from 30% 2022)Female customers have been consistent last 4-5 years, a slight dip in the US, and growing in AsiaYounger generations are drinking younger wines, they like the security of younger wines, have a fear of disappointment in older bottlesOnline auctions require ease of useChristie’s does 2x online auctions vs liveLive auctions for key moments, key collectionsVarious owner sales in online auctionsProvenance is improving with more communication (e.g., purchase & storage records), people working together (merchants, auction houses), and technology (digital microscopes, UV light, carbon dating)Provenance is critical, as people remember the bad bottles sold to them over the good onesBelieves China will make a comeback in the next 2-4 years

Making wine is capital-intensive. Making traditional method sparkling wine is even more so. From less juice from the grapes to double fermentation to more expensive bottles and taxes, Weston Eidson of recently launched Westborn Wine describes the differences in sparkling production.  Detailed Show Notes: Weston’s background: >10 years winemaking in Napa (Silver Ghost), family are wine collectors, interned w/ Jason Moore at Modus Operandi (2012), and acquired extra Chardonnay from Steve MatthiassonWestborn was founded in 2018, taking “Grand Cru” or single vineyard level fruit for sparkling wine (e.g., Heintz, Ritchie, Durell vineyards)Partnered w/ Russell Bevan (mentor) and Nathan Reeves (made sparkling in Margaret River)The goal is to start with high-quality wines and layer on complexity with traditional method agingTook 4-5 years to find a stride & hone the winemaking processInitially thought it would be 3 years aging vs 6 for 1st release (2019 1st release; 2018 1st vintage just disgorged mid 2025)SKUs: vintage, Blanc de Blanc, Rose, Non-vintageLuxury priced - $100+Solera method perpetual reserve program, late disgorged release, lead to a lot of capital in inventory2018: 500 cases; 2025 ~1,000 cases; target ~2,000 casesSparkling production costs vs. still wineFruit costs the same (growers love it: less shrivel, gets fruit off earlier - less pest/disease pressure; spreads out the work)Press cuts important, ~25% less gallons/ton vs still wine, as they don’t take tailleNeed to make the wine twice: initial fermentation (vin clair), secondary fermentation (bottled with yeast and sugar)Custom crush costs are slightly more expensive due to double fermentationBottles are more costly and need to be bought earlier (~$0.15-20 for a standard bottle; ~$1 for sparkling)Taxes higher: $2.40/gallon for sparkling wine, $0.07/gallon for still wine <16% abvStorage and financing costs are higherFinancing is combined with other brands, which may make it hard to start a sparkling brand as a stand-alone entityLook at the business plan over 20 20-year time horizon, projecting cash flow positive in 2027 (9 years from founding)Trends underpinning Westborn strategy: following Michael Cruse w/ grower CA sparkling wine, premiumization, sparkling doing relatively well, sparkling being used beyond celebrationsTake inspiration from Bereche, De Souza (lees stirring in bottle to amp up umami), and SelossePeople looking for experiences have a tasting at The Art Collective Napa Valley

It’s a cycle that has been happening since the late 1800s. The need for agricultural labor in California is a cycle of bringing in labor and then deporting them when they become too visible. Elaine Chukan Brown, wine writer and author of recently published The Wines of California, describes the history, current situation with new regulations and deportation, and the tension put on vineyard workers’ wages in California and their impacts on the labor market and vineyard workers.  Detailed Show Notes: The Wines of California covers 3 sections: How we got here - the history and what context allowed things to happenWhere we go - the growing regions and key producersWhat we’re facing - marketing challenges, climate changeInterest in farmworkers started with Salud, a medical program for vineyard workers and their familiesHas mobile and physical clinicsSuccessful because it provides care for workers and their familiesCA is the largest farm region in the USExports 40% of ag productionBecame nationally relevant in the 1900s, which led to the need for farm laborSources of farm labor (in chronological order)Indigenous people (until smallpox outbreak and reservations)China - exchanged labor for citizenship, after 10-15 years, expelled Chinese with the Chinese Exclusion ActJapanIndiaBlack sharecroppers from the South (small group)Mango (Philippines)Mexico (post WWII) - led to the current H2A programWhen labor populations grow and get too big, they are expelled, which has been in ~20-year cyclesH2A Program - temporary work visa programCannot be extended or transferred to another employerEmployers must provide housing & transportationBiases towards big business to deal w/ complianceFDR (1930s/40s) - Labor Protections Act created worker protections, but excluded agricultureUnited Farmworkers (1975) - 1st farmworker protection legislationAssociation of Farmers - farm wonders banded together to have more leverage against workersEver-growing CA labor regulations create large compliance requirements that end up favoring big businessCurrent system sets up farm workers’ wages as the only lever for farm owners to maintain profit margins and be economically viable (w/w/o gov’t subsidies)New CA farmworker overtime pay law - 8 hours/day, 40 hours/week before overtimeDerived from an office worker’s perspectiveDoes not match the seasonal work of agricultureEmployers have small margins, can’t afford overtime ratesWorkers make less money and need to get 2nd or 3rd jobsIf workers get injured at 2nd job, workers’ comp does not cover wages of the main jobEmployers need to find more workers to do the same amount of work, and lose the experience and skills of the current workforceMany crops (e.g., strawberries, peaches) need manual labor and can’t be mechanizedICE raids & deportations: not a new thing, but what’s new is people with documentation (visas, amnesty recipients, citizens) are being detained and deportedCreating fear, workers not showing up to work (some regions report a 70% drop in workers)Workers not going to farms on main roads (too visible)Families choose 1 member to go ot work, the other stays home to take care of the kidsHistorically, when the safety of workers is an issue, workers don’t respond to higher payUS tariffs increase prices to consumers, decreasing sales; it may take decades for consumers to substitute for domestic wines

With a large domestic market for wine, US producers often don’t focus a lot on exports. Honore Comfort, VP of International Marketing for Wine Institute, lays out the benefits and challenges of exporting wines globally. She covers the top markets for US wine globally, the role Wine Institute plays in helping US exports, and the potential impacts of the current trade war.  Detailed Show Notes: Wine Institute overviewMembers are CA wineries (>1,000)Public policy organization focused on legislation (e.g., DTC shipping)Member dues are a sliding scale (based on prior year revenue & volume), baseline is a few hundred dollarsCA is the 4th largest wine region in the world after France, Italy, and SpainLargest market in the USThe US market is 75% domestic (80% from CA), 25% importsExport is 4% (by value), 95% is CATraditionally lower-priced wines, now a barbell (both low and high, but not mid-priced wines)Other countries have high taxes, duties, and tariffs on imported wines (int’l pricing often 2-3x US retail, 10x for India)Cost to produce is high in CA (heavily regulated - environmental & labor force protections; land costs high)Goal to showcase the diversity of CA wine globally, but only a sliver is available Key int’l markets - Canada (#1 until Feb 2025; ~30% of US exports - premiers took all wine off shelves as part of trade war); Europe #2 (Germany is hard w/ strong domestic, low priced market; Scandinavia big); UK #3 (punches above its weight as oldest wine market, lots of wine writers, critics, traders; one of the broadest selections of CA wine); China, Japan, Korea, MexicoWine Institute has active programs in >30 countries for CA winesBenefits of exporting wine: importers sell wine for you (no 3-tier system like the US), build brand visibility, position wines next to other great wines of the worldChallenges of exporting wine - takes investment, needs face-to-face storytellingSmall Napa producer (<5k cases) now exports 15% of sales working w/ Wine InstituteIWSR creates an index ranking all wine markets globally on attractiveness (2024 - US #1, Canada #2, Switzerland #3 - a small country, but strong wine culture and high value wines)EU subsidies are pervasive (e.g., bottling line, materials subsidies, marketing support (Italy $150M/year), buying excess bulk wine), but hard to get complete infoThe US has less support for alcohol (USDA has $8M/year for CA wine); wine is the highest value US export, but low in total valueTrade war impactsMarket uncertainty has many importers not wanting shipments on the waterCost of input materials (e.g., steel, oak barrels) upPrior administration not interested in addressing trade disparities, potential to open up other markets (e.g., India - 150% tariff on alcohol, #1 whiskey market, #5 beer market; Vietnam; Thailand)Attitudes towards the US impact business (e.g., Denmark dislikes threats on Greenland, reducing US purchases; China is not a factor; Vietnam and Korea are positive on US products)Hong Kong’s move to 0% taxes on wine led it to be a hub of CA wine in AsiaIn 2019, China's tariffs on US wine plummeted businessWine Institute promotes “0 for 0 tariffs” - keeping wine out of trade disputesMajor policy priorities: US dietary guidelines (on alcohol), getting wine back on the shelf in Canada, Ingredient & nutritional labeling, CA bottle bill on recycled glass, and environmental regulations“Share Wine” program - building understanding, community, and engaging with wine consumers, focusing on 25-45 year olds, centering on relationship w/ technology