June 2018 Issue of Wines & Vines
 
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A Conversation With Roger Nabedian

The Gallo executive discusses Orin Swift, Stagecoach and market economics

 
by Jim Gordon
 
 

By Jim Gordon

Roger Nabedian, a 32-year employee of E. & J. Gallo Winery, has made many headlines in recent years for orchestrating high-profile, high-priced acquisitions of vineyards, wineries and brands. As senior vice president and general manager of Gallo's Premium Wine Division, he is in charge of 40 brands produced at 28 wineries around the world. The division includes more than 7,500 acres of vines on 24,000 acres of land.

Nabedian has helped secure and lead the integration of winery acquisitions in recent years, including Louis M. Martini, William Hill Estate and The Ranch Winery in Napa Valley, J Vineyards in Sonoma County and Columbia Winery in Washington State, to mention a few. A further move in the premium direction was the company's April 2017 acquisition of the 1,300-acre Stagecoach Vineyard property in Napa Valley, which included 600 acres under vine that produce mostly high-end Cabernet Sauvignon grapes. The real estate itself was worth at least $180 million, according to Napa County records.

In 2016 Nabedian's division acquired Napa-based Orin Swift Cellars from founder Dave Phinney, who continues to direct winemaking. Orin Swift was then a 100,000-case brand. Phinney had created The Prisoner wine brand and later sold it to Huneeus Vintners, who subsequently sold it to Gallo competitor Constellation Brands for a reported $285 million.


You are in charge of E & J Gallo's premium wine division. What is its mission?

Nabedian: Gallo's simple mission has been to provide the best-quality wine at a value to consumers in a way that will have the broadest appeal, and within the economics of the wine trade. So whether it was Hearty Burgundy, or Boone's Farm or Martini Monte Rosso Cabernet, the mission has been pretty consistent.

If I were a consultant, I would tell you to break the market down and ask, where are the profit dollars available? Back in the '90s or '80s this profit pool was being generated at more premium price points that Gallo wasn't participating in. It was apparent you have to play there and you have to play there successfully to sustain your business. We want to participate and excel in all segments of the wine market, no matter how you want to define them.


Q
Is Gallo observing the market and giving people what they want or leading the market?
Nabedian: I think we are early adopters, and we are good at amplifying the market. We weren't the first with Pinot Grigio but it was starting to become popular, and we created a brand called Ecco Domani in 1996 that I think helped define the Pinot Grigio category in the United States. Another example is the red-blend phenomenon that occurred a little less than 10 years ago. We weren't the first to launch a California red blend and market it uniquely, but Apothic helped define the category.


What recent acquisitions are you especially pleased with?

Nabedian: In acquisitions we try to be focused on wherever we think our biggest opportunity is, whether it's a different appellation or area, or focused on a different varietal. As an example, we sought to acquire William Hill because we saw it as a credible vehicle to sell Chardonnay. It was a bigger acquisition for us than some of the others we had done prior, so just acquiring it and having success and demonstrating to ourselves that we could do this well began to shift the company's paradigm on how we think about acquisitions.

I think in five years I'm going to say the same thing about two other acquisitions. One is Orin Swift, a very different acquisition for us, not only because of the personality of the brand and how it fits into the marketplace but our ability to work close with its founder and leader, Dave Phinney. Part of the acquisition is being able to develop a partnership with him, and that has changed the way we think about evolving in the wine business.

And that led us to Stagecoach Vineyard in Napa Valley. Look, we've been investing in vineyards for a long time. The family has been very aggressive about trying to find the best vineyard land possible and investing in it for the long term. I don't want to suggest Stagecoach is unique in that way but its size, scale, and the price point in which the wines that are grown there play, is a very different step forward for us.


What will happen with Stagecoach?

Nabedian: We have 90 customers, and we value them. We respect their commitment to the wines that they make from that vineyard. My expectation is that we will continue to do business with many of them. Obviously, we see it also as a great source for us to build our existing businesses like Louis M. Martini, like Orin Swift, even potentially William Hill. We will innovate from that vineyard. As a result, we expect to sell a fair amount of [Gallo-brand] wine made from the grapes grown on that vineyard, but I am sure we will continue to sell grapes to customers from there. Monte Rosso is an example. The Gallo family bought it in 2002, and so here we are 15 vintages later and we still sell grapes off of that vineyard to a handful of customers. My sense is that 20 years from now we will still do business with people from Stagecoach.


Q How do you see the wine market in general? Is it on a strong foundation so that it could still grow through the next recession?

Nabedian: For the first time in my memory global demand will be higher than global production in 2017. It will be interesting to see what the effect will be on a global basis of a slowing wine market and a short 2017 vintage. Prices are probably going to elevate and as those wines come to market we'll see how the market is able to absorb that.

The wine market continues to grow, particularly above $10, and I think there's reason to feel confident that growth will continue. I think the greater question is at what rate will it grow. Will it grow by volume at 1% or by volume at 3 or 4%? And what is the value to volume ratio?

The U.S. is still one of the fastest growing wine markets in the world even though it's the largest wine market in the world now.

 
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