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Wine Business

Updated: Sausal Vineyard and Winery Acquired by Silver Oak Family

Updates: The Sausal Winery tasting room is now open again, from 10am to 4pm, seven days a week. They are offering free tastings and selling Sausal wines. The wine club is still active, but is not currently accepting new members. To purchase wines for shipment without visiting, call the tasting room.


Sausal Winery, an Alexander Valley landmark, has sold to the Duncan Family, owners of Silver Oak and Twomey, for an undisclosed sum. The agreement was finalized late last week and Sausal Winery club members were notified of a sale on Friday by email. However, no details, including the purchaser's identity, were released until today. The Sausal tasting room was closed to the public as of Friday. Silver Oak has not announced if or when it will re-open, nor has it disclosed specific plans with the regard to vineyards, Sausal employees or brand.

SOArchTextSilver Oak Cellars was co-founded in 1972 by Raymond Duncan and Justin Meyer and dedicated exclusively to producing Cabernet Sauvignon that is aged and drinkable upon release. The winery makes two wines at two separate facilities: Napa Valley Cabernet Sauvignon in Oakville and Alexander Valley Cabernet Sauvignon in Geyserville. Twomey Cellars makes Pinot Noir, Merlot and Sauvignon Blanc from five California AVAs. "The Sausal Vineyard site presents us with an excellent opportunity to grow Cabernet Sauvignon with a variety of soils and conditions not previously available to us in the production of our Alexander Valley Cabernet," said David R. Duncan, President and CEO of Silver Oak and Twomey Cellars.  "We are excited to see what other opportunities it will afford us in the future."

This transaction brings to a close more than a century of involvement in the Northern Sonoma County wine industry by the Demostene-Ferrari family. My research also indicates Sausal was the oldest family-owned winery still in operation1 within the Alexander Valley AVA. The winery was established in 1973 on the 125-acre Sausal Ranch purchased by the Demostene family in 1956.

Sausal estate vineyards include what are thought to be the oldest Zinfandel vines in Alexander Valley. They are at least 135 years old, having been noted in a regional atlas of 1877. In addition to that “Century Vine Block,” the vineyard includes old vine Zinfandel in the “Private Reserve Block” and the “Family Block” with average ages of 95 and 55 years respectively.

The Demostene’s themselves have a long history in the area. Genoese-immigrant Manuel Demostene worked on ranches in Alexander Valley from 1901. His son, Leo, married Rose Ferrari in 1936. Her father, Abele Ferrari, had joined Italian Swiss Colony shortly after the turn of the century. He went on to operate the Healdsburg Machine Shop, where he invented and built the Healdsburg Crusher for wine grapes. In 1923, he purchased Soda Rock Winery2, which he restored and operated after the repeal of Prohibition.

Leo Demostene took over as winemaker at Soda Rock after his marriage to Rose. He held that post until his death, nearly 40 years later. In 1956, the couple acquired Sausal Ranch with intent to establish a winery there. They and their children (Dave, Ed, Peachie and Cindy) planted more Zinfandel, along with Cabernet Sauvignon, through the mid-1960‘s. They completed the winery in 1973, just after Leo’s passing. Sausal added a tasting room in 1986.

Sausal wines, all made from estate fruit, included Family, Private Reserve and Century Vine Zinfandel as well as Cabernet Sauvignon, Sangiovese, Petite Sirah and blends thereof, some including Carignane. The wines were made in a traditional, balanced style that expressed the unique terroir of Alexander Valley with fruit-derived complexity. The Zinfandel routinely scored high 80’s and above in major wine publications.

Dave Demostene has served as Sausal Winery’s winemaker from the beginning and his brother Ed managed the vineyard. Cindy has been responsible for operations. Peachie ran the tasting room until her retirement a few years ago. All four Demostene “kids” are now of retirement age, hence the sale.

Frequent visitors to Sausal Winery are well-acquainted not just with the wines but also Sophie and Gypsy, the winery cats. They were the inspirations for Sausal Winery’s Cellar Cat Red and Purrfect Petite. The cats have declined comment on the sale, but are happily making themselves at home with Cindy.


1Other longtime Alexander Valley wineries included Alexander Valley Vineyards (1975) and Johnson’s Alexander Valley Wines.

2Soda Rock Winery was sold to the Tomka family in 1978 who operated it for more than a decade. Ken and Diane Wilson purchased the name, buildings and non-vineyard property in 2000. Their restoration is nearly complete and it’s once again a popular destination.


Follow NorCalWine on Twitter for breaking wine news, information on events and more. Become a fan and join the NorCal Wine community on FacebookAlso check out our comprehensive Northern California winery listings. They are very useful for planning a tasting trip or just getting in touch with a winery.

This article is original to Copyright 2012 NorCal Wine. All rights reserved.

Regarding the Diageo Announcement of Pending Cuts in their US Wine Business

The Diageo announcement that they will eliminate approximately 90 jobs within its U.S. wine business has been widely reported. Diageo also said that they may sell some wine brands and/or vineyards. These revelations follow Tuesday’s announcement that their CFO of 18 years, Nick Rose, has resigned and will be replaced by deputy CFO Deirdre Mahlan. On May 6, Diageo reiterated their expectation that profit growth for the current fiscal year would be “low single digit.” The following information provides a background that today’s announcements did not include.

During their March 2010, investors Q & A, Diageo CEO Paul Walsh stated the U.S. was a very competitive market overall and the company would step up promotional spending there by 1 - 2 %. Walsh also said that, for the fiscal year, sales in the U.S. and Europe were flat and the company’s growth was coming from Asia, Latin America and Africa. Of course, this all relates to the company’s total business, not just wine.

According to Diageo, it’s wine brands make up just 6% of the company’s net sales. First half sales for Diageo were 5.2 billion pounds (roughly $7.5 billion using December 31, 2009 exchange rates). That means that net sales for their wine brands during the first half of their fiscal year were approximately $447 million. It’s not clear how much their U.S. wine brands contributed to those numbers. Diageo does not split such data out in their public disclosures.

Their best known U.S. wine brands are Beaulieu Vineyard (Napa Valley), Chalone Vineyard (Monterey County), Sterling Vineyards (Napa Valley), and Rosenblum Cellars (based in the town of Alameda and sourcing fruit from a variety of areas). Diageo’s last U.S. wine acquisition was Rosenblum Cellars in January, 2008. Looking at North American wine only, the first half results for Diageo showed growth in volume of 6% but, due to decreasing prices, net sales were down 3%. That result isn’t out of line with the experiences of other large wine brands with high volumes in price categories below $20.

Diageo also owns non-U.S. wine brands. The most prominent among them are the Champagne houses of Dom Perignon and Moet & Chandon. They also have Blossom Hill which is the dominant wine brand in the UK, offering a wide range of low-priced wines based on grapes from various countries. Despite it’s apparent popularity, the Blossom Hill website has been “having a little nip and tuck” since sometime in 2009 and has not been updated since then.

Beer accounts for 22% of Diageo sales and includes such brands as Guinness, which they have designated as a “global priority brand,” and Harp Lager. The bulk of Diageo’s business is in spirits however. Spirits within their “global priority brands” are Captain Morgan, J&B, Johnnie Walker, José Cuervo, Smirnoff and Tanqueray. Other spirits brands they hold with which you might be familiar include Myer’s rum, Gordon’s gin, Pimm’s Cup, Ketel One vodka and the whiskeys of Bushmills, Crown Royal, and Lagavullin. They hold many additional brands and also distribute Cognacs for Moet Hennessy.

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Follow NorCalWine on Twitter for breaking wine news, information on events and more. Become a fan and join the NorCal Wine community on FacebookAlso check outour comprehensive Northern California winery listings. They are very useful for planning a tasting trip or just getting in touch with a winery.

This article is original to Copyright 2010 NorCal Wine. All rights reserved.

Data in this article was collected from official Diageo financial releases and supporting documents.

9 Risks to Consider when Investing in Wine

Articles espousing wine as an investment are published regularly. They seem to be even more common now that so much doubt exists about the safety of more conventional investments. The latest of these articles was published yesterday by Bloomberg. The article discusses the conclusions of two Swiss economists who found investment in certain wines of the past two decades to have outperformed the Russell 3000. But should you really put your money where your mouth is?

The Bloomberg article is well balanced. It offers commentary from a number of good sources, both pro and con wine investment. It’s a good article. However, such articles always get picked up by others who simplify and add hype. Shouty titles such as “Wine a Better Investment than Stocks” ensue and readers may be misled.

The following nine points focus only on the negatives of wine as an investment. It’s not that I don’t see positive aspects to investing in wine. I just think current sentiment may be minimizing the negatives. Since understanding risk is a vital part of responsible investing, I’ve chosen to only highlight the risks of wine investment.

profit-lossPast performance is not indicative of future results.
This is a stock market mantra, but the same is certainly true of wine values. Tastes change. Wine quality is ever changing. The world economy changes. Wine production levels change. Despite current excitement over the 2009 vintage,
Bordeaux en primeur and pricing models are troubled. All of this tells us that investing money in a new wine today, because certain vintages of that wine from two decades ago have appreciated, is risky.

High returns are based, in part, on scarcity, but the amount of great wine available is increasing rapidly.
Certainly, the amount of wine produced by the “blue chip” wineries of Bordeaux is not substantially increasing. However, due to modern vineyard and winery techniques, they are producing more great vintages than they did in the 20th century. And, they have more and more competition from very good wines produced elsewhere in Bordeaux or the world. While their production levels are much lower and their vintages have been more consistent, the same basic issues exist with regard to “cult” wines from Napa.
If more great wine is being produced, a large percentage of the “blue chip” wines will be purchased by investors rather than consumers. This in turn means that more of the wine will remain unconsumed in the coming decades and that means greater availability at auction and lower prices.

The quality of wine is not static.
Wine ages and changes. The way it does so is affected by many variables including the way it was made, transported and stored. The quality of individual corks obviously has an impact too. All of this means that investment in wine must include careful study of the wine to be purchased and an investment in secure storage with consistent and appropriate temperature and humidity. The wine must also be protected from light and vibration.

Wine investments need to be insured.
Since wine can be damaged or destroyed, if one is keeping it for investment purposes, it should be insured against theft, fire, flood, earthquakes, etc. The cost of such insurance can be high and needs to be factored into any profit and loss calculations.

Ironically, wine is less liquid than more traditional investments.
Of course, the wine itself is a liquid. But, from an investment standpoint, it is more difficult to sell, or liquidate, than stocks, bonds and many commodities. There is less demand for investment grade wine and fewer channels for selling it. Laws also make it necessary for owners to sell their wine through licensed companies which take a cut. In this respect, wine is much harder to sell than precious metals or gems.

It may be tempting to consume one’s investment.
Unlike most other investments, wine is deliciously consumable. While we may use this as an excuse to invest in wine – “if it doesn’t appreciate I’ll just drink it” – it can also lead to poor decisions. Wine may be purchased because, somewhere deep in our subconscious, we really want to drink it rather than hold it for resale. Or we might, on some drunken evening, stumble into the cellar with our friends and guzzle our nest egg.

Wine does not increase in value indefinitely.
Because wine does change as it ages, it ultimately becomes less desirable as a beverage. At that point, the value starts to decrease rather than increase. Knowing exactly when to sell isn’t significantly less difficult than timing the stock market. In the end, the value of a wine as a beverage is based on the perception of others and that is hard to predict.

Counterfeiting of investment grade wines is a problem.
While you may be sure the wine you buy as an investment is genuine, you need to be able to convincingly demonstrate the wine’s authenticity when you sell it. That requires written proof of origin and, in some cases the sacrifice of a bottle for tasting. And, to the extent that counterfeit wines do find their way to auction, they diminish the value of your wine by satisfying some of the demand and because general concern about authenticity diminishes the enthusiasm of bidders.

The price of investment grade wines at release has increased substantially.
The high price of these wines from the outset reduces sales to wine drinkers and the opportunity for appreciation. Buy low, sell high is a better tactic than buy high, sell higher.

If you enjoyed this article, please share it! Icons for popular sharing services are at the above and below.

Follow NorCalWine on Twitter for breaking wine news, information on events and more. Become a fan and join the NorCal Wine community on FacebookAlso check outour comprehensive Northern California winery listings. They are very useful for planning a tasting trip or just getting in touch with a winery.

This article is original to Copyright 2010 NorCal Wine. Graphic by Mark Stay. All rights reserved.

How to Turn Your Customers into Fans for Life

Today, most of us who use social media know Guy Kawasaki from his non-stop, helpful tweets and for his website Alltop. But my first interactions with him were in the 1980’s when he was at Apple Computer. Eventually, he became their Chief Evangelist. As he says in the sales lead in for his book Selling the Dream, “If you do one thing right in your career, you can live off your reputation for a long time. The thing I did right is evangelize Macintosh, and though I am nothing compared to Jesus and the disciples, I did put secular evangelism on the map.”

In those days of yore, Guy not only had to evangelize Apple. He had to explain what “secular” evangelism was. How does it work? Why is it important? How can you do it in your business? Guy was talking about “turning customers into fans for life” two decades before Facebook fan pages existed. And what he said made sense and made a difference. It helped a lot of companies, both fledgling and established, thrive.

I bring all this up now because of something I read today and something I observed yesterday. A few minutes ago, I read an online interview with Paul Mabray of VinTank which bills itself as “a digital think tank for the wine industry.” He provided a lot of useful advice in that article, but I think that the most important may have been this simple phrase toward the end, “create a customer centric strategy.”

He was directing that comment toward wineries, but it’s just as applicable to distributors, retail shops, restaurants, websites and almost any other business. It’s also reminiscent of advice Guy Kawasaki used to give for turning customers into fans for life. Your customers are your business. To paraphrase Sandra Bernhard, without them you’re nothing.

Nurturing customers is essential and takes more than a “the customer is always right” attitude. One of the best ways to do it, to turn a customer into both a fan and an evangelist for you, is to treat your customers like people. This sounds obvious, but it’s rarely a company focus. Customers are usually treated like... customers. But if you treat a person like a customer, they’re likely to act like one. When they want something only you have, they’ll pay you for it. When they want something a lot of people have, they’ll shop around to find the most affordable or convenient option.

In the 21st century, that’s a dangerous situation for businesses. Cut your price as much as you can, there will always be another company cheaper. And there will always be a competitor with  broader inventory or a unique way to sweeten the deal. Fans don’t shop around, they go directly to you. Evangelists not only go straight to you, they bring their friends.

What I observed yesterday was the final phase of a winery turning customers into fans for life. I was standing in the club member tasting room at V. Sattui Winery when in walked a couple in their late-50’s. It turns out that they had had a memorable conversation with one of V. Sattui’s telemarketers. The lady had talked to him for 45 minutes. They probably talked about wine too, but all she mentioned was that they’d talked about her losing her house in Katrina and about her cats. And about how her husband had then gotten on the phone and talked to the V. Sattui rep for another 45 minutes. At the end of the conversation, the rep told them to stop in and say “hello” if they were in the area.

So, here they were in California on a vacation from their home in Florida, asking for the rep by name. This wasn’t a “we’re in the area, I guess we’ll stop by” visit. These people were really excited to be there. I’m positive they planned their itinerary around a stop at V. Sattui. The rep came down to the tasting room to meet them. Hugs and conversation ensued.

You don’t need to spend 90 minutes on the phone to make a sale. That would get telemarketers at most companies fired. But treating customers like people, learning about them, building genuine and meaningful rapport, can take that long. Creating that kind of personal bond is an excellent way to turn customers into fans. I’m sure that couple will be buying the lion’s share of their wine from V. Sattui in the future and talking up the company and its wine to their friends for years to come.

I suspect V. Sattui knows a lot about creating fans and evangelists. They built their business by thinking about what potential customers would want, where they’d want it, etc. It’s also the only winery I’ve seen [there are probably others I’m not aware of] that has a Hall of Fame for customers. A lot of places put up Polaroids of customers. How many take the time to write a paragraph about the people in the photo and explain why they’re on the wall? I can guarantee that everyone on that wall is more than a customer, they’re a fan for life and an evangelist.

V. Sattui’s business success speaks to both their successes in customer interaction. 100% of V. Sattui’s wine is sold direct, either at the winery or shipped direct to consumers. They sell more wine direct to consumers than any other winery in the world. And V. Sattui doesn’t have an ad agency. They rely on customer word of mouth. If Dario Sattui was able to build a castle with the money made from customers who became fans, it can probably help your company too.

Business used to be entirely the result of face-to-face interaction between people. Today, there are a lot of places to interact with customers as people and many opportunities to turn them into fans. You can still do it face-toface in your tasting room or shop, or when you call on them in their office. You can also do it on your website or using social media. Remember though, it’s fairly easy to get someone to call themselves a “fan” of your company on Facebook. It’s much harder to turn them into a genuine fan and evangelist.

If you’re not sure how to get started, the first step is to consciously work to create a customer centric strategy. If you need guidance on doing that, you might read a couple of Guy Kawasaki’s books. You might read more of Paul Mabray’s articles. Or you can spend some time studying V. Sattui. Doing all three would be excellent.

If you enjoyed this article, please share it! Icons for popular sharing services are at the above and below.

Follow NorCalWine on Twitter for breaking wine news, information on events and more. Become a fan and join the NorCal Wine community on FacebookAlso check out our comprehensive Northern California winery listings. They are very useful for planning a tasting trip or just getting in touch with a winery.

This article is original to Copyright 2010 NorCal Wine. All rights reserved. The banner photo is an edited version of this one by barcoder96 and used under Creative Commons terms.

On the Changes At Rosenblum Cellars

Diageo, owner of Rosenblum Cellars, recently announced that the Rosenblum winery in Alameda, California will be closed as will its boutique tasting room in Healdsburg. Wine production will move to the Beaulieu Vineyards facility in the Napa Valley. These moves are part of cutbacks in its U.S. wine operations that Diageo had previously hinted at.

When a local winery like Rosenblum Cellars is acquired by a multinational manager of brands such as Diageo it’s new owners look at the company in a fundamentally different way than did the founders. It is no longer a winery with a personal brand but a national brand with a winery.

For the original company, the winery is at its center. It is more than just a place to make wine. It’s the place where the owners and employees spend most of their waking hours, their home away from home. It’s where customers come to taste, buy or just hang out.

Likewise, the brand isn’t just the name on the bottle or a set of expectations with respect to packaging, flavor profiles and value. The brand is the people at the winery and the way the company interacts with the community. With the focus on in-winery tasting for visiting customers, the winery facilities are part of the brand too.

The focus of typical multinational corporations is on enhancing shareholder value. Driving profitability and growth are the top priorities. Efficiency is essential. Product lines and operations need to be streamlined to maximize margins and reduce complexity that might cause problems in a big company with multiple layers of management. Discipline and process are more important than passion and personal relationships. Decisions are made based on ROI and market share analyses.

When the brand in question is being focused on high volume products distributed nationally, local or visiting customers are not of much consequence. Their faces and personal stories are unknown to the national brand manager and their individual purchases insignificant in the overall revenue picture. The winery in this case is no longer at the center or even of central importance. It is a cost center.

The structural changes that come as a result of such an acquisition are not necessarily immediate, but they are nearly inevitable. The long-term value to the buyer, that value which allows the buyer to pay the seller a premium, depends on these changes taking place. [While an individual wealthy investor may buy into a winery and be satisfied with a steady stream of good revenue and the lifestyle of a winery owner, public corporations must have growth.] Whether the changes that result from the transfer of ownership are good or bad depends on your perspective. Are you a local customer or a stock holder?

Had the economy not gone into major recession and the U.S. market for wine not slumped so badly, Diageo could have put off some of these changes longer, but they likely would have occurred eventually. The town of Alameda, an island off the coast of Oakland, isn’t as close to the vineyards or winery supply companies as is Napa Valley, nor is it home to as many experienced wine industry people. “Bottled in Napa Valley” will also be more meaningful to a consumer in Pennsylvania than was “bottled in Alameda.”

With regard to product assortment, it is much more efficient to focus on a small number of high volume products sold nationally than to maintain dozens of low-volume products that don’t find their way onto store shelves or are made in volumes too small to meet a chain’s minimum requirements. If the winery’s target market is grocery store shoppers, even flagship wines that score high points in Wine Spectator aren’t of great value. Finally, if you no longer make boutique wines and plan to focus on bottles of $25 or less for supermarket shelves, a tasting room on The Square in Healdsburg is a waste of money. It’s better to put that money into in-store merchandising or circular ads.

Fortunately, for the local fans of the “original” Rosenblum Cellars and those who enjoyed their high-end wines, such as the Monte Rosso Vineyard Zinfandel, there is Rock Wall Wine Company. Located in the former Alameda Naval Air Station, Rock Wall was founded in 2008 by, among others, Rosenblum Cellars founder Kent Rosenblum and his daughter Shauna. They offer a range of wines sourced from good vineyards all around Northern California. If you need Monte Rosso Zinfandel fix, you can get it with their Rock Wall Zinfandel Reserve Sonoma County, $30. And they throw a great party.

If you enjoyed this article, please share it! Icons for popular sharing services are at the right above and also below.

Follow NorCalWine on Twitter for breaking wine news, information on events and more. Become a fan and join the NorCal Wine community on FacebookAlso check outour comprehensive Northern California winery listings. They are very useful for planning a tasting trip or just getting in touch with a winery.

This article is original to Copyright 2010 NorCal Wine. All rights reserved.