Photo: Tony Stewart of Quails' Gate and Bacas Family Estates (photo courtesy of Quails' Gate)
The strong U.S. dollar and wine marketing trends in the United States
have triggered several strategic moves by Bacas Family Estates, the Stewart
family holding company for Quails’ Gate Estate Winery.
chief executive Tony Stewart recently announced the acquisition of Envolve
Winery, a 2,000-case producer with a tasting room in Sonoma. This is the company’s second Sonoma winery. In
2012 it acquired the 40,000-case Valley of the Moon winery in Glen Ellen.
It was been restructured; now operating as Madrone Estate Winery, it
produces three labels including Lake
Sonoma and will
produce the Envolve wines.
is winding up Plume Wines, a 2010 joint venture with Dan Zepponi to
produce primarily Napa Cabernet Sauvignon and sell it in Canada.
The dramatic change in the Canada/U.S. exchange rate virtually wiped out
the profitability of exporting the wine to Canada.
Quails’ Gate wine to the United States
is now “a definite consideration” with the Canadian dollar at 70 cents U.S. “We only sell a little bit now through
Washington and Oregon, and a bit through the Earl’s
Restaurants,” Stewart says. But he has been getting more and more inquiries
about Quails’ Gate wine from American wine retailers.
The Quails’ Gate wine
strategy both in Canada and
with its Sonoma
production is pegged to the premium segment, or sweet spot, of the market.
According to the Silicon Valley Bank’s recent State of the
Industry report, this segment is healthy and is forecast to grow between nine
and 13% this year. Bottle prices will rise four to eight percent in 2016 for
wine selling for more than $10 a bottle, while volumes and prices will drop at
lower price points.
A summary of the bank’s findings says: “Bottled fine wine
imports will begin to take a larger market share this year, while bulk foreign
wine loses market share. A strong and strengthening U.S. dollar, available
foreign supply and willing millennials will encourage imports at all premium
Tony Stewart is picking up those signals when considering
exporting more Quails’ Gate wines. The winery’s current production is about
55,000 cases a year.
“I don’t see it has a huge market,” he said in a recent
interview. “Maybe it is 2,500 cases annually, which could be a good thing for
Quails’ Gate. And there is a question of Icewine. With Quails’ Gate, we have an
opportunity. Canadian wines are not well known. You are looking at a very
select buyer. You set your pricing parameters at what works for you and you
sell without a need to sell large volumes. I have spoken with wine store people
who say to let them know if we ever get our wines into the market. They say
they have customers coming in and looking for different things.”
Envolve Winery was founded in 2008 by members of the
Benziger family with a partner. It was acquired by Bacas primarily for its Sonoma
“We were looking for a place to be able to have Lake Sonoma
wines tasted and poured, a direct to consumer experience,” Stewart says.
Bacas bought Valley of the Moon and Lake Sonoma Winery in
2012 from F. Korbel & Sons. Both are among the oldest brands in Sonoma (Valley of the
Moon was established in 1863). The Stewart family completed a renovation of the
historic Madrone Vineyards Estate at the former Valley of the Moon Winery in
the fall of 2014, adding a small-lot winery within the original barrel cellar
built in 1887. The winery’s hospitality center at Glen Ellen also was
formerly had a tasting room in Healdsburg but
that has closed several years earlier, with a devastating impact on the
membership of the Valley of the Moon and Lake Sonoma
wine clubs. Membership had collapsed to 200 from 5,000.
“We are reaching out to those 5,000 names that we have on
file and saying we are back,” Stewart says. “We hope that we could finish this
year with Lake Sonoma
having 1,000 club members. That
is the goal. If we can get it to 2,000, that is fantastic.”
A healthy wine club is key to selling directly to consumers
rather than being squeezed by distributors in the ultra-competitive wholesale
wine market in the United
“Without a physical presence, our ability to grow the Lake Sonoma
wine club was very minimal,” Stewart says. “Now they can come to the shop. They
can taste the wines. They can be talked to about the club. They will be
reciprocal benefits at Madrone and Quails’ Gate. That is not so big for people
that don’t travel to Canada
but for our club members in Canada
they find it interesting when they go to the U.S.
and they get the club discount
and free tastings.”
Valley of the Moon was renamed Madrone Estate Winery
(another historic Sonoma
name) after the Stewart family bought it in 2012. Now, Valley of the Moon is
commercial tier of wines under the Madrone umbrella. The winery also produces
two premium tiers, including an upper end reserve tier.
The Envolve wines become a premium tier in the Lake Sonoma
range. “They are right where we are, in the $20 to $45 range,” Stewart says.
“They had a few wines that were $60; mainly small lots. They did varieties like
Malbec, Pinot Noir, a Bordeaux
blend and Chardonnay. We will carry on with a few of those.”
Envolve also has an 800-member wine club; that was another
of its attractions.
There has been positive synergy between the Sonoma
wineries and Quails’ Gate. “We have
gained a lot of intellectual capital,” Stewart says. “Our knowledge of markets
in the U.S.
has made us much
more aware of how the changes in British
may affect us, with grocery stores coming
into play. Every year we get together as a leadership team, meeting winemakers
and management from both wineries. We communicate how we are handling club
business, the wine shops and production issues. There are lots of advances in Canada
that we can employ down south. So we are working on that.”
The wine club business has been illuminating, even though
Quails’ Gate has a thriving wine club with about 1,400 members.
“The club business in the U.S.
is much more developed than Canada
so that has been a huge eye-opener to us as to what we have to try and do at
Quails’ Gate in order to keep up with the consumer who is looking for something
more than the club that offers discounts,” Stewart says. “They want some unique
attributes to the club. Membership has privileges. We are adding a whole bunch
of things at the Quails’ Gate wine club to take us to the next level.”
For both Quails’ Gate and the Sonoma
wineries, the wine clubs and the
tasting rooms are fundamental for profitable direct-to-consumer sales.
“The only way to be effective is to develop a solid DTC
market,” Stewart says. “Twenty-five percent of Quails’ Gate sales are at the
estate. That strong business at the estate helps us. When we go across Canada
we are not beholden to price incentives. We go in and we make no qualms about
it. Our wines are going to be over $20 across Canada
The Madrone and Lake
wines also sell
primarily the DTC channels and to restaurants.
Bacas has plans to distribute some of those wines in Canada despite
the exchange rate. “Madrone is strictly high-end direct-to-consumer wines,”
Stewart says. “We will start to see the first Madrone wines come into Canada in about
a year’s time. They will be limited to a few hundred cases.”
To conclude, here are notes on recent wines released by
Quails’ Gate in the Canadian market.
Chardonnay 2014 ($20.49). This crisp and refreshing Chardonnay begins with
aromas of tangerine, apple and peach with a hint of butterscotch. On the
palate, the wine has flavours of citrus, melon and apple with a very subtle
toasty note. The flavours are bright, with a vivid, clean focus. The finish
Quails’ Gate Merlot
2013 ($21.79 for 3,865 cases). Dark
in hue, the wine has appealing aromas of cassis, blueberry and blackberry. On
the palate, there are flavours of black cherry, black currants and vanilla. The
texture is firm and concentrated. There is a spicy finish, with notes of
chocolate and cedar. 91.
Quails’ Gate Pinot
Noir 2013 ($24.39 for 4,345 cases).
The wine begins with aromas of cherry, along with the earthy notes that
aficionados call forest floor. The flavours are rich with layers of dark fruit
and spice on the finish. The texture is still youthfully firm. This wine
benefits from decanting or from cellaring. 90.
Quails’ Gate Old
Vines Foch Reserve 2013 ($34.79 for 1,345 six packs). This has been
something of a cult wine since the first vintage in 1994. It is a bold wine,
almost black in colour and boldly oaked. It delivers a huge spoon of sweet
fruit (black cherry, plum) and chocolate to the palate. The oak tannins give
the wine a firm structure. A take-no-prisoners wine like this can handle strong
flavoured meats, such as lamb or venison. 92.
Fortified Vintage Foch 2013 ($18.17 for 420 cases of 750 ml). The wine
begins with aromas of plum and liquorice. It is big and fleshy on the palate,
with flavours of plum and fig that mingle with chocolate on the spicy finish.