161
University of California • Berkeley
REGIONAL ORAL HISTORY OFFICE
Regional Oral History Office University of California
The Bancroft Library Berkeley, California
The Wine Spectator California Winemen Oral History Series
Michael Moone
MANAGEMENT AND MARKETING AT
BERINGER VINEYARDS AND WINE WORLD, INC.
With an Introduction by
Charles A. Carpy
An Interview Conducted by
Lisa Jacobson
in 1989
Copyright (c) 1990 by The Regents of the University of California
Since 1954 the Regional Oral History Office has been interviewing
leading participants in or well -placed witnesses to major events in the
development of Northern California, the West, and the Nation. Oral history is
a modern research technique involving an interviewee and an informed
interviewer in spontaneous conversation. The taped record is transcribed,
lightly edited for continuity and clarity, and reviewed by the interviewee.
The resulting manuscript is typed in final form, indexed, bound with
photographs and illustrative materials, and placed in The Bancroft Library at
the University of California, Berkeley, and other research collections for
scholarly use. Because it is primary material, oral history is not intended
to present the final, verified, or complete narrative of events. It is a
spoken account, offered by the interviewee in response to questioning, and as
such it is reflective, partisan, deeply involved, and irreplaceable.
************************************
All uses of this manuscript are covered by a legal
agreement between the University of California and
Michael Moone dated November 3, 1989. The manuscript is
thereby made available for research purposes . All
literary rights in the manuscript, including the right
to publish, are reserved to The Bancroft Library of the
University of California, Berkeley. No part of the
manuscript may be quoted for publication without the
written permission of the Director of The Bancroft
Library of the University of California, Berkeley.
Requests for permission to quote for publication
should be addressed to the Regional Oral History Office,
486 Library, University of California, Berkeley 94720,
and should include identification of the specific
passages to be quoted, anticipated use of the passages,
and identification of the user. The legal agreement
with Michael Moone requires that he be notified of the
request and allowed thirty days in which to respond.
It is recommended that this oral history be cited as
follows :
Michael Moone, "Management and Marketing
at Beringer Vineyards and Wine World,
Inc.," an oral history conducted in 1989
by Lisa Jacobson, Regional Oral History
Office, The Bancroft Library, University
of California, Berkeley, 1990.
Copy no.
MICHAEL MOONE
1990
Cataloging Information
MOONE, E. Michael [b. 1940] Wine Marketer
Management and Marketing at Beringer Vineyards and Wine World. Inc.. 1990,
viii, 109 pp.
Career as salesman with Procter & Gamble; Beringer Vineyards and its umbrella
company, Wine World, Inc., 1973-1989: marketing in the 1970s, Beringer
President Richard Maher, sales and pricing, Los Hermanos label, revitalization
of Beringer under Nestle, acquisitions of Souverain Cellars, Asti winery,
Estrella River Winery, developing premium brands, export markets; wine
industry organizations.
Introduction by Charles A. Carpy, Freemark Abbey Winery
Interviewed in 1989 by Lisa Jacobson for the Wine Spectator California Winemen
Series. The Regional Oral History Office, The Bancroft Library, University of
California, Berkeley.
TABLE OF CONTENTS -- E. Michael Moone
PREFACE i
INTRODUCTION, by Charles A. Carpy v
INTERVIEW HISTORY vii
BRIEF BIOGRAPHY viii
I EARLY YEARS AND EDUCATION !
Growing Up in Southern California
University Education 2
An Early Role Model 3
Development of Interest in Wine 4
Wine Collecting 5
Fraternity Life: Preparation for the World of Business 7
Interest in Cooking g
II CAREER AT PROCTER & GAMBLE 9
Sales Responsibilities 9
Recruiting Activities 10
Traits of a Good Salesperson n
Affirmative Action 13
First Contact with Richard Maher 14
III BERINGER VINEYARDS AND WINE WORLD, INC., 1973-1989 15
Joining the Company 15
Early Responsibilities and Training 16
Key Personnel 17
Marketing Challenges in the Early Seventies 20
Richard Maher 's Contributions as President 21
Pricing Philosophy 22
Building National Sales 22
Relationship with Distributors 23
Qualities Desired in Salespeople 25
Sale of Fontana Candida 27
Reshaping Product Lines 29
IV LOS HERMANOS BRAND 31
Airline Package 31
Boon to Distribution of Beringer Wines 32
Introduction of Light Wines 33
Declining Jug Wine Sales 35
V BERINGER VINEYARDS 37
Renaissance of the Beringer Label 37
Market Research Studies 38
Rebuilding the Winery 39
Beringer Vinemakers 39
Vineyard Acquisition and Management 41
Beringer White Zinfandel 42
Streamlining Beringer 's Wine Portfolio 44
Jim Tonjum's Contributions to Premium Wine Marketing 47
Wine Competitions 48
Advertising and Public Relations Budgets 48
VI NAPA RIDGE 50
Carving a Niche Among the Fighting Varietals 50
Strategies for Competing in the Fighting Varietals Market 52
Broadening the Consumer Base through Fighting Varietals 53
VII C & B VINTAGE CELLARS 55
The C & B Portfolio 55
Focus on Expensive Brands 58
Impact of a Strong Dollar 58
Shipping 59
VIII ACQUISITIONS AND PREMIUM BRAND DEVELOPMENT 61
Maison Deutz Partnership 61
Acquisition of Souverain Cellars 63
Acquisition of Asti Winery 65
Chateau Souverain Brand 66
Acquisition of Estrella River Winery 67
Meridian Brand 68
Other Vineyard Purchases 69
Strategy for Developing Premium Brands 70
Foreign Investment and Long-term Business Orientations 71
Ownership Changes 72
IX EXPORTS 74
European Market 74
Japanese Market 75
Trade Barrier Issues in Canada and Japan 76
Wine Marketing and Distribution in Japan 77
Wine Marketing and Distribution in Europe 78
Targeted Export Assistance Program 79
Developing Brand Recognition in Foreign Markets 80
Japanese Distribution Companies 81
Benefits of Import Experience 81
Focus on High Image Wines 81
X CULINARY ARTS PROGRAM 83
Scholarships for Chefs 83
Hudson House Renovation 84
Chateau Souverain Restaurant 85
Madeleine Kamman's School for American Chefs 85
Matching Food and Vine 86
XI INDUSTRY ACTIVITIES AND CONCERNS 89
Market Development Committee, Wine Institute 89
Formation of National Wine Coalition 91
Expansion of Premium Wine Business 91
Advertising Wine as an Everyday Beverage 92
Health Issues and AWARE 93
Wine and the American Heritage 94
National Wine Coalition 95
Importance of Industry Affairs to Beringer's Success 95
Definition of a Winery Committee 96
Wine Train 97
Grower-Vintner Relations 98
Napa Valley Vintners 100
Wine Industry's Economic Contributions 101
Wine and Spirits Wholesalers' Association 103
Wine Industry Culture 103
TAPE GUIDE 105
INDEX 106
PREFACE
The California wine industry oral history series, a project of the
Regional Oral History Office, was initiated in 1969 through the action
and with the financing of the Wine Advisory Board, a state marketing
order organization which ceased operation in 1975. In 1983 it was
reinstituted as The Wine Spectator California Winemen Oral History Series
with donations from The Wine Spectator Scholarship Foundation. The
selection of those to be interviewed is made by a committee consisting of
James D. Hart, director of The Bancroft Library, University of
California, Berkeley; John A. De Luca, president of the Wine Institute,
the statewide winery organization; Maynard A. Amerine, Emeritus Professor
of Viticulture and Enology, University of California, Davis; the current
chairman of the board of directors of the Wine Institute; Ruth Teiser,
series project director; and Marvin R. Shanken, trustee of The Wine
Spectator Scholarship Foundation.
The purpose of the series is to record and preserve information on
California grape growing and wine making that has existed only in the
memories of wine men. In some cases their recollections go back to the
early years of this century, before Prohibition. These recollections are
of particular value because the Prohibition period saw the disruption of
not only the industry itself but also the orderly recording and
preservation of records of its activities. Little has been written about
the industry from late in the last century until Repeal. There is a real
paucity of information on the Prohibition years (1920-1933), although
some commercial wine making did continue under supervision of the
Prohibition Department. The material in this series on that period, as
well as the discussion of the remarkable development of the wine industry
in subsequent years (as yet treated analytically in few writings) will be
of aid to historians. Of particular value is the fact that frequently
several individuals have discussed the same subjects and events or
expressed opinions on the same ideas, each from his own point of view.
Research underlying the interviews has been conducted principally in
the University libraries at Berkeley and Davis, the California State
Library, and in the library of the Wine Institute, which has made its
collection of in many cases unique materials readily available for the
purpose .
ii
The Regional Oral History Office was established to tape record
autobiographical interviews with persons who have contributed
significantly to recent California history. The office is headed by
Willa K. Baum and is under the administrative supervision of James D.
Hart, the director of The Bancroft Library.
Ruth Teiser
Project Director
The Wine Spectator California Winemen
Oral History Series
June 1990
Regional Oral History Office
486 The Bancroft Library
University of California, Berkeley
iii
CALIFORNIA WINE INDUSTRY INTERVIEWS
Interviews Completed by 1990
Leon D. Adams, Revitalizing the California Wine Industry. 1974
Leon D. Adams, California Wine Industry Affairs: Recollections and Opinions.
1990
Maynard A. Amerine, The University of California and the State's Wine
Industry. 1971
Maynard A. Amerine, Wine Bibliographies and Taste Perception Studies. 1988
Philo Biane, Wine Making in Southern California and Recollections of Fruit
Industries . Inc. . 1972
John B. Cella, The Cella Family in the California Wine Industry. 1986
Charles Crawford, Recollections of a Career with the Gallo Winery and the
Development of the California Wine Industry. 1942-1989. 1990
Burke H. Critchfield, Carl F. Wente , and Andrew G. Frericks , The California
Wine Industry During the Depression. 1972
William V. Cruess, A Half Century of Food and Wine Technology. 1967
Jack and Jamie Peterman Davies, Rebuilding Schramsberg: The Creation of a
California Champagne House. 1990
William A. Dieppe, Almaden is Mv Life. 1985
Alfred Fromm, Marketing California Wine and Brandy. 1984
Louis Gomberg, Analytical Perspectives on the California Wine Industry. 1935-
1990. 1990
Joseph E. Heitz, Creating a Winery in the Napa Valley. 1986
Maynard A. Joslyn, A Technologist Views the California Wine Industry. 1974
Amandus N. Kasimatis, A Career in California Viticulture. 1988
Morris Katz, Paul Masson Winery Operations and Management. 1944-1988. 1990
Legh F. Knowles, Jr., Beaulieu Vineyards from Family to Corporate Ownership.
1990
Horace 0. Lanza and Harry Baccigaluppi , California Grape Products and Other
Wine Enterprises. 1971
Louis M. Martini and Louis P. Martini, Wine Making in the Napa Valley. 1973
Louis P. Martini, A Family Winery and the California Wine Industry. 1984
iv
Eleanor McCrea, Stony Hill Vineyards: The Creation of a Napa Valley Estate
Winery. 1990
Otto E. Meyer, California Premium Wines and Brandy. 1973
Norbert C. Mirassou and Edmund A. Mirassou, The Evolution of a Santa Clara
Valley Winery. 1986
Peter Mondavi, Advances in Technology and Production at Charles Krug Winery.
1946-1988. 1990
Robert Mondavi, Creativity in the Wine Industry. 1985
Michael Moone , Management and Marketing at Beringer Vineyards and Wine World.
Inc.. 1990
Myron S. Nightingale, Making Wine in California. 1944-1987. 1988
Harold P. Olmo, Plant Genetics and New Grape Varieties. 1976
Cornelius Ough, Researches of an Enologist. University of California. Davis.
1950-1990. 1990
Antonio Perelli-Minetti, A Life in Wine Making. 1975
Louis A. Petri, The Petri Family in the Wine Industry. 1971
Jefferson E. Peyser, The Law and the California Wine Industry. 1974
Lucius Powers, The Fresno Area and the California Wine Industry. 1974
Victor Repetto and Sydney J. Block, Perspectives on California Wines. 1976
Edmund A. Rossi, Italian Swiss Colony and the Wine Industry. 1971
Edmund A. Rossi, Jr., Italian Swiss Colony. 1949-1989: Recollections of a
Third-Generation California Winemaker. 1990
Arpaxat Setrakian, A. Setrakian. a Leader of the San Joaquin Valley Grape
Industry. 1977
Elie Skofis, California Wine and Brandy Maker. 1988
Andre Tchelistcheff , Grapes. Wine, and Ecology. 1983
Brother Timothy, The Christian Brothers as Wine Makers. 1974
Ernest A. Wente, Wine Making in the Livermore Valley. 1971
Albert J. Winkler, Viticultural Research at UC Davis (1921-1971). 1973
INTRODUCTION -- E. Michael Moone
Dame fortune is a fickle one at best, yet here in Napa Valley she let
her richness shine on an industry, community, and company in turning
over the leadership of Beringer Vineyards and the umbrella company of
Wine World Estates to E. Michael "Mike" Moone in 1984. Mike's vision
of the future of the wine industry, as well as the position of his
company in it, set the course for the last six years which I'm sure
will be a quality force in the future. Mike has created an enviably
successful, geographically diverse company which has three first-rate
winemaking facilities: Beringer in St. Helena, Chateau Souverain in
Geyserville, and Meridian in Paso Robles, all supported by some of the
finest vineyards attainable. Quality is exemplified not only in the
physical assets of the wineries, but maybe more importantly in the
caliber of the employees. There is no question Mike's enthusiasm and
demonstrated success permeates the company with that same desire to
excel, and excel they do. Over three million cases are now produced
by these wineries, with top-notch wines in every varietal and price
category.
I first met Mike after he became president of Beringer. Our
association grew naturally through winery activities, and because our
home is adjacent to the Beringer property. Mike is a gracious host.
Various functions at the Rhine House and the newly renovated Hudson
House provided the opportunity to meet his charming wife, Valerie, and
his two lovely daughters, Erika and Erin. Erika, who entered Stanford
on a swimming scholarship earned during her senior year in high
school, will be a junior this year. Erin will be attending the
University of California, Santa Barbara, this fall. Mike possesses a
quick wit, never fails to have a new story or two, and when not at
work can usually be found pursuing his passion* -golf .
As would be expected, Mike is very active in industry
organizations. He has served on the executive committee and board of
directors of the Wine Institute, is currently a vice chairman, and
scheduled to be chairman in June 1994. In addition, he has served on
various boards and committees of the Napa Valley Vintners and the
California Wine Commission. Mike and the Beringer Winery provide
wonderful support to our community and its schools . They have
furnished a substantial investment in computers to help develop an
integrated computer literacy program that starts down in the early
vi
grades, and just recently made a substantial contribution to an
affordable homes program. This ability to share the rewards of
success makes Mike in every good sense truly a good neighbor.
Charles A. Carpy
Freemark Abbey Winery
July 6, 1990
St. Helena, California
vii
INTERVIEW HISTORY -- E. Michael Moone
E. Michael Moone was interviewed in three sessions at his
Beringer Vineyards office to document his career at Beringer Vineyards
and the umbrella company of Wine World, Inc. An active participant in
wine industry affairs and a skilled wine marketer, Mr. Moone has been
a wine lover from age 18 and a serious collector since his late
twenties. Following an 11-year career with Procter & Gamble,
Mr. Moone joined Beringer Vineyards in 1973, merging his talents in
sales and marketing with his passion for wine. Ten years later he
assumed the helm of Beringer Vineyards and has been credited with
managing one of the best run wineries in California
President since 1984, Mr. Moone has overseen Beringer Vineyards
and the wine portfolio of Wine World's other operating divisions. All
are holdings of Nestle, the Swiss multinational which first bought
into the California wine industry when it acquired Beringer in 1972.
The interview begins with a career overview, followed by a
discussion of each operating division. Los Hermanos represents the
jug wine label, Napa Ridge is the line of negotiant varietals , and
C fit B Vintage Cellars is the import division. Beringer Vineyards,
Chateau Souverain, Maison Champagne Deutz, and Meridian complete the
line of premium brands. Commenting on brand development, geographic
diversification, and vineyard investments, Mr. Moone elaborates a
strategy for success in the long-term business of wine. He also
discusses imports and exports, industry politics, and Beringer
Vineyards' extensive culinary arts program.
Mr. Moone carefully reviewed his manuscript. Photographs were
graciously provided by Beringer 's public affairs staff.
Lisa Jacobson
Interviewer -Editor
August 1990
Regional Oral History Office
486 The Bancroft Library
University of California at Berkeley
Room 486 The Bancroft Library
viii
Berkeley, California 94720
BIOGRAPHICAL INFORMATION
Your full name
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Date of birth
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Birthplace ***-^*
Father's full name
Occupation Pi let -
Birthplace
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Occupation
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Birthplace
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Your children
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Where did you grow up?
Present community
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Areas of expertise
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I EARLY YEARS AND EDUCATION
[Interview 1: 24 July 1989 ]##1
Growing Up in Southern California
Jacobson:
Moone :
Let's start at the very beginning, with when and where you were
born.
A good idea.
June 2, 1940.
I was born in Santa Monica, California, on
A long time ago. [laughs]
Jacobson: Did you grow up in Santa Monica?
Moone: Yes, I was pretty much raised in L. A. We moved from Santa
Monica to Westchester to Palos Verdes. Really, the formative
years- -from eighth grade on—were in Falos Verdes. So it was
pretty much a beach environment, as you can imagine.
Jacobson: I've been to Palos Verdes, and it's beautiful.
Moone: Yes. It's really a pretty area. We lived in a couple of areas
in Palos Verdes, one in Rolling Hills inside the gated area
that was real nice. Then we lived in the grove area, a place
called Via la Selva--a Spanish name that means "by the woods."
It's appropriately named.
I finished up school there, and there wasn't a high school
in Palos Verdes at the time. So I went to El Segundo High
School. Typically, the kids from Palos Verdes went to Redondo
High, but it was filled up, so we went to El Segundo- -which was
1This symbol (#//) indicates that a tape or segment of a tape has begun
or ended. For a guide to the tapes, see page 105.
a great experience. El Segundo had a bunch of younger kids
coming up, so we were kind of a bridge group; there were two
hundred of us. For two years the kids from Palos Verdes went
to El Segundo High School. Then Palos Verdes had another bunch
of kids of high school age, and they went to Narbon High School
for a couple of years. Then Palos Verdes High School came
along. Now there are three high schools up there.
Jacobson: Did you take a bus to get to school?
Moone: We drove; we had a friend who drove. In those days it didn't
take too long; it was only about twenty minutes. Traffic
wasn't what it is today. Today it would take you an hour
[laughs]. Oh, it's still only probably about thirty minutes.
But it was only a twenty minute drive in those days, and
sometimes we made it in fifteen [laughs].
I was a pretty typical high school kid, I think. I had
pretty broad interests, was sports -minded, chased girls (never
caught any) .
Jacobson: I see all those sports trophies up there behind your desk--
football from UCLA.
University Education
Moone: I went on to the University of Pennsylvania out of El Segundo.
I had a semi -jock and semi -need scholarship. I was an only
child, and my dad was a pilot for American Airlines. My dad
went to UCLA, so I was kind of red-hot for UCLA. But I got
this interest through an old girlfriend's father and decided to
try an Ivy League school. It was a good experience. It was
really the first time that I was confronted with making a tough
decision, and that was to stay and do something you didn't
like, but to sort of gut it out. Or to say, "This isn't for
me," and go to UCLA. I made that decision, and it was a very
good one, I think. It wasn't an easy one.
I went back and finished up at UCLA. There I majored in
"fraternity" as a Fiji, and school was kind of secondary. I
had a great time in college. I graduated in the top 80 percent
of my class [laughs]. I was in the old business school; I was
in the next -to -the -last class to finish up in the UCLA business
school as an undergrad. Then it became a graduate program.
Jacobson: Was the marketing program at UCLA a relatively new one when you
started?
Moone: No, the school had been long established. I'd say the strength
of the school was originally accounting- -and I say that as a
differentiation from finance. Then it moved to computers. I
think the computer sciences as they relate to business was
probably the strength when I was there. Marketing was a solid
second, and actually all the disciplines within the business
majors are within a difference of two or three courses for your
maj or .
An Early Role Model
Moone: I had always wanted sales, and had always wanted marketing, and
was very strong in that direction from when I was thirteen or
fourteen years old. I was influenced heavily by a neighbor,
Mar Nelson, who was the sales manager of a company, and I just
loved everything he did [laughs]. I wanted to do what he did;
you know, you set role models for yourself.
Jacobson: Did you have jobs in high school that encouraged you to develop
that interest?
Moone: No. I had jobs from him that were kind of different. As an
example, I took care of his boat. He had a fifty- foot yacht,
and I had a key to it and total use of it. 1 did all the work
on it: I recaulked the teak decks and did all the painting and
all the hull work. The fun part about that was that I knew
absolutely nothing about it. He'd just say, "You're smart,
kid; you go figure it out and send me the bill if you need
anything. "
Then I shingled his house. He had a really nice house,
and he said, "Shingle the roof for me." I went down to the
library and found out how to shingle and bought all the
shingles. That was kind of his style, letting people do things
and becoming responsible for them. That was a really great
lesson in life that I learned from him. And I was motivated
because of the way he comported himself, I think, in a lot of
respects.
Jacobson: Was he a person you could go to for advice if you needed it?
Moone: I didn't. It was just a fun association. He became almost a
friend. He liked what I did, and I liked the things he did, so
it was a neat thing. He was a good neighbor.
I also worked at his company in the summer , which was
called Barksdale Valves. Then I worked in the oil fields later
on as a roustabout.
Development of Interest in Wine
Moone: During the year I concentrated on high school sports --and
surfing, partying; pretty much the beach environment. In fact,
that's where I really began to drink good wine, in high school.
I had a friend, Randy Johnson, who drank good wines, and that's
when I started. I used to drink Almaden Grey Riesling. It was
$1.49 and seven cents tax.
I used to have a Urago ten- speed bike, and we used to
bicycle a long ways. We'd go to Malibu and San Diego, and
places like that. We'd take a backpack and just go down to the
beach or something. We'd always take some sandwiches and a
good bottle of wine. It just became a kind of a lifestyle
early on. As I look back, it was probably a very European kind
of wine environment that I was raised in.
Then at UCLA I became the social chairman of our
fraternity, and there I booked rock and roll bands. I was also
the chef in our fraternity for a while, and also cleaned pots
and pans [laughs]. Then I began making a lot of money booking
rock and roll bands. I had eleven bands, and had some really
good performers: Richard Berry, who wrote "Louie, Louie". We
had Jan and Dean in our fraternity (Jan Berry and Dean
Torrance) , so I used to book them—not too much, but once in a
while. Then the Red Jackets, their backup band, I booked a
couple of times. I had Bruce Johnson, who is one of the Beach
Boys. I had him under contract for two years. He was a
fabulous entertainer. I had Don Julian and the Meadowlarks ,
who did "Cherry Pie." He recorded that.
Anyway, it was a neat environment to get carried away in.
[laughs]
Jacobson: Did you try to introduce wine to the fraternity members?
Moone: Yes, I did, as a matter of fact. I was the first one to bring
wine to parties. Of course, most people put 7 -Up in it, and
they drank Red Mountain, which was the big, popular Gallo wine
then. Cucamonga Village was the smooth Zinfandel, and I
brought that in. The first wine coolers of that era we brought
in, and also good wines for occasions.
Jacobson: Did that ever surpass beer consumption?
Moone: I don't think so, no. They consumed an awful lot of beer. I
personally can't drink a lot of beer. I drink a can, and I'm
just bloated. There were times when I went way beyond that,
but generally- -well, sometimes you drink in college.
I joined Procter & Gamble right out of college. But when
I was about twenty- two, I had about a two hundred-bottle wine
cellar. I'm a very outer-driven person; I'm not inner-driven
in this sense. I'd never care to tell you where the seeds were
grown or anything like that; I just enjoyed a nice bottle of
wine with a meal.
Jacobson: Did your family have an interest in wine?
Moone: No, they were the martini crowd, and I never liked that. So I
was into wine , as you can see , at a very early age . I was
basically an L. A. wine buff. Someone I met would have a nice
bottle of wine, and I'd ask what it was and go buy a case or a
couple of bottles. So I liked what everybody else liked.
Generally it was pretty good stuff.
Then I found out later on, after being in the business,
that I'd bought some real junk [laughs] - -about half of it. It
was stuff with my name on the label (Windsor Vineyards) , but
that's how you start.
Wine Collecting
Jacobson: In those early stages, did you ever become systematic in how
you selected wines?
Moone: At the end I did. I became a much better wine person at about
the age of twenty-eight or twenty-nine. I had moved then from
Cincinnati to Venezuela, and I began not liking my wine cellar
because it was full of one bottle of this, and one bottle of
that, each only good enough to drink with God. I couldn't
drink the first bottle; I just couldn't do it. I became a
collector, and I wasn't enjoying my drinking. That was
terrible, so I said I had to buy more of a wine that I liked.
I just said to myself, "I'll only spend a hundred dollars,"
which was my wine purchase. I wouldn't just go out and buy a
five dollar bottle; if I really liked it, I was going to spend.
That made me make a better decision, and it usually got me one
or two cases of wine.
Jacobson:
Then if my mother-in-law came over for dinner, I wouldn't
sit there and suffer. Because I wasn't even going to have any
wine if she was there. But now I would have enough and could
say, "Well, I'll have it, and she can have a glass --so what?
I've got three cases."
I began to age wines out and really follow them and enjoy
them. That made wine much more enjoyable to me. Basically, I
really like to cellar red wines- -Cabernet Sauvignons . That's
what really started my cellar becoming a much better cellar.
It made me a better purchaser, because I was sort of
researching the fact that I couldn't get them all, so if I'm
going to spend a hundred dollars , I may as well get one I
really like. Then I became a little more inward- driven at that
time on my wine habits. I pretty much still follow that. In
fact, I buy all by the case now. So that made me a better wine
person, and I have a better cellar because of it.
Have you ever had any formal training in wine tasting, or taken
courses?
Mo one :
Not until I went to work in the wine business.
Jacobson: Would you casually talk about wines with friends?
Moone: Yes, we did. We talked at dinners. We'd go to restaurants,
and I usually ended up ordering the wine because people thought
I knew something about it. I knew a lot about California wines
and very little about European wines. I followed California
wines. I came up to Napa a couple of times and bought wine up
here. In fact, when I left Procter & Gamble, one of the
reasons I joined Beringer at the time was that they also
marketed imports and I could learn something about imported
wine while I was here learning more about California wines .
Jacobson: Was there an evolution in your tastes in wine from when you
started?
Moone :
Jacobson:
Moone :
No, I've always had a really great palate. [laughs] I've
always trusted my palate. I've always overrated my palate, I
guess [laughs]. I know what I like, and I think I've been a
pretty good judge of good wines all along. And I'm very good
on red wines. Not quite as good on white wines.
Do you tend to have more red in your collection?
My cellar is almost all red wine. I drink whites and cellar
reds. I'm always out of white wines, like everybody else.
Fraternity Life: Preparation for the World of Business
Jacobson: Let me ask you a little bit more about your marketing studies
at UCLA. Did those prepare you well for entering the business
world?
Moone: Oh, [pause] I don't know. If you asked me what I learned in
college that would be most meaningful to my career, certainly
the fraternity would be the place I would start, before the
business school.
Jacobson: That's interesting.
Moone: I think the business school is a good one, and you do learn
some techniques . Certainly you learn the terminology of
business and those kinds of things. You have to be grounded in
economics and accounting. Those are things that we use as our
daily tools. In marketing you have to know about types of
advertising and what they do. But to say you learned something
in that marketing class that's helped you in what you've done
in marketing at Beringer- -no, it doesn't do that.
In terms of the fraternity, I think there you learn peer
group leadership , where a pretty sharp group of a hundred
decide to put you in charge of something. Then you have to
turn around and make them do it. I always said if I could get
a bunch of football players up on Sunday morning to clean up
after a party, for free, I could get them to do something in
business for money easily. I think that kind of motivation is
what you learn.
And you come to grips with every kind of human problem in
four years in a fraternity house that you would encounter in
life. So that was a tremendous learning experience for me.
would say that was number one on the list.
Interest in Cooking
Jacobson: What about your stint as chef for the fraternity?
Moone: Well, our cook quit and we didn't have one. I've always been a
pretty good cook, so I said I'd cook all our breakfasts and our
Friday night meals. We had different people doing different
nights. So I did every breakfast. I got up at six o'clock
every morning, and from six to nine o'clock did individual
breakfasts for everybody.
Jacobson: My goodness!
Moone: Yes. Sort of a fry cook. I used to be a fry cook at one time
in a restaurant- -a short order chef --as a summer job. That was
fun.
Jacobson: They were sure lucky to have you.
Moone: And I enjoyed it. I saw everybody in the morning. In fact, we
had better turnouts in the morning when I was cooking than we
did when the chef was there. Everybody came down just to laugh
at me. That was fun.
Jacobson: As your interest in wine developed, did you also refine your
cooking?
Moone: Oh, yes. I always had a great interest in cooking. I haven't
cooked as much lately because of all the wonderful things we
have here at Beringer and at Chateau Souverain, and just
entertaining and being around the country. But I really enjoy
cooking. I think anybody who really cellars wine probably
likes to cook. They almost go together. I've become a better
chef since those [college] days.
I was an only child, and my mom worked and my dad flew a
lot, so I always cooked a lot of my own meals from when I was
eight or nine years old. I always made my own breakfast and
things, so I was pretty independent. I think that got me
started, anyway.
II CAREER AT Procter & GAMBLE
Sales Responsibilities
Jacobson: Your first job out of college was with Procter & Gamble?
Moone : I got it through the placement office at UCLA. I went to work
for them in 1962, right out of college. I went to Bakersfield,
California, as a salesperson for Kern County. I was there
about two years , maybe a little less , and then I became what
they called office head salesman. I got a twenty- five dollar
raise, and they took my car away from me. I was absolutely
devastated. I almost quit, I got so mad.
I worked for a wonderful guy there named Ray Kidel. Ray
hired me out of college. He was the district manager for the
L. A. area in packaged soap, a real old-time Texan and a real
influence on my life. He was a wonderful manager who settled
me down through some early immature times . Then I became what
they called a unit sales manager and had five or six sales
people working for me. Actually, it was funny--! was back
hiring UCLA graduates; I did all the interviewing at UCLA. Two
years after I graduated, I was hiring Procter & Gamble people
out of there .
P & G gives you a lot of responsibility early- -a lot of
dollar sales and people responsibility. You really learn how
to operate a sales group at an early age . I ran all of the
units in L. A. There were four of them, and I ran all of those
at one time or another. I called on all the large accounts.
Ralph's Grocery Company was the largest one at the end.
10
RecruitinE Activities
Moone: Then in 1969 I moved into recruiting. What they did was that
when they moved you out of a first- line management position,
they put you in a staff position for some more exposure and
probably some more evaluation, too. From there I began as what
was called a regional recruiter; it's kind of a guinea pig job.
Procter & Gamble had had up until that time central recruiting,
where they did recruiting at all colleges centrally, with a lot
of sales managers (like I did at UCLA) calling on the college
campuses. They hired five or six hundred college students a
year for the sales organization.
The idea was to be able to hire not only all the college
people in the area and not travel so much, but also to hire
what we called the career salespeople who would join the
company and not be a college person to move ahead in the
business. That was real exciting. I got to open an office and
write the manual on the position. In fact, I did so good on it
that they made me manager of recruiting for P & G. So I went
back and ran the whole company.
I set up those offices in Atlanta, Cincinnati, New York,
and of course replaced myself in Los Angeles . At the same time
I talked Procter & Gamble into having manpower planning, of all
things, put into effect. We reduced their turnover nationally.
They were hiring five hundred college people to promote sixty a
year. So every time they would promote one, ten would leave in
each district [laughs]. The turnover was outrageous. I
thought each district of thirty people should only have three
development people and twenty- seven good career salespeople.
If they found someone that they wanted to hire, then they ought
to fire one or two of the other three . In other words , be
honest with the three you had; don't over-promise everybody.
So we put some guidelines on the districts, and that was a
real sales difficulty because we were stepping on the sacred
grounds of old district managers. But we sold that concept and
reduced the turnover by over 50 percent, which saved them
millions of dollars. I wrote all the manuals. Actually, it
was very good for their business.
11
It was really a fun job. I studied a lot about [David]
McClelland at Harvard on achievement.1 Looking back on my
career, I think of Bill Coleman as an important influence. My
immediate boss, Wally Anderson, had a stroke and was wounded
and never came back to work. They didn't want to replace him,
so I reported to a higher level --to what they called eleventh
floor. I reported directly to Bill Coleman, who was the v. p.
of sales. He gave me a tremendous ear, and was someone who
wanted to do a lot of the things that I wanted to do .
We stopped all the unit managers calling on the college
campuses, because I convinced them that it was a difficult job,
a job for a professional. We instituted hiring minorities and
women; we hired the first women. Part of my job was to put on
seminars around the country on how to do that, and the fact
that it could really work [laughs]. We did all that, and it
was a great part of the job.
Traits of a Good Salesperson
Jacobson: Back when you were recruiting, what kinds of traits would you
look for in a salesman?
Moone: If it was a career person, it would be the fact that they were
stepping up in their job; that it wasn't a step down or a
lateral move. As an example, a person who was selling Coca-
Cola off a truck could have been a great personal salesperson,
maybe with a year of college or something like that. But the
physical part of the job- -they make twenty calls a day, they
have to take the Coke off the truck and schlep it in and stack
it in the stores. You put a person like that in a nice car, in
a coat and tie, and instead of twenty stops he makes fourteen
or twelve a day and just sells. Plus you get paid more money
and all these wonderful benefits. It's a tremendous step
ahead.
We would bring them in and tell them right out that we
were hiring people for this job, and while you might get
promoted, the chances are you won't. You're competing against
people who are really geared to move ahead. You have a chance,
but if you come in here solely for that, put it out of your
'See also pages 12-13, 25-26.
12
mind. A lot of people said no, they didn't want the job, and
six months later they would call back and say, "I really do
want this job, and that is what I want. I've always told
myself I needed to move ahead, but I really don't. I'm happy,
I'll send my kids to college, buy a new car once in a while,
live right here and not move. That's me."
We really made them talk about what they wanted to do. On
the other hand, in the college person you look for an
achievement-oriented person- -there' s that word I told you about
from McClelland earlier1- -who had demonstrated in the past that
they could succeed in leadership positions recognized by their
peer group, and who had a demonstrated pattern of success in
their lives.
Jacobson: Was there any particular kind of background that these people
would usually have?
Moone: They were UCLA Fijis. [laughs]
Jacobson: Were they athletes, or--?
Moone: A lot of them were. Sales people are competitive, so both men
and women were competitive. The first gal I hired for P & G,
ever, in sales, was a pistol- shooting champion for the
University of Mississippi. She was very competitive and
measured herself --and liked to be measured that way. I think
in sales, people like to know what occurred during the day; did
I win or lose? Did I meet my goals? How many calls did I
make, how many did it sell? What happened, where am I versus
my quota? It's very much like sports. So generally they are
people who like athletics and competition. Show me a
salesperson who doesn't like to compete, and I'll show you a
loser. [laughs]
Then, in terms of your management people, they may not be
the best salespeople. They are certainly people that their
peer group has put into a leadership position throughout their
lives. I don't see many people becoming good managers who
haven't been in a leadership position somewhere, and it can be
anywhere --church, school offices, fraternities and sororities
are good ones .
1See pages 10-11.
13
At Procter & Gamble, we looked not only for the person who
was in that position, but what did he do in that position?
What did you do- -not what did we do- -that made you a better
president than the president before you? What was your
contribution? What did you get people to do? What were your
goals? How did you do against those goals? How did you get
people to do what you wanted? Who was your biggest help? So
we really found out what they brought to the party. That was a
criterion. The best predictor of a person's future is their
past. It's that simple.
Affirmative Action
Jacobson: Before I asked you that question, you were talking about
introducing the idea of hiring women and minorities. Did that
encounter resistance?
Moone: Sure, it did. Yes. P & G was a real WASP, male company. Even
the idea of hiring Jews or anyone like that was, "Can we do
that?" [laughs] I mean, "Oh, horrors!" Blacks were a
problem. I had to do all the EEOC guidelines at the time, and
there was a lot of government pushing to get people going, too.
But it was the law of the land, and P & G had to obey the law
of the land and they weren't.
We set up goals and timetables, and I did all that with
the two departments that ran us. That was interesting in
itself. And we did a good job. Once Procter & Gamble made up
its mind they would be a good citizen, they did it as good as
anyone could in the United States.
Moone: So I went out with Vate Levatus Powell, a great guy, and
another fellow, and we went all around the country together.
That was fabulous . That was good learning for me . We had
some tragedies- -people who didn't work out; we gave them the
company car and they stole it. We had those kinds of things
[laughs], but overall we really found some very talented
people. A lot of them went on and became managers at P & G-
men and women. I've hired so many, I've lost track of them
all. But a lot of them write me once in a while, and they've
moved right on up the ranks. It was fun.
14
First Contact with Richard Maher
Jacobson: While you were with P & G, you came into contact with Dick
[Richard] Maher, did you not?
Moone: Not there. It's a funny story, how I met Dick. I had joined
Wine World in 1973, and Dick came along in about '75 or '76. I
was being interviewed at the time by my next door neighbor, to
become the region sales manager for Heublein at Inglenook. I
didn't even know that his boss --this was a guy named Ted
Isenberg, a great guy at Heublein- -was Dick. We heard some
rumors one day that our president was being dismissed and we
would get a new president. I heard that on Friday. I came in
on Monday, and this guy walks in my office, sits down, and
says, "I'm Dick Maher, the new president." I didn't know who
he was at all. He asked, "Are you going to take that job at
Heublein, or aren't you?"
I was shocked! Who was this guy, and how did he know
this? [laughs] I asked how he knew about that, and he said,
"I'm Ted Isenberg's boss, and I'm your new president here." I
said, "Oh." I said, "I'll tell you what I'll do. I'll stick
around a couple of years and see how it goes." He said,
"That's all I want. See you later." That's how we met.
At the time, Bill Ryan was national sales manager. He
brought Bill in to become national sales manager after a couple
of weeks, also from Heublein. So I worked for Bill Ryan for
the first couple of years, and then Bill worked for me when I
became national sales manager. Then about six years ago I
became president, when Dick left. That was in January of 1984.
Jacobson: I thought for some reason that the two of you had worked
together at Procter & Gamble.
Moone: Well, he had been at Procter & Gamble. He was a brand manager
on Comet and was there about a year. He wasn't there very
long. So, while we're the same vintage, I didn't run across
him.
15
III BERINGER VINEYARDS AND WINE WORLD, INC., 1973-1989
Joining the Company
Jacobson: How did you make the transition, then, from Procter & Gamble to
Beringer?
Moone: Gallo had tried to hire me through the years, mostly I think
because of my recruiting and training background, which they
needed help in. They had put some great offers out. Actually,
I went down to Venezuela after my recruiting experience and
spent a couple of years there. I was coming back to
Philadelphia and decided to quit, because I didn't want to be
in Philadelphia again. I had quit the University of
Pennsylvania, and I said I wasn't going back. So I thought I'd
better find a job.
I really didn't do it too intelligently. My wife's
sister, Joan, lived in Berkeley. She was married to a Japanese
guy named Eliot Horikoshi, and they had a couple of kids. I
said, "Wouldn't it be nice to have the sisters together? I've
been moving around quite a bit, and we could establish family
in this area, and we could spend time together. Plus, the wine
business is out there." Gallo had tried to hire me. "So what
I'll do is move there, find a house I like, get all set up, and
then I'll go look for a job."
So I did. I went out and bought a house in Round Hill, a
wonderful area with a golf course , and I paid too much for it
[laughs]. I was unemployed and I bought this nice house! I
moved the whole family out here, and then I just went knocking
on doors . I called up the Mondavis , the Beringers , the Krugs ,
Beaulieu, and all the people in the business. The Beringer
people said, "Let's go to work. We need a guy like you."
16
The fun part about getting hired, by the way, was that I
was hired by a guy named Tom Aquilano, who was the treasurer,
and Bob Bras, who was president. Bob Bras was the former
Nescafe brand manager, who knew absolutely nothing about wine.
He made some horrible deals, but was responsible for some of
the early impetus to get the company into the wine business.
He was Puerto Rican, which I did not know.
At my first interview, when he noticed I had been in
Venezuela—we had our first interview in Spanish [laughs]. Not
only did I not know a whole lot about wine, just being a wine
buff, but I didn't know all the terminology, other than what I
had ordered in restaurants and so forth. So my first interview
was pretty stressful. It was an hour or an hour and a half of
all Spanish. I was pretty good in Spanish in my area, but not
in wine or some other areas. And Puerto Ricans speak so fast,
like the Cubans. I can communicate with the Colombians and the
Peruvians and the Chilenos, who really speak it nice and slow.
But that was fun.
Early Responsibilities and Training
Moone: I started off as a district manager in San Francisco.
Jacobson: What were your responsibilities?
Moone: Well, I had to sell the wine they made [laughs]. We owned a
distributorship at the time, called Wine Distributors, on
Fourth Street at Brannan. There was a national sales manager
by the name of Bob Mason, and the fellow who ran the
distributorship was Claire Prendergast. I guess I would be the
next in line at that time. Most of our business was pretty
localized in the San Francisco area. While Nestle had just
bought the winery and we had a large import portfolio called
C & B Vintage Cellars, the total company sales in 1973 were
under $3 million dollars for all brands. I'm going to guess
that $2.5 million of it was right here in San Francisco. It
was a pretty small company with a lot of problems.
I knew the problems going in, because Beringer wasn't one
of the wineries that participated in the wine boom coming out
of the sixties. I think it was the only winery that lost
volume [laughs]. But you could see the tremendous potential of
17
Jacobson:
Moone :
the place, and the fact that they had some great vineyards made
me think they ought to be able to make some great wines.
I had signed up also to learn the imports, as I said
earlier; I really had a desire to ^earn about imports --go to
Europe and learn about the great vineyards of France, Italy,
and Spain.
Anyway, the responsibilities were basically for
Sacramento, Fresno, everything in Nevada, and that was about
it. The company had no clue on how to market or sell wines.
It really didn't. There was a lot of chaos at the time, and
they were making more than they were selling. Los Hermanos
brand was the big push at the time, and the Beringer wines were
about average .
At that point, early on, did you undergo any more formal wine
training?
Yes, I spent two months in the vineyards. I picked grapes and
got to use my Spanish, which was fun because the vineyard
workers really thought I was from Spain. I made wine here at
the winery. So I had a couple of months of pretty intensive
training—you know, really getting my hands dirty at all phases
of the business.
Jacobson: Was that something that all the salespeople did?
Moone: Yes. We still do that. In fact, not just salespeople- -
everybody.
Key Personnel
Moone: We really have a pretty good group of people who have been here
in the battle a long time. The core group of people who were
here are significant to the progress of our company, because
we've all been together so long; we communicate well together
because we've been together so long. That's really the
strength of this company.
Jacobson: Who makes up that core group?
Moone: It's quite a list. Let's see if I can't take them in some
order: Guy Kay, who runs our production and who ran our
18
production at that time. He literally went from all phases of
production, from our small original winery across the street to
moving to a wonderful new winery- -in fact, designing this
winery. He's also been a St. Helena city councilman, and is
now on the planning commission of Napa County. So he's our
political ombudsman for the company. He was a Nestle employee
from before, who ran milk factories. He came out here in the
wine business, and has just been phenomenal.
We have Bob Steinhauer, who has been with us a little over
eleven years now. He was manager for all Beaulieu vineyards
for about eight years under [Andre] Tchelistcheff , and then he
came here . One of the real turning points in our company has
been our vineyards. We had young vineyards when I joined the
company, and they're now just reaching their tenth and eleventh
leaf in a lot of cases. Bob's matching of the vineyards to the
soil has been incredible. Plus, as we'll get into later on,
all our new ventures at all our vineyards have been
spectacular. We've come from about eight hundred acres to now
farming six thousand acres. So we're the largest premium
landholder in the state by quite a margin. Bob's been,
obviously, a real integral part in this; we don't do anything
without Bob stepping up to the plate and saying we can do it or
want to do it. So he's a key player, and that really impacts
the quality of all our wineries, obviously.1
Then, of course, there was Myron Nightingale, who was here
and you interviewed.2 While Myron was a good journeyman
winemaker, I think our marketing brought a lot to bear on Myron
to make better wines. That started with Jim Tonjum. Jim's
been our Beringer brand manager, and then moved on up to the
v. p. of marketing. When I came in as president I made him
v. p. of marketing and sales. I wanted to bridge the gap from
me to sales; I didn't want to have sales report to me right
after being in sales. Too, it was great having your marketing
guy get out and see the world [laughs]. That makes them better
marketing people.
Jim is phenomenal. He's a Harvard Business School grad
who's been with Heublein before, and has a tremendous insight
1See also page 41.
2Myron S. Nightingale, Making Wine in California. 1944-1987. an oral
history interview conducted 1987, Regional Oral History Office, The Bancroft
Library, University of California, Berkeley, 1988.
19
into what is quality at the extreme levels. I think he's the
best premium marketing mind in the wine business.1 That goes
for everything- -packaging, labeling, knowing the consumer. We
made a lot of tough choices along the way, too. I remember one
year, as an example, we gave up all our advertising budgets to
buy French barrels. Those kinds of decisions are tough, but
they're the right ones. They're longer-term decisions.
Then Walter Klenz was our v. p. of finance. Actually,
Walter was a marketing person who did our C & B Vintage Cellars
marketing, ran the Beringer brand as a brand manager, and then
moved into finance; he has a financial background. Then, when
I became president, I put Walt in charge of all the operations.
In terms of bottling, Guy Kay reports to Walter, as an example.
Quality control- -although it's a winemaking function in this
business, I don't want the winemakers to have their own quality
control; I want to have someone else check on that, so it's a
checks and balances situation.
Then all the new facilities, including the winemakers,
report to Walter. And all the computer personnel, and at one
time the personnel department reported to Walt. I spun that
off and had them report to me about two years ago , as the
company grew to a lot more people . I wanted to have more input
directly into the personnel function. So Walt's got a
tremendous background and does all our bulk wine purchases, all
our acquisition analysis, and all the accounting functions.
Ed Sbragia, who's the Beringer winemaker, reports to me.
Ed has been a real stalwart in winemaking. He made our first
reserve wines under Myron, without a whole lot of input. That
first wine was a 1977 Private Reserve Cabernet. I mean, he
made that back in the early seventies. Ed's been with us since
then, and he's a phenomenal winemaker, very talented. He
graduated from Fresno State.
So we have a real deep, deep core group. Bill Ryan, whom
I mentioned before, has been here. He runs all our export
businesses, the Rhine House, and develops our training programs
for us now. He used to be national sales manager and has
thousands of friends around the country.
Dick Wallingford has been with us now about seven or eight
years as a marketing manager, and now runs our national
1See also pages 46-47.
20
accounts. I could go on and on. Tom Peterson's the winemaker
over at Chateau Souverain, and Chuck [Charles] Ortman is now
the winemaker at Meridian. So we have a really great, great,
deep, deep group that's experienced- -and experienced here. I'd
say we're not only good, we're deep. Jim Biggar, who runs all
the Nestle businesses, called us the best-managed company he
has. And he says that not just here, but in front of all the
companies. We're a high quality group that's really done a
good job.
In wine, you know, it's not a business where you have any
patents; anybody can squeeze a grape and make a bottle of wine.
So the only thing that really makes any difference is the
people. That's all it is. You must have skilled people at
every position, and they've got to be really dedicated. It's
real hard work, looking at thousands of details, et cetera, to
make a good competitive bottle of wine. I think our wines
today are tremendous. I think we're making some of the best
wines in the world. And the reviews show it. Of course, I'm
not biased!
Marketing Challenges in the Early Seventies
Jacobson:
Moone :
When you first came in as district manager for San Francisco,
there were difficulties marketing the wine. What were some of
the challenges?
The first thing at the time was that they were marketing some
Los Hennanos products with Beringer on the label. They had
just started doing that because Safeway had requested it.
Being a Procter & Gamble person, I stopped that. I think each
brand should stand on its own, and it either succeeds or fails
because of its own merits. I think that was a significant
contribution at the time, because Beringer could have easily
taken a short cut at the time to have success as a jug wine.
It would have become an Almaden or an Inglenook jug wine, and
I've always been convinced that it should only be a great Napa
Valley, cork vintage, 750 milliliter, good bottle of wine. I
don't think you can tell people it's a Cadillac and a Chevy.
You've got to just be the Cadillac, and make the Chevy the
Chevy.
That was a real good decision, and we did that at the
time. It was painful. We got thrown out of some accounts.
21
Jacobson: Did you have trouble keeping the supermarket accounts?
Moone : We did, because Beringer wasn't that established at the time,
and it wasn't that great an item. Los Hermanos is what they
wanted, and they wanted Beringer on it. They wanted us to be
selling like Almaden and Sebastian! and Inglenook. We said we
weren't going to do that. That took a certain amount of
resolve, but it was a good, long-term decision.
We had some good wines at the time. The first good wine
we had was the 1970 Cabernet Sauvignon. It was a pretty good
one for us. We'd talk about one of the great wines, and the
rest were "B's" and "C's," and a few "D's," I'm sure. There
were things like Barenblut and Traubingold- -some horrible
wines. Chablis, burgundy, and rose were big sellers, and they
just didn't have the trappings of all the things that you
wanted that were premium.
Richard Maher's Contributions as President
Moone: I worked for Dick Maher for almost seven years in there, and
when you look back and ask what Dick's contributions were, he
made a couple of contributions that were significant. One was
that he got rid of some of the vineyard contracts that we had,
that Bob Bras had signed up. The world's supply of Malvasia
Bianca was one of our wines [laughs]. Not only did we have a
lot of it, we paid something like eight hundred dollars a ton
for it when it wasn't worth a hundred. My daughter wouldn't
have made a contract that bad. We lived up to that contract
and lived through it, and got rid of all that wine- -sold it at
a loss. He had bought tons of imported Chateaus, and committed
to great quantities for years. Dick convinced Nestle to dump
all that and write down $7-8 million in losses.
Once those things were righted, it set the stage for me to
come in and really pay attention to Beringer. Of course, Dick
spent a lot of time on Los Hermanos, driving it, I guess, for
cash reasons. Basically, I think my main contribution here
would be the emphasis on Beringer and its quality, and getting
rid of the wines that didn't meet our margin requirements and
didn't meet our company goals. But I guess that's stepping
ahead a little.
22
Pricing Philosophy
Jacobson: About the time you came to Beringer in the early seventies, the
price of wine, industry-wide, was escalating.
Moone: We didn't raise it too much [laughs]. Our philosophy here has
been to raise prices slowly, over a long period of time, and
not take what I call capricious increases- -although we could,
particularly in this market. We've taken a very, very
conservative viewpoint on price increases.
Generally, pricing in the wine business has lagged
inflation by about twenty years, because we're an agricultural
base, which people tend to forget. So while a lot of our costs
go up- -labor, glass, packaging, advertising, and all those
costs- -hopefully we've tried to pay for some of that out of
increased volume and by making our prices go up enough to cover
a little bit of those and holding our production costs.
Because to some degree it's an asset play, too, in the
business, where your assets are appreciating. If you have a
factory that makes Tide soap, in thirty years you throw it away
and build a new one. Whereas in the wine business, in thirty
years your winery is worth a fortune because it's this
wonderful old place that people love to see. So in here you
don't throw the factory away.
So you really create value. And, of course, the vineyards
go up in value a lot- -hopefully , if you buy them right. There
are a lot of different ways to measure how you succeed in the
wine business on a profit basis.
Buildine National Sales
Moone: I can go back to some early experiences. I remember, after
being at Procter & Gamble and coming here, being in shock over
peoples' backgrounds; no knock on them, but they just hadn't
been around what I'd call a good, disciplined sales
organization with someone setting the standard for hiring the
right people. I had always been a real team player--! still
am- -in the sense that I had never before done anything
outlandish on my own, like tell somebody I am going to take
over in Oregon, Washington, and Idaho because nobody's up
there, and I think we can do some business. "Oh, okay, go
23
ahead." In fact, I did that. I fired our broker and put a
person up there and colonized the area myself on several trips.
Then I came back and told them that I used to live in
L. A., and you could see that if the company wasn't successful
in L. A., it wasn't going to be successful. So I went in and
told Bob Mason, "I'm going to take over L. A.; we're going to
go down there, and you're going to give me that." He said,
"Okay." [laughs] I went down there, and there were twelve
salespeople employed there, if you can believe that. I fired
all twelve of them the day I got there. They were just
horrible. I put the whole thing together, piece by piece, and
built it up. I appointed new distributors, got all the old
wine inventories out and got all the fresh stuff in, and
started from scratch.
So there were some tough times in there, and some things
you'd never, never do. Then they gave me Chicago. There was a
fellow named Knight Fee, who was kind of my counterpart in the
East- -another P & G guy. Knight was an interesting guy.
Eventually, in about a year, he was asked to go find something
more entertaining [laughs], and I took over the whole country.
I was very imperial, I guess [laughs], but it all worked
somehow.
I ran the East. I was national sales manager and acting
Eastern region sales manager at the time, because I wanted to
get to know the area. So I ran all that for a year myself, and
then appointed a person to run the Eastern region and build
that all up.
Relationship with Distributors
Jacobson: Were the qualities that you looked for in distributors or sales
people different from what you looked for at P & G?
Moone: Well, we didn't have distributors at P & G. They were new to
me. The philosophy we've always had, and that I had early on,
with distributors, which I think is a good one, is that they're
our biggest asset. They're our partners. People would always
ask, "How's business?" I would say, "Where?" If I have a very
good rep and a very good distributor, I have a very good brand.
Where I don't have those two things, we don't have a good
brand .
24
We never moved distributors capriciously. I don't think I
moved more than two or three sales managers a year out of a
hundred. Even if they went down- -maybe the market went down,
or maybe somebody did a promotion that we didn't measure up to,
or maybe they'd get better the next year. We'd tell them that
we weren't happy, but we wouldn't just change them. That has
really paid off. Our distributors know now that we're with
them, and we're real solid with them. They are truly our
partners. We have a relationship that's almost like they're
family. We're wine only; we're not one of the big liquor
people that come in and pound things down their throats and
say, "You will sell this much wine." and so forth.
Two, I think we've always said- -I know I've always said--
that a brand has to build it's own strength. If the brand
isn't successful, no shoving of wine and inventories is going
to help it. You do need distribution, you do need a wine list,
and you do need people to think positively, and an image that's
set locally, and so forth. All that needs to occur, but the
fundamentals have to be behind it. I think we've been
realistic.
Take, for example, when we bought Chateau Souverain. I'm
convinced that if a group of people bought that and took it to
the marketplace, it would have failed. But when we bring it to
the marketplace, the distributors have such confidence in us
that they try, and we get a real try. Ergo, it's become
successful.
We've also failed. We had French Rabbit, and California
Royale-- things that just died. We made our share of mistakes,
but we admit that. We come out and say, "Hey, we tried this,
and it didn't work here, so we're not going to beat it to
death. That's the end of it."
A lot of companies today wonder how to get into the
distribution system, because it has certainly narrowed. We
invite our distributors out every year for a golf tournament at
Silverado. We bring them out individually, and we spend a lot
of time with them. We know them personally, so when we come
out with something new, or we have a problem, or we want
something done- -boy, they're so responsive. That is worth a
fortune in today's wine business. To them and to us.
25
Qualities Desired in Salespeople
Jacobson: What about the salespeople? Did you look for the same basic
qualities as you did at P & G?
Mo one : The same people, sure. I'll give you an example. I hired a
guy named Dario Margve , who was a West Point grad--tank
commander, brigade commander of West Point, promoted twice in
rank. He was president of his high school, captain of the
basketball team, didn't know a thing about wine. At nine
months in the business I made him region sales manager in Los
Angeles. He was there a year and a half, knocked it stupid. I
brought him up here, and he's now vice-president of the
company. I'm sure I'll work for him someday. [laughs] I
mean, that's the caliber of people we have. We bring them in
and move them fast. We have a lot of people like that. We're
really deep in good salespeople.
They would measure up, and in fact I would say pridefully
that they are as good or better than anything I ever saw at
Procter & Gamble. They're real good. There are fifty of them
now. We have blacks, hispanics , women- -all that. We're not
just good; we're good in every way.
ft
Moone: There are two women who come to mind quickly. Janelle Thompson
is the v. p. of marketing. She runs all the company's
marketing brands, and she's just sensational. She's been here
going on six years. She was a brand manager at Clorox. She's
been a phenomenal input into the company over the years . Linda
Higgins is our v. p. of sales in Chicago. Women have moved
along at a really high rate within our company. There are a
lot more, but those two are at the highest level.
Jacobson: Achievement -oriented qualities are more important than
knowledge of wine, then.
Moone: The achievement factors far outweigh wine. I made two
decisions. One, I was not going to go hire Procter & Gamble
people away from Procter & Gamble; I didn't want to burn any
bridges there, and I left under good circumstances. It would
have been easy for me to go to somebody that I had recruited
for them and say, "Gee, come and work for Mike Moone. I
steered you wrong; this is a better deal," or something. I
said I really didn't want to do that, so I never have hired a
26
person from Procter & Gamble. Some have called me up, and I
refuse to do it.
And, two, when I looked at the wine industry at the time,
I didn't like all the people that I saw in the business. I
didn't think they had a real high caliber of salespeople out
there. I said I would rather take the time to train and find
the people who met our criteria, who we could train. That
might hurt you in the short term- -but it never did; a smart
person is going to be smart wherever they are. So give me a
room full of those, and give me a room full of people who "know
the business," and I'll own the world with the kind of people
that I like to hire.
That's not to say that we haven't hired people with wine
experience. We found them in various places. Because this
business is kind of like the movies- -a lot of people work in it
for nothing, just to get into the business. It's a fun
business, in that sense. So people come in to you who are just
wine lovers, and say, "I want to go to work, and I'll do
anything to work in the wine business." They're wine buffs,
and they've been with some company but haven't had a good
opportunity or whatever. So we find a place for them. They've
been good, too.
As I run across my mind, our sales manager, Rick Carter,
was a Gallo person with wine experience. I hired Rick out of
the distributorship in New York. He was a Los Angeles guy who
wanted to come back to L. A.
Our Eastern region manager, Michael Cesario, I found in
Sacramento at a wine tasting. I hired him and moved him to
L. A. He's a real wine buff. He was out of college and in the
wine business a couple of years in Sacramento. I was up there
touring the Sierra, and I liked what he did in the tasting. I
said, "Do you want a good job?" He said yes, so we moved him
to L. A. [laughs] Now he runs the Eastern region.
Bill Foster was a West Point grad who didn't know anything
about wine. He now runs our Atlanta region. Gary Jones was a
terrific wine person of high reputation when we hired him in
Texas. He was with Franciscan and had a lot of problems
bumping along, and when Justin Meyer left there he wanted out.
Jon Biane, our L. A. sales manager, is kind of an
interesting story. Jon's family, the Biane family, owned a
winery for years down near Los Angeles, and the winery went
27
under. He worked for Chateau Souverain at the time and had
been trying to go to work for us for two years. I used to get
a call every month, and a letter, and great follow-up. I had
hired him from Souverain to us because we finally got an
opening for him, and then we turned" around and bought
Souverain. That was funny. So he's certainly got wine
experience .
It's kind of a mixed bag. Dario Margve I mentioned
before. Dick Wallingford, whom we hired, went into marketing
and now is our national accounts manager. Dick speaks five
languages, worked for the CIA in Russia, and then became
manager for the Ben Hogan Golf Company before us. So he didn't
know anything about wine. Most, I'd say, lean towards not
having any wine experience.
Sale of Fontana Candida
Jacobson: Once you built up the sales force, what were your next moves?
Moone: I guess that would take us up to when I was just about to
become president. At the time that I became president [1984],
the company sales were about $40 million. The profitable brand
of the company was Fontana Candida Frascati; it sold about a
hundred thousand cases. Los Hermanos was the next big item; in
dollars Los Hermanos was bigger. Beringer was still pretty
small; it might have been a couple hundred thousand cases.
I remember the sales of our import operation was about
$20 million, somewhere in that range. So it was about half
import sales, really, and Los Hermanos was the other part of
it. The margins were not good, so my decision was to de-
emphasize Los Hermanos. I sold Fontana Candida in 1986, after
we'd built it up to about three hundred thousand cases two
years after I became president.
Jacobson: Why did you decide to do that?
Moone: The decision was really made for us, because the company,
Winefood [Consortium] and the Gruppo Italiano Vini in Italy,
was sold. It's a very complicated thing, but it was sold
basically to the group that was owned by the Communists. In
that mix was Calissano and a lot of winery companies, like
Banfi and Bolla around the Milano area where the Communists
28
Jacobson:
Mo one :
were centered- -which are called the "reds" in Italy. The
"whites," which are the white Christian Democrat Party, were
down in Rome, near where Fontana is produced, and in Latium.
In that arena we had a contract which Brown-Foreman didn't know
about. Brown Foreman markets Bolla. Brown- Foreman always
wanted Fontana Candida; it'd be a killer item for them, to go
along with Bolla, because we were always in their hair with
Fontana Candida.
So Brown-Foreman went over there and paid $7 million for
the rights to the brand when the Communist group purchased the
Gruppo Italiano Vini. By the way, the Communists are very good
business people in Italy; they're probably the best business
people over there. They had access to a bank; the Italian
government finally said they could have a bank. Once they had
a bank, then they could start buying companies and they were
rolling. The way they financed the purchase of acquisitions
was to sell off the worldwide distribution rights. Pretty
smart.
But, again, what Brown-Foreman didn't know was that we had
a contract. The contract we had had a three -year rolling note
with no performance factors in it, which luckily I put in with
all our imports. So when they said they would give us $300,000
for the brand, which on their calculations was what it was
worth in terms of one year's profit, I said, "No, I want
$10 million for the brand." It was really a great
conversation. He asked how I could be serious. Well, we were
50 percent of Fontana Candida's sales for the world.
In the conversation I said, "I am going to sell the brand
for a year and make all the money I want, and the next year I'm
not going to sell one case. So two years from now, when you
get your brand, you will have zero business in the U.S., and
you will have 50 percent of the winery's business not even
coming into this country." They said, "You wouldn't do that."
I said, "Then there's no need to talk any more." So I got a
good price for it. [laughs] It was a wonderful position to be
in.
That was a very skillful negotiation.
Well, they put us in that position. In the meantime, I started
up our own brand, called Centanni, which is a winery we own in
Italy now. We went to the Christian Democrats, who really
didn't want to send their wine to the Communists. They said,
"Look, we want to give it to you guys." So we've got the best
29
quality Frascati in Rome now, and we sell it as Centanni .
We're up to about 25,000 cases this year. The whole category
has suffered. I guess Fontana is probably down to a couple
hundred thousand. The imports have gotten quite a beating in
the last couple of years.
We sold Fontana at its peak, and we got right back in the
business with good quality Frascati grapes. So we'll do well
long term. That's a successful one. I still would rather have
had Fontana Candida all this time, but what the heck? If you
have to sell it, you may as well get some money and start off
on your own . 1
Reshapine Product Lines
Jacobson: At the time that you became president, I take it your
distribution was much more evenly spread and not all centered
in San Francisco.
Moone: Most of the business was West Coast and East Coast. Imports
were heavily skewed to the East Coast, California wine was
heavily skewed here to California, and the jug wines were
selling everywhere.
In the old days, when you could set the price for your
wines, Los Hermanos was kind of the premium image wine, like a
Sebastiani. But it was the same kind of wine that people were
putting out at a lower price. Ours had a cork in it, and
everyone else had a screw cap, so everyone said we were a
better wine. I mean, really! What happened was that alcoholic
beverage price controls were ruled illegal by the Supreme
Court, which means that retailers featured the more popular
brands. Almaden really got a big run-up that year. The people
who made the screw cap wines started making better wines and
putting corks in it. So their packaging and appearance were
confusing to the consumer.
We weren't niched any more. We were probably operating at
two dollars a case as a penalty. It was like running a
Volkswagen through a Mercedes factory, trying to have them make
it for us --trucking the wine up here and everything; it was
1See also pages 55-56.
30
crazy. We couldn't buy glass at the price they did or
anything. We were just getting our brains beat out, so we
said, "The hell with this. This is not our business. Our
business is the premium business."
We really cut out, between Fontana and all the Los
Hermanos items and some other low- end imports we dropped, in
excess of $20 million in sales. The $40 million base of what
we built from was really cut in half. But we started building
Beringer back, got involved in Chateau Souverain, and now
Meridian, and introduced Napa Ridge. Today our business is
over $100 million. It's much better based, good quality, and I
think we're doing a lot of the right things to merchandise it,
particularly with food and Beringer and the restaurant with
Chateau Souverain.
31
IV LOS HERMANOS BRAND
Jacobson: Let's go into each of the divisions in more detail, starting
with Los Hermanos. When you first came in, it was the primary
seller and was up until- -
Moone: It still sells a little bit. Oh, yes, it was up to a million
cases at that time. Now it's down to about 400,000 or 300,000
cases .
Airline Package
Jacobson: An airline package was introduced in 1976.
Moone: That idea came through a friend of Dick Maher. Inez McGowan
had developed that package. It was the little teeny bottle
that had the glass molded right over the top of it, and then a
shrink wrap around it . So when you opened the package up you
had a glass in one hand and a little bottle of wine in the
other. It was really a clever package. It was a 6.3 ounce
package. That made us a lot of friends on the airlines,
because it was perfect for them. They would just chill them
and hand them out. What happened was that the plastic glass
got so expensive, in part because of the fuel shortage, that
they became about a dime a glass, up from three cents. We
couldn't make it any more.
Jacobson: How long did you have that?
Moone: It was around for about five years.
Jacobson: Was it marketed elsewhere?
32
Moone: No, we had a patent on it. It really was an exclusive product.
We ran that up, and what it did was to get a lot of weight and
activity for our distributors, even though we lost money on it
in the end. It made a lot of friends; it made us friends with
the airlines, and it got a lot of volume going.
Boon to Distribution of Beringer Wines
Moone : The one thing that Los Hermanos did was that if we needed
twenty cases of Beringer in Iowa, the Los Hermanos truck that
went there had the twenty cases of Beringer on it. If we were
just Beringer and never Los Hermanos, we'd never have gotten
all the distribution that we gained through the years. By the
time Los Hermanos went away, it had really done a good function
for us. Where a lot of the smaller wineries couldn't get the
case there, we got the business because our cases were always
there and coming in fresh. If they didn't have a Krug Chenin
Blanc because Krug couldn't get it there, then they sold the
Beringer. People liked it, and the next thing you know we had
a franchise .
Jacobson: Do you continue to sell wine on the airlines which is packaged
differently?
Moone: No. We don't do any coach business now, and we don't do any
price negotiations with the airlines, in the sense that we sell
at the same price we would sell to a distributor. We have a
wonderful airline grouping now. We're on Finnair, all first
class, with Chardonnay and Cabernet Sauvignon; we're on
Swissair with Cabernet Sauvignon and Chardonnay; we're on
United Airlines Asian routes, which is big, with Chardonnay in
first class; we're on JAL with the Chardonnay; we're on Delta
on all their overseas business to the European markets, first
class. We currently have our Meridian, our new sweetheart- -the
Chardonnay is on U.S. Air, first class.
So all our business is targeted to first class. It's a
small part of the company, but it's good exposure and good
prestige. And all sold at full price.
33
Introduction of Light Wines
Jacobson: Then there was the introduction of the light wines --Light
Chablis and Light Rose in 1981. What gave you the idea to
introduce it at the time?
Moone: We needed to save Los Hermanos at the time. That was under
Dick Maher's regime. I mean, Los Hermanos was going to go the
way of the wind if we just stayed in the thick of the burgundy-
chablis-rose battle. Wine by the glass in restaurants was
dying off. Because of our experience with our imports, we knew
a lot about lighter wines from Europe, so we thought that taste
spectrum would be successful here. So we experimented around,
and we made some good products. Then we all collectively got
the BATF to allow us to sell them, and everybody went to town.
We were really the first to come out with them, and they hit
with quite a storm.
That was a good move for Los Hermanos . The brand has
survived because it niched itself into specialty items. The
wine by the glass was one. Step two was that it went into the
light wines. And three, it went into the White Zinfandel
business early.
Los Hermanos has hung on for a long time. We've looked at
selling it, but it's so interrelated with the history of
Beringer that it would be a tragedy if it got in somebody
else's hands. So it should either die peacefully in our own
arms [laughs], or survive because it survives on its own
merits. So far it's not, but it's not terminal. It's still
hanging in there.
Jacobson: What exactly is a light wine?
Moone: The definition that we have of it is that it had to have
30 percent fewer calories. The reduced alcohol helped lower
the caloric content somewhat, although the sugar levels helped
lower it more . We had it down around 9 percent and 8 percent
alcohol, and some were 7 percent. The meaningful thing at the
time was that the definition of wine by the BATF was that it
had to be 12 percent by volume. Anything over 16 percent was a
port. They gave you a 1.5 percent variance. So wine could
only be 10.5 percent to be sold as wine. That was for U.S.
producers .
34
On the other hand, the Liebf raumilchs , which came in the
country and which were wonderfully nice light wines, were all
7 or 8 percent. Well, they'd just put on the label,
"12 percent by volume." We'd go to the BATF and say, "Look,
these guys are making 7 and 8 percent wines. They're not
within the guidelines that you have for us." They'd say that
was different, that they couldn't control the foreign imports,
but they could control us. Finally we convinced them that they
should allow us to make lower alcohol wines. It took us four
or five years.
The light wines were what twisted their tail. So for the
first time we can make wines of that type. So a lot of it was
legal.
Jacobson: The lower alcohol wines were introduced at the same time as
light beer, were they not?
Moone: Yes. And I think it was timely. People had an interest in
light products. There are a couple of perception problems.
One is the perception that wine is a light product, in terms of
a drink or a beverage. So I think to some people it's like
saying, "Would you like a 'diet' diet soda?" It's the same
kind of concept, if you will. It's like saying, "Would you
like a glass of wine?" They think that's a diet drink.
They flourished a little bit. Paul Masson made a big move
on them. Paul Masson still has theirs. Almaden has
discontinued theirs, I think, and Los Hermanos is the "other
product." Paul Masson is by far the largest producer. We're
down to maybe a hundred thousand cases of light, but
interestingly enough, it's growing now. But it's very small.
Actually, in the last three or four months it's been pretty
healthy.
Jacobson: Who is the consumer of light wines?
Moone: I don't know. People like the taste. It's a nice taste.
They're fruity, low in alcohol, easy to drink. It's a
specialty item. There's usually only one in a store. If
they're going to carry one light, they'll carry a Masson in
most cases; in some cases they take ours. Here in the Bay Area
where we've got a nice franchise, most people do still carry
it. And it sells. You know, it just moves along. We don't
promote it too much any more; we just let it sell along.
35
Declining Jug Wine Sales
Jacobson: Declining jug wine sales in general has been the trend for
quite a while.
Moone: If you cover our company's gallonage reports, why, we've been
growing steadily. It's kind of misleading, because we've
really taken Los Hermanos down 600,000 cases in volume in the
last five years by discontinuing items. So a lot of our
business was just discontinuing the four liter sizes totally.
Los Hermanos today is only five wines, and they're all magnums.
We discontinued all the 6.3 ounce and all the three liters and
all the four liters. And we had an eighteen-liter bag-in-the-
box for restaurants, which was even more ridiculous.
The theory used to be that if you controlled the house
wine in a restaurant, the carafe business, then you could get
wine on the wine list. But you needed a house wine to compete.
Certainly, most restaurants don't have a house wine anymore of
that ilk. Also, you don't need a jug wine to "get in the
door." They'll buy a good wine from anybody. So restaurants
have changed quite a bit. We really made Los Hermanos
originally to help sell Beringer.
Jacobson: That was the entree for Beringer--?
Moone: Oh, sure. You used to talk house wine first. You'd go in, and
someone would have Inglenook house wine; their wine list was
all Inglenook, BV, and imports. "How will I get Beringer in
there?" "You never will." So we'd say, "Let's talk about the
house wine." You'd do a tasting, and they liked yours better:
"Okay, we'll buy your house wine, and we'll put some Beringer
on." The next thing you know, you own the wine list. It was
that kind of game .
What happened is that the glass of white wine went the way
of the martini. It was a real popular cocktail drink; it was
an over -the -bar business. Today, the over -the -bar business
itself has declined, whereas the business tableside has really
increased in restaurants. Restaurants have gone to a European
concept of giving you a glass of good wine. So you can get a
glass of Chardonnay now for four or five bucks. That was the
biggest single boon to the premium wine business that we've
ever seen, which means the premium business was fueled by
restaurants, not by retailers.
36
So as consumers got exposed to a glass of good vine, they
certainly wouldn't want to go back and have a glass of that
swill. People didn't need to drink a whole fifth, or go
through the ceremony of opening the cork to get a nice glass of
Cabernet Sauvignon. They became better consumers. That's what
still fuels the premium wine business. The consumers found out
a lot about wine, started drinking it, and bought it to take
home. Slowly, the jug glass-of -wine and "carafe" business
died.
It's not dead; it's still a big business, but it's
declining. I think a lot of the brands in that category still
will consolidate. I don't think there will be four wineries in
the jug business in five years; there'll be two.
I think the total business in wine is much, much smaller
than it was five years ago. If you add up all the imports that
are down, all the totally California-produced wine, and then
all the wine coolers, we're definitely down. My guess is that
consumption on a per capita basis, which approached three
gallons per capita coming out of the late eighties, will
decrease 50 percent to around two gallons per capita in the
year 2000. But the number of people who do drink wine will
have increased dramatically. We go from 44 million people in
the prime drinking age of 21 to 44 in 1980, to 88 million
people coming out of 1990.
Then my bet is that, as we mature, we won't stop drinking
wine magically at 44. In fact, I suspect I drink as much now
as I did when I was 44. When you look at hard liquor, as I
like to call it, I think something like 60 percent is consumed
by people 56 and older. As they roll off the table, that
consumption is not going to be replaced. This gives liquor
companies huge cash flows that generate incredible positive
cash, because they're not replacing their inventory. So
they're turning around and buying wineries --or other
businesses .
37
V BERINGER VINEYARDS
[Interview 2: 12 September 1989 ]////
Renaissance of the Beringer Label
Jacobson:
Moone :
Jacobson:
Moone :
I thought we'd start this time with the Beringer story. Let's
talk about the renaissance it's experienced under Nestle.
Well, it certainly has been a renaissance,
start?
Gee , where do you
What do you think has chiefly been responsible for that?
Oh, there are a lot of reasons that we've been successful. One
is that we've had a good, solid game plan to move Beringer to
better quality wines, and we stayed with that plan from the
very inception in the early seventies. There were things that
Beringer did in the early seventies that weren't consistent
with a good premium winery. They had the wrong wines, they
didn't have Cabernet Sauvignon, they didn't have a good
Chardonnay. They had wines like Barenblut and Traubingold,
which are not consistent with the varietal image that wines
needed to have .
They're called proprietary wines, but the proprietary
wines, I think, are very difficult to establish a prestige
image with. As an example, Paul Masson's Emerald Dry was a
nice wine, but it's not an upper image wine.
We had Grignolino, which had some unique points of
interest. The grape varied from year to year in its quality.
It was a very difficult grape to make good wines with. We also
had burgundy and chablis and some of the lower-end wines. All
those made up a good portion of the volume.
38
The plan was to get Chardonnay vineyards and Cabernet
Sauvignon vineyards to add a private reserve layer of
exceptional wines, and to establish the standards that were
really world-class. Now, in the wine business that's an
evolutionary process; it takes time. I always make the
statement that if I knew it took this much time, I wouldn't
have started. [laughs] I've been here fifteen years at it,
and I'd say it took us about ten years to really get good.
Then you have that time when you know you're better than you're
being perceived, and in this business perception follows value
by quite a lag.
I think just now, after making five years of what I call
really A+ wines- -and maybe a few B's, but no C's or D's- -we've
really got solid wines. I think almost every one of my wines
has gotten a gold medal somewhere in the last five years . Our
private reserve wines, particularly the Cabernet Sauvignon,
have been ranked number one in the U.S. by one or two people
every year now for the past five years. We're really
establishing great credibility with a broad cross section of
consumers. But, again, you still have our inherited past which
shows up in some locations, particularly in San Francisco where
everybody knows the winery so well .
So the perception of where we are now is that if somebody
asked who the best winery in Napa Valley was, Beringer probably
wouldn't be number one on the list. If you asked if Beringer
was one of the really great wineries in the Napa Valley, we'd
probably be on that list. I would think that if we continue to
do in the next five years what we're doing, we'd begin to show
up on the best winery in Napa Valley list. [interruption]
Market Research Studies
Jacobson: Have you ever done market research studies?
Moone: Oh, yes, we do them all the time. They're improving
dramatically, which is more evidence in the line of what I
said. We know we're getting a good awareness out there of our
image, and the perception that we're a better winery is growing
every day. But the true praise that I like, of course, is £ -om
what wine writers say, and the wine buffs, the restaurateurs
and the retailers who really understand wine around the world.
When they dip into a bottle of your wine and take the time to
39
write a letter about it or something, that's the part that you
really like to see. Or when you're named number one in the
country, like we just were in the Wine Spectator with our 1985
Private Reserve Cabernet. That's -really nice, to see that kind
of accolade.
Rebuilding the Winery
Jacobson: A lot of investment in new equipment and improvement to
vineyards was done in the early seventies.
Moone: We started with the vineyards in the mid- seventies , and we
built a winery in '74 which opened in '75. Like most wineries
at the time, it was not designed correctly; it was designed for
red wines. Remember that the seventies was "there'll be no end
to the red wine boom," and we had all red fermentors.
Actually, at Beringer we had very little red wine; we're mostly
a white wine winery, despite the image of our size. As an
example, we produce our Cabernet Sauvignon from Knights Valley.
It's about 55,000 cases a year, which is less wine than Jordan
makes. So our Cabernet is pretty scarce. We'd like to have
more. In fact, we're planning to get more. In 1997, we'll
have more ! [ laughs ]
One of the first things that I was challenged with when I
came in as president in 1984 was, really, to rebuild the
winery. We put about $22 million in the winery to put in a de-
juicing operation and Bucher presses. We put in all Bucher
presses, two fifty- ton and a twenty -five -ton Bucher. We put in
two must chillers back to back for our Chardonnay. We designed
our own system on that, by the way. It's quite a neat system,
a rotary system instead of a long pipe processing system. It's
a heat exchange system, which they all are. We build up a
block of ice at night and then use it during the day. It's
very efficient. We can chill a wine about thirty degrees, and
we can handle about twenty tons per hour at thirty degrees .
Beringer Winemakers
Jacobson: How did Myron Nightingale contribute to the Beringer
renaissance?
40
Moone :
Myron, of course, was one of the technically better vinemakers
in the state. He knew California wines. I think he's the kind
of winemaker who I'd say never really had a break. He was with
Schenley Distillers a long time, who were more liquor-oriented,
and he never really had a place where he could go and say,
"This is what I need to make great wine , " and it would show up .
I'm sure he said, "This is what I need," but it never came. So
he was the perfect person, I think, at the time to instill high
standards .
He was a brutally honest winemaker. If his wines didn't
measure up to what he wanted, he would say so. And he really
had a sparkle in his eye . He was quite a PR spokesperson for
us. He was a good person at the time, and certainly one of
California's great winemakers . I think we were as good for
Myron as Myron was good for us, too.
institution.
We made Myron really an
In the footsteps of Myron has been Ed Sbragia. Ed's made
all our private reserve wines since the first one in 1977. So
while Ed was in the footsteps of Myron, he was generationally
ahead (I guess that's the best way to say it) of Myron. As a
premium winemaker, he's spectacular. He lives it, he breathes
it, he's from a third-generation California winemaking family.
Ed's been to Europe four or five times with the great
winemakers of the world. Eight weeks a year here we have the
first growth winemakers as consultants. So he's been
dimensionally way beyond anything that Myron had experienced,
and I think the wines show that.
Jacobson: You've done a lot to associate the winemaker 's name with the
Beringer image in advertising and promotion.
Moone: Our philosophy is that the winemaker speaks for the wines. We
don't have a bunch of executives like me running around talking
about them; we stay in the background as much as possible and
talk to trade issues and subjects like that, where it's
natural. But the wines and the winemakers speak for the wines.
Jacobson: The commercials that Ed has done have a sort of casual, down-
to-earth flavor to them, and at the same time educate the
consumer about wines.
Moone: We try to be informative. We try, obviously, and talk to
something that's to our advantage, that we're good at. Ed is
very comfortable. He's a very down-to-earth winemaker. He's
not one of these arrogant kind of guys; he's a real peoples'
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41
people person, and I think that shows in the style of his
commercials. He's very good at them. Many people probably
think it's an actor, but it's really Ed [laughs].
•
As an example, we try and talk about proprietary- grown,
what that means to Ed- -the fact that all the Chardonnay grapes
he has are ours; he doesn't have to buy them on the open
market, they don't change from year to year, and what that
means to him.
Vineyard Acquisition and Management
Moone: The other thing is Bob Steinhauer, who is the second part of
the equation. You don't just have a good winemaker show up and
make good wine; you need good grapes. Bob Steinhauer, who was
with Beaulieu Vineyards for about eight years, has been with us
now going on twelve years. He's a real unique farmer. He's
the best farmer in Napa Valley, without question. Tremendous
capabilities.
He's the first viticulturist who's been president of the
enologist and viticultural group [American Society for Enology
and Viticulture]. I think that's quite a compliment to him.
He's taken our core group here and made the vineyards
phenomenal with a great crew. He's helped us in our selection
of all our vineyards, including our operation up at Chateau
Souverain, where we moved into the Alexander Valley. I think
we had four grape growers at Chateau Souverain that we were
left with, out of four hundred growers, after examination of
the wines. We went out with our winemaker and with Bob and
visited every vineyard before we made a contract, and took the
business down to very few cases. Bob really did a great job on
that, and the wines are really showing it there.
Then there's our new venture into Meridian, which I'm sure
we'll talk about later on. We bought all our vineyards down in
Santa Maria, the Santa Barbara coast, and Paso Robles. We now
have six thousand acres, so we're by far the largest premium
vineyard owner in the state. Bob really handled all that, and
all that is key to our quality. We're really driven by
controlling our own destiny as much as we can by controlling
our own vineyards, bringing them to the highest levels, and if
we only want four tons to the acre, we're going to get it; we
42
Jacobson:
Moone :
don't need to grow five tons to make money,
steps that show up in wine's quality.
All those are
So when our winemakers ask for a pH of 3.2, and an acid of
2.9, and a residual sugar of 22.8, or whatever, we do it. And
if we can't do it, we sit down and talk about next year and how
to get it there. Then we farm for that. That makes all the
difference in the world, if winemakers get what they want.
Getting those vineyards is a very expensive undertaking.
Nestle been very supportive of all of those--?
Has
They've been very supportive of us, and they're very supportive
of any business venture, I'd say, that has a good return on it.
It's not Just Nestle money pouring over here and buying
vineyards. We throw off a lot of positive cash in our own
company. While we've gone negative in the last couple of years
with our large investments, particularly the one that we just
spent almost $20 million for in the San Antonio vineyard, we'll
go back to a positive cash flow next year. That includes
sending our parent company a dividend, so we're a profitable
company .
I mean, if Nestle wasn't here, we'd have gone to the bank
and done the same thing. So it's not just a matter of somebody
needing a place to stick some money. This is a profitable
enterprise that pays its bills and makes a return on
investment, which we're very proud of.
Beringer White Zinfande 1
Jacobson: Let's talk a bit about marketing premium brands for Beringer.
I take it that gradually over time you streamlined your product
line.
Moone: Yes, we've narrowed the portfolio of wines. Our biggest wine
by far is White Zinfandel. There we made a tough decision, one
that we've stayed with, and I think it's the right decision, to
use only North Coast grapes for our White Zinfandel program and
to use only arrested fermentation. A lot of people take White
Zinfandel down to dryness and add a grape mute to give it a
sweetness, and that adds a harshness to the wine. We halt the
fermentation by chilling it, which requires very expensive
cooperage. We have invested in that cooperage all through the
43
Jacobson:
Moone :
North Coast, here at Beringer, up at AstI, which we purchased,
and at Chateau Souverain. All those facilities bring in
Zinfandel grapes for Beringer White Zinfandel. Currently our
guess is that about 60 percent of the Zinfandel grapes on the
North Coast go to us, which means we're limited in how much
more we can get. I don't think we'll get much more than that,
personally.
The wine sells about a million cases , and while I think we
could sell two million cases if we were possibly a California
appellation and went to the broader grape market, to balance
that we sell it two dollars a bottle higher than all the other
White Zinfandels on the marketplace. I think we have a
different product. It's superior, it has a better taste
spectrum; we've proved that to ourselves in consumer testing
and tastings, and blind tastings, where we're preferred about
60 to 40 percent, which is a pretty good win in a taste
preference .
We've become the upscale White Zinfandel, if you will.
Now, the bad part of that is that we just can't make any more,
it looks like. So we'll be planting some of our vineyards
long-term to grow that slowly.
That's been our number one seller; it's been a tremendous
product for us and one that we have really legitimized, I
think, by giving it real high standards and keeping it
segmented from the herd. That's important to us, too, because
we're not here just to sell a White Zinfandel and make a lot of
money. We're here to sell Chardonnay, Cabernet Sauvignon,
Sauvignon Blancs. Those varietals are where our vineyards are.
We own those vineyards on the upper end; we buy the Chenin
blanc on the open market .
It's important for us to realize that long-term, if we've
harmed our Chardonnay by doing the wrong thing for White
Zinfandel, then we've done a terrible thing. We're going to
keep it on the upper end, upper level. It's worked very well
for us.
Has the two dollar price differential discouraged consumers?
We're on allocation, and we have been for three years. Every
case of white Zinfandel- -actually every wine we have at
Beringer is on allocation for the whole country. So business
is very healthy. That's unfortunate, too, because you can't
grow the brand any more than you have the grapes, so Beringer
44
is moving more towards a price increase strategy than a volume
increase strategy. We'll keep the brand about where it is in
volume .
Jacobson: Is there a ceiling on how high White Zinfandel can go?
Moone: Oh, I think so. I don't think the consumer's going to pay
twenty dollars a bottle. I mean, I don't see a private reserve
White Zinfandel business. I don't know, I have a feeling we're
probably up at the upper limits now. It's an eight -dollar
bottle of wine in New York right now, and they can't keep it on
the shelves. So I'd say it certainly sells at eight; now,
would it sell at nine? I don't think so, but it might.
As I get older, I lose perspective on pricing. A bottle
of Scope mouthwash that's 2 percent chemicals, 1 percent
flavoring, and 90 percent water sells for eight dollars, so
certainly a bottle of wine, in my mind, compared to that is
worth ten dollars. But I don't know that the consumer
perception of the value of wine is the same. I think it's
probably a little lower. But we do an awful lot to our product
to get our dollar. I mean, we have to grow the grapes, squeeze
them, age the wine, ship it carefully, and battle all the
governments and BATFs and everything else to get a dollar. The
other products, like Scope, don't do that.
Streamlining Beringer's Wine Portfolio
Jacobson: Can you describe for me what the wine portfolio was like in the
early seventies and what it narrowed to?
Moone: In the early seventies, when I first came here, we had a few
stars. Every year we had one good wine that kept us going.
The first really good wine we had was the 1970 Cabernet
Sauvignon, which did quite well in tastings and was really a
nice wine. The '69 Cabernet Sauvignon was also pretty good,
although a very light vintage. After that the Chardonnays were
not competitive, but they were good drinking. By the way, they
were low-priced at the time. It was like $2.99 for the
Chardonnay, and Fume Blanc was $2.99 to the consumer here in
California.
We did move through the inventory. The first things we
did here were to begin to bring in some oak barrels. I
45
remember the year we cancelled all our advertising to buy oak
barrels. Why advertise something that wasn't as good as you
wanted it to be , if in fact oak is what you need to make better
Chardonnay. We knew that. We gr«w ourselves internally here,
by our own bootstraps, by doing things like that. It wasn't
just, "Send more money. Send more money." Those were dark
days, but we made the right decisions along the way, always, as
I said back at the start, staying with our plan.
Sure enough, that first wine happened to be our '78
Chardonnay. It was a pretty good vintage, and all of a sudden
we got a gold medal. We had quite a bit of it; we had about
30,000 cases or so at the time, and, gee, we made a nice name
for ourselves with that Chardonnay. It's continued every
since. Our Chardonnay has been, I think, a very good program
for us. Stylistically I really like the development of our
Chardonnay in the last ten years.
In the early times we had things like Malvasia Bianca, I
recall, coming out our ears. It was a sweet wine that was Just
terrible. We had a long-term Malvasia contract that finally
ended [laughs]. So we sold a lot of that, and as soon as it
was gone we discontinued it, of course. Grignolino we wiped
out. I got rid of Barenblut and Traubingold. I killed the
generic wines, which was a pretty good-sized business for
Beringer--the burgundy, chablis, and rose. I killed Camay
Rose. So we got rid of a lot of those kinds of wines. I
discontinued all 375 milliliters because the quality in the
small bottles doesn't hold up. You know, those things are like
taking a step back to take a step forward. They were good
decisions, but a little painful at the time.
We focused on the 750-milliliter business, period. We
made no magnums, except for a few reserves and upper-end
Cabernet Sauvignons . If you look back and ask why Beringer has
been so phenomenally successful, it's because we're the largest
user of North Coast grapes . The North Coast counties were up
to 1.8 million cases of Beringer this year.
As an example, when I joined this company, the gross sales
of the company for all things combined was $3 million in 1973,
and this year we do $120 million. So it's really a tremendous
success story. And it's fueled, of course, by Beringer. But
if you ask what Beringer has done , if you could focus on that ,
that has made it so successful, the answer is that we're the
only winery that has focused on the 750-milliliter business.
That's an absurd statement, but if you really think about it,
46
the Mondavis, the Fetzers, the Inglenooks, have all taken a
magnum and driven some form of table wine off their premium
image to gain a few dollars in sales. We're the only major
winery focusing on 750 milliliter.
We've also focused on the consumers and talked to them.
We're the only company that's really marketed at all to the
consumer with print and radio. So we've operated in an
advertising vacuum, which has been wonderful. We've had a good
story to tell. Now we're starting to get a little more
competition in that respect; people are waking up. But we've
had a wonderful focus from quality to marketing to our whole
strategy, and stayed with it. That's what's made us
successful.
Jacobson: Were some of the wines that Beringer got rid of absorbed by Los
Hermanos?
Moone: Yes, Los Hermanos was a wonderful scavenger for us, because if
something didn't meet Beringer standards we could move the wine
off very easily. So it did play a good role for us. And while
it never made great money, it did contribute some overheads.
As it's slowly ebbed itself away it helped carry the freight.
Because its tonnage was larger, Los Hermanos carried the
twenty-five cases of Beringer to the Minnesotas, upstate New
York, and all the places around the country.
If you were a small winery just trying to get in that
area, you could never get there. But the Los Hermanos freight
carried the small amounts of Beringer. So we colonized
Beringer across the country in every market. While our focus
was always Beringer, you know, it's very much a bottle
business, a wine list business. So we've been driving it for a
long, long time in all those markets. Now we're doing two and
three hundred cases a month in those cities. So cumulatively
we're truly a good, strong national brand without any weak
markets; we have good markets all across the country. Because
of that, we have a really great network of distributors, which
is a great strength of ours . That helps us in our new
products; that's where that key is to us.
47
Jim Tonlum's Contributions to Premium Wine Marketing
Jacobson: You mentioned last time that Jim Tonjum was the best premium
marketing mind in the business.
Moone: I still say that, a month later!
a
Moone: He's got a tremendous feel for the premium business; call it
gut level instincts. First of all, he's very bright. He lives
his life on the upper end of experience, and he's a very
inward-driven person, as opposed to being an outer-driven
person. That is, he would rather have the experience of a
first-class trip to Paris than he would another house worth
another hundred thousand dollars. So he's driven by experience
levels, and he really understands life on the upper edge of
what quality really is. He can translate that into our
products .
It doesn't mean he has a great palate. It does mean he
understands the labeling and what taste spectrums and trends do
in Chardonnays or Cabernet Sauvignons , and how we should be
there, and what wines are winning in fairs and how to judge
that, and what the perception of that is to the consumer. He
tells us how to translate that. So he's very deep and very,
very good. We love him. [laughs] He's extremely well-paid.
Jacobson: What have been some of his better marketing ideas?
Moone: Well, one was to cancel his advertising and buy barrels; that
was his idea. Another of his ideas goes back about five years
ago, when we almost selected Allen and Dorward as our agency.
He ran into Fran Hulse, and we didn't give Allen and Dorward a
chance of becoming our agency. He was very impressed with her
and the talent she had, and that drove us into really
breakthrough advertising for radio. We backed it in a big way,
and it really added momentum to our brand.
Jacobson: When did you first start with the radio advertising?
Moone: I'm going to say six years ago, five years ago. I must be
getting old when I blur years like that, but it's somewhere in
there .
48
Wine Competitions
Jacobson: What about entering wine competitions?
Moone: Oh, we enter all those. There isn't much of a penalty if you
lose one, and if you win something everybody loves it. And we
win quite a few. The consumer pays a lot of attention to that.
If you can stick a gold medal on your bottle, it'll sell
better. We know that, so we like to win them. Usually,
unfortunately in our business, the wine that won is already
bottled and gone, so you don't have time to do much. You can
put a little shelf tag on it, or a neck hanger, or something
like that. But they help, and they add to the overall prestige
in the winery over time.
Jacobson: How does Beringer decide when to enter competitions?
Moone: We enter them all, selectively, with our wines. We know when
our wines taste good. For example, we're releasing our '88
Chardonnay right now, and it's too young for it. We wouldn't
enter it in a fair for another four or five months because it
needs some more bottle age. So we pick the time. Sometimes
they pick the time and you know that your wine at that time
wasn't tasting great, so you don't expect too much from it.
But you know that later on it's going to be great. By and
large a lot of the fairs are scheduled too early.
A lot of wineries design their wines to taste good early--
and I could tell you who they are- -and those wines fall apart.
You see them a year later and they're dark in the bottle and
they don't hold up. We're not going to do that. We're going
to make wines that are good for consumers for a long, long
time, and do the things that we want to do. We're not going to
go upside down just to win some medal at a fair.
Advertising and Public Relations Budgets
Jacobson: How important a piece of the budget is advertising?
Moone: Advertising is equally as important to us as PR. Now, Jim runs
our public relations department also, and we spend about
equally on them. Our advertising budget would be about
$3 million, and our PR budget would be about $3 million. That
would include our entering the contests, seeing the vine
writers, being visible with a winemaker. We have Madeleine
Kamman with the School for American Chefs, which has generated
a tremendous amount of publicity for us, very positive. And
then we're running our facility here for the Hudson House.
We'll have about twelve thousand guests who dine here with us
this year at our new Hudson House, so it's quite an integral
part of our program at Beringer.
Now, that's not all Beringer. The numbers I gave you are
total company. Beringer would be about two- thirds of that, so
we spend about $2 million in PR and about $2 million in
advertising at Beringer.
Jacobson: And the rest goes for Napa Ridge and Chateau Souverain?
Moone : Right, and miscellaneous print for some of our import
operations. The real media we drive is Napa Ridge and Beringer
for radio. In a PR sense we have a winery and full PR staff at
Chateau Souverain, and a restaurant that has done fabulously.
That would be the balance.
50
VI NAPA RIDGE
Carving a Niche Among the Fiehtine Varietals
Jacobson: Napa Ridge falls in the fighting varietals category, does it
not?
Moone: The negociant vines, right. That's how they started; I don't
know what they are now [laughs]. It's interesting- -we just
took a look at the top ten wineries by price categories . We
took the magnums out of this category and looked at 750
milliliter only in the four dollar and eight dollar categories,
and then the eight dollar category and up. Then we split the
wineries out.
In the top ten wineries the eight dollar and up category
last year grew at 9 percent and accounted for 30 percent of the
business. All wineries below that, which are in the hundreds,
grew at 9 percent and accounted for 70 percent of the business.
The largest winery there in volume was Mondavi, and Beringer
was number two. Of interest in that is that all wineries are
doing pretty well and nobody's dominating that upper end. We
certainly have need for million-case wineries in that category.
Now, going to the four to eight dollar category, the top
ten wineries account for 70 percent of the business- -just a
mirror image of the eight dollar and up category- -and grew at
28 percent last year. All other wineries declined 2 percent.
So what you see there in that four to eight dollar category is
an intensification of the marketing efforts of the wineries,
which consumers and the trade are responding to.
Since then we'd have to add into that category Gallo,
who's entered with White Zinfandel, which would change the
numbers . My bet is that that category is skewing to four or
51
five wineries at the very most, and the source of grapes will
be very key to that The bigger wineries in that category will
be more eager to get more grapes- -and they'll get them- -to fuel
their growth.
The big brands are represented by Fetzer, Mondavi with his
table wines, us with Napa Ridge and Beringer White Zinfandel--
we play in that category in two ways --Glen Ellen and Sutter
Home. Those are the wines that are really popping out as very
popular and growing. My bet is that they will continue to grow
and skew into that category very aggressively.
Jacobson: What was the thinking behind Napa Ridge when it first started?
Moone: When it first started we could get a lot of Napa grapes right
here; there was an excess of wine. We'd always gotten samples
of wine here because, one, we pay well, and if we have a
problem with what we paid for we don't try and mess around with
the person that sold it to us; we just take our lumps. So we
have a good "handshake" reputation.
A lot of wineries were trying to get rid of excess wine
inventories, so we said, "Gee, why don't we start buying some
of these and we can make some pretty good wines. They're
attractively priced." We started Napa Ridge. Actually, we
tried to buy a winery at the time and use it as a vehicle, but
it didn't work out. So we just said we would go with a name we
like. As Los Hermanos was declining, we said, "Why don't we
replace that where we can make a couple million bucks and have
a little scavenger here locally that we can move our wines to,
to put out a good wine at a good value." Basically, to have
Napa County wines was the idea.
And we did that. We came out with them with a Cabernet, a
Chardonnay, and a Sauvignon Blanc. Our idea was to drive it to
a hundred thousand cases, and we were going to be real happy.
Well, what happened is that we went by a hundred thousand cases
the first year just rolling off the table. The second year we
went to three hundred thousand cases, and of course there were
no wines available from Napa towards the end of that year. The
next year we went to six hundred thousand cases. It was an
absolutely phenomenal success story. My bet is that we'll
drive that brand over time to a couple million cases.
It changed from what we started with it, to what it is
today, certainly. It's certainly more successful than we ever
thought it would be .
52
Strategies for competing in the Fighting Varietals Market
Jacobson: Is it a challenge to keep the price in that four to seven
dollar range?
Moone: It has been, but we bought vineyards so that we can farm our
excess wines into Napa Ridge and fuel it ourselves. That's
very important. I really think that the U.S. needs a wine like
the Macon Village Blanc Chardonnay that is a good value , tastes
great, you can get a glass of it inexpensively. It's not the
big, oaky, complex wine that a Beringer is, that you're going
to pay a lot of money for and really enjoy the experience of
over a long, lingering dinner. This is something that you're
just going to enjoy at the moment. It's good! Europe's had
that for years, and the U.S. never developed that business.
Well, when we bought our vineyards in the Santa Barbara
area, we bought lots of acreage where we can make a lot of
Chardonnay. Our cost factor in it will allow us to sell a
Chardonnay at about a forty dollar f.o.b. --forever . We can
make very good margins, and we can farm it at that level, and
we can make a great wine. So we don't have to pay twelve
hundred and eighteen hundred dollars a ton, like you hear
stories of, and have squeezed margins.
Now, the other side of that is that we've kept Napa Ridge
volume down. We could have grown the brand much faster if we
had gone out in the open market and just said, "Let's grow at
any price." One, we wouldn't have had the quality that we
wanted, and, two, we wouldn't have had any margins that would
have been interesting. So we've kept it a slower growth, while
the growth rates are phenomenal; the category has really
boomed.
I think in comparison Sutter Home and Glen Ellen, between
them, are almost three million cases each. So you can see that
we didn't share in that kind of growth. But we'd rather come
back and say, "Gee, let's grow the parts of it we like, slowly
over time, and do it with quality." Because I think quality
will be very important in this category long-term. We're going
to keep a fighting varietal wine at a very good price level,
where we can make money for a long time.
I think the market will dip down where people can come in
and out of it and compete with us , but over a long period of
time there just isn't enough good quality Chardonnay coming
53
into this state to compete with us. So I think we're very well
positioned with our six thousand acres to be a good quality
supplier of Chardonnay, in particular, in that category.
That's our strategy. Other people have done other things.
Bel Arbors bought cheap grapes and wine in Washington rather
than paying higher California Chardonnay prices. That's their
strategy. Glen Ellen paid whatever it took and is operating at
lower margins. They're trying to transfer that business, it
looks like, down to Fresno Chardonnay grapes in the near
future. So they said, "We'll maintain share, no matter what it
costs us, and then we'll transfer our grapes down to lower-
cost grapes from Lodi and Fresno when they come in." That's
their strategy.
Jacobson: A long-term strategy that might get them into some trouble.
Moone: Well, they can make money, but if the wine doesn't hold up it
could get them both in trouble. I like our strategy, and our
strategy was to buy quality vineyards and protect the
franchise. Sutter Home strategy is to move to Lodi also, and
wait until those grapes come in. Sutter Home is also
broadening their Cabernet Sauvignon and Sauvignon Blanc
franchise a little bit from what must be 90 percent Zinfandel
and White Zinfandel.
So all of the big ones have some kind of strategy.
Mondavi looks likely to do a joint venture with some other
people in this new Montpelier wine that they're coming out
with. So there are all kinds of different strategies. And, of
course, Mondavi bought a lot of vineyards, as we did, down in
the Santa Maria area. So they're very well entrenched, I
think. I like our strategy and Mondavi's the best so far.
We'll see who was right at the end, right?
Broadening the Consumer Base through Fiehtine Varietals
Jacobson: How important is the fighting varietal category in terms of
broadening the consumer base?
Moone: Oh, it is what's broadened the consumer base. If you look at
what's driven the wine business, it's, one, wine by the glass,
If we had just sort of sat back and waited for the retail
business or the customers in restaurants to order a bottle of
54
wine, we'd have been millions of cases behind. But now
somebody can walk in and enjoy a glass for three, four, five,
six dollars, and it's a good glass of wine. They can enjoy a
meal and not have to have a whole bottle. We've really made
wine convenient by that. It works for the restaurateur, it
works for the consumer, it works for us.
The fighting varietals field inspired that entire change
from horrible house wines [laughs] --and remember the carafe?
You don't even see a carafe any more. Isn't that great? They
were just rotten. I had one once with a mouse in it. It was
quite exciting. Anyway, it's a wonderful change for the U.S.
consumer. It's very much European, and it's what's fueling the
growth of our business in the premium end, and will continue to
fuel it. So fighting varietals are very, very important.
Three out of four grapes sold in the premium arena last
year were Chardonnay, Cabernet Sauvignon, and White Zinfandel.
Jacobson: So you see consumers following what they are perhaps learning
at the fighting varietal end of it.
Moone : Sure .
55
VII C & B VINTAGE CELLARS
The C & B Portfolio
Jacobson: Why don't we talk about C & B Vintage Cellars and other
imports .
Moone: Way back when, when we had a big investment here and a lot of
people and no business, we asked how we could get more
business. One of the ways was to sell European wines, where
you had no investment and your people could talk to somebody,
sell them something, and make some money. So we started off
with C & B Vintage Cellars. In the old days it was Crosse &
Blackwell, which is the name Nestle had- -the old plum pudding
division. But we didn't like that (some people still call us
that), so we shortened it to C & B Vintage Cellars.
We kind of messed around in it for a while and lost a lot
of money. We got into Bordeaux and Burgundies, and they really
weren't an area for marketers like us; we couldn't bring much
to the party there. That is, if we had a 30 percent mark-up on
a Burgundy, and the market place was 20 percent less than that,
what did we bring to ours that made it better than somebody
else's? It was really the same with Bordeaux.
But we hit upon Fontana Candida Frascati, which was the
white wine of Rome. It really became successful. When we took
it over it was 180,000 cases, and when we sold the brand it was
325,000 cases. It was made by Winefood in Italy, which was
purchased by Brown -Foreman, through a real complex, long story
that was kind of interesting and fun.1 They paid $7 million
for the worldwide rights to it in Italy, not knowing that we
LSee pages 27-29, 57.
56
had a two-year contract with no volume provisions here In the
U.S., on a three-year rolling basis.
We entered into negotiations with Brown -Foreman, and they
didn't want to pay anything for the brand. So I told them,
"Good, I'll take it to zero cases in the U.S." It was 50
percent of the Frascati business for the world. It was really
a great negotiation. Ve got rich, and they got the brand
[ laughs ] .
We introduced Centanni, our own Frascati wine from our own
winery near Rome. We sold about 35,000 cases last year. We
know the business, and I think we'll grow it slowly to a pretty
good brand. It looks like it's got some life to it. Brown-
Foreman didn't even ask us for a covenant not to compete, so it
was very exciting for us. It was a good deal.
That was the backbone of our business. Since then,
because Centanni 's quite small, we've refocused. We had Zonin
wines, which were about half a million cases. We dropped them
because it was just a big volume effort that we couldn't make
any money on, and we didn't see long-term how we could.
We scaled C & B back about three years ago, at the time we
sold Fontana Candida. Now we're a portfolio of world-class
wines that basically sell themselves. We have Cune , the great
Rioja wines; it's been one of the top fifty wineries profiled
by the Wine Spectator. A really wonderful family; the same
people have owned the winery since the 1840s. It's really
great quality. We sold about ten thousand cases of that this
year in the U.S. It's a pretty nice item.
We have Jean Carlo Travaglini's Gattinara- -that's the
squashed bottle that you see around. A wonderful product.
He's been with us since the inception. We sell every case we
can get of his, about six or seven hundred cases a month;
that's all we get. We're 90 percent of the Gattinara business
in the U.S. with Jean Carlo. He's in the Hugh Johnson Great
Wines of the World book. He's a wonderful quality producer.
We have Champagne Deutz . Of course, we did a joint
venture with them in producing Maison Deutz. They're a very
small, highly prestigious wine. Very small, but very, very
pages 61-63.
57
good. Very expensive,
cases .
Last year we sold about ten thousand
Jacobson:
Moone :
Then we have Vayra from Italy, a great Barolo. We have
Poggio-Salvi with a Brunello di Montalcino. So we have just
wonderful, small products, high quality: Bigi, the estate
Orvieto, those kinds of things, that really sell themselves.
Also we have had Monmousseau for over fifteen years- -a
wonderful quality wine from the Loire Valley. With that good
little volume base --it's about $4 or $5 million a year in
sales- -perhaps the timing is now good to enlarge it more.
We're contemplating doing some new things in there- -adding to
the portfolio again. I think our timing to get out of it was
great. We sold Fontana at its peak; I think the brand's less
than a couple hundred thousand cases now. And, of course, the
dollar changed a lot in that time, and our emphasis switched to
California.
We'd like to keep a third leg in Europe. Our people enjoy
selling the imports. It's added to us here in the U.S. by
making us more aware of what a great wine in the world is, and
not just a good wine in Napa Valley. So we really have world-
class standards to our company and our contacts. Our friends
come over here, as I mentioned earlier, from the first growths
of Europe and they spend eight weeks with us. Our great
Beaujolais supplier does the same thing, Georges Deboeuf.
These are friends we've made through this, so the imports bring
a lot more to us than just revenue and some fun selling them.
Maison Deutz--we wouldn't have gotten into that without
Champagne Deutz , so there have been some big pluses. I'd like
to see us continue in it, and I'd like to get it up to
$20 million again, some level where it's really worth messing
around with. Because at a lower level of sales you kind of
lose focus or interest. That's one of our challenges in the
next two or three years .
How will you grow it from $4-5 million up to $20 million?
We can do a lot of things. We're looking at some acquisitions,
we're looking at some joint ventures. There's been a lot of
interest expressed by owners of brands who don't feel they've
been marketed well in the last few years in the U.S. We've
rejected them so far, but one of those will be of interest, I'm
sure. So it's going to be a little of this, a little of that,
knocking on some doors and showing them what we have to offer
and what we can bring to the party.
58
Focus on Expensive Brands
Jacobson :
Moone :
Jacobson:
Moone :
Jacobson:
Moone :
Jacobson:
Moone :
Do the imports do better on the East Coast than in California?
Oh, yes. Two-thirds of the sales are in that eastern corridor,
so it's a big item in the East. Upper-end vines sell from
Washington, D.C. , up through Boston, and lover-end imports sell
from Miami all the vay up the coast, everywhere .
What about positioning the imports that are more expensive than
middle-range or lov-end prices? Which is the most difficult to
handle?
We're almost all upper end nov.
in there that's not $10 and up.
the C & B imports.
I don't think there's a vine
I mean, they're expensive --
Was there a lover-end product before you cut C & B back?
There vas , and it vasn't a good business for us. The Zonin
vines vere inexpensive-- As ti Spumante and those kind of things,
that's just not our business. That's kind of like the Los
Hermanos part of the business. We don't do veil in that,
either.
So you plan to keep it an upper end--?
Definitely an upper end.
Impact of a Strong Dollar
Jacobson: Hov has the strength of the dollar affected the import
business?
Moone: Well, it hurt imports, and helped California at the time it
occurred. Because if you look at advertising through the
decade of the eighties, advertising in the U.S. by branded
goods vas Gallo on television and imported brands on some
television and radio. When the dollar valuation changed, the
import margins changed dramatically. So the first thing they
did vas cut their marketing in order to hold their price
margins. In other vords, if you vere selling for $7.99, and
nov suddenly to keep your margins you had to go to $10.99, you
59
said, "Gee, the consumer won't do that,
price by cutting the advertising."
I'll keep my $7.99
As soon as they did that there was this giant void, and
Beringer stepped into that void, if you will — that wonderful
window of opportunity, where nobody was advertising, nobody
here and nobody there. I took, as an example, Beringer
Chardonnay to New York and put it on the radio when our
business was sixty cases a month. We needed to sell a couple
hundred cases a month just to pay for a flight of radio
commercials. Of course, we did it overnight; we drove it to a
thousand cases a month. That was an opportunity that probably
won't come along again in a long time.
Jacobson: I'm glad you brought that up, about the vacuum.
Moone: It's been fabulous. And it's still going on a little bit
today, so we're still out there. The imports are not back, but
some of the California people I don't think have seen what
we've been doing. So they'll be coming after us a little bit.
We already see Sutter Home with effective radio media as an
example .
Shipping
Jacobson: How are the imports shipped?
Moone : We ship them in a couple of manners . We ship them in
containers by themselves directly to distributors. That's the
most popular way; that's about 80 percent of our business.
Then we ship containers here to our warehouse in St. Helena and
ship them out of our warehouse here across the country in one,
two, three cases, along with the Beringer and Chateau
Souverain, Napa Ridge, Maison Deutz , and all that.
Moone: It's a little more expensive to ship to the East Coast because
to handle it here we mark it up about four bucks a case, and
it's about the same cost to land it here as it is back there.
The freight back there would be two bucks. Let's say it's a
six or seven dollars a case difference, but it allows many
distributors to sell a hundred dollar case of wine and not have
a big inventory; this way they can buy one or two cases at a
time and still have it in their price book and have a full
offering. A lot of distributors are so small that they just
60
can't handle containers in small cities and so forth, so this
is a real service part of our business. It's a good dimension
for us to have.
61
VIII ACQUISITIONS AND PREMIUM BRAND DEVELOPMENT
Maison Deutz Partnership
Jacobson: How did the Maison Deutz partnership come about in 1986?
Moone: First of all, we'd been selling Champagne Deutz for about six
years, and they had an interest in buying some land over here
and starting an operation. We don't have expertise in the
sparkling end of the business. It's an entry that we'd like to
have some expertise in and learn about, so it was a chance for
us to put some money in the pot and have somebody who really
knows the product come over here and produce it and make it ,
and have us market it, which we're good at. It did fit each
person's expertise.
We helped them look for land, and they ended up going in a
whole different direction, part way between Santa Maria and
Paso Robles. They wanted the chalky soils like they have in
Europe, and they also wanted it near the coast for high acid
levels, which are better for champagne flavors. I think they
made a wonderful move. They're not in Napa, like everybody
else who came here, where I think we have a little heavier
Chardonnay and a little different Pinot noir. I think they
made a great move. We've been called the most French-like
champagne made .
This year we have sixteen thousand cases, we're in our
fourth cuvee. We'll produce thirty thousand cases as full
production.
Then we use the old original pressoir wooden vats, the old
kind they don't even use in Champagne any more. So it's all
hand-pressed in the old wooden presses, which makes a
wonderful, really clear juice for the fermentation.
62
Moone: So it's been a good economic venture and a good quality
product. It's a neat little winery.
Jacobson: Is the French expertise anything that Beringer winery hopes to
benefit from?
Moone: No, I don't think champagne products help us premium wineries.
In fact, I think they hurt us because you can't be two things
to people. It's like Cadillac having a sports car; that's
crazy. Call it something else and market it as something else.
I think the likelihood of somebody liking both products is
remote. I think they'll like one, and then when they taste the
other they won't like it. Ergo, they won't go back and buy the
other one; they've been disappointed. So I think they're
apples and oranges. Other wineries feel differently about
that, obviously. They feel it makes a great image-booster for
their winery or something. I think it really is harmful.
Jacobson: How does the Maison Deutz partnership work?
Moone: We own one-third of the asset, which is the winery. The
vineyards are owned by a man named Jean Tardivat, and he's a
one- third partner in the winery. Then Champagne Deutz from
France owns a third of it. We do all the marketing, which is
another profit center. We also run the retail tasting room.
So it makes for a nice arrangement. Basically it's a balancing
act; we're the marketing/sales people, Tardivat brings the
grapes to the party and the capital for that, and Champagne
Deutz brings the expertise on how to make champagne. So all of
us bring something to the party.
We were fortunate in the way we got into it, in that we
market Champagne Deutz for the United States . It was our
opinion that Maison Deutz could not be marketed without
Champagne Deutz as a companion. However, I didn't want to
enter into a marketing arrangement where we would do all the
work and birth this wonderful project, and then have them shake
our hands and say, "Thank you very much." The reward for that
effort had to be something more than just what we could make on
the marketing arrangement. And they agreed, so they said, "How
would you like to be a full partner?"
As the winery was being built up for a couple of years and
was just about ready to bring its first release to market, we
63
actually were able to come in on the original book value of the
winery. It was very nice of them to let us in as a full
partner at that stage, after this had been put together. We
came in as a late partner, and it's been wonderful.
Jacobson: Is there any confusion between the Champagne which is a French
product and the Santa Barbara product?
Moone: I don't think so. It's a little early to tell because it's so
small. It's mostly been in Los Angeles where we have both of
them heavily marketed. Around the country we haven't really
introduced Maison Deutz until just recently. I wouldn't think
so. I mean, there are Napa mountains and French mountains, and
there's Chandon and Moet Chandon. I think there are enough
around now so that they are literally all here with some kind
of French product and a U.S. product. So I think in the
consumer's mind they know it's California. It certainly says
so on the label. You might confuse it in the taste, because
it's a very, very good product and very French- like.
Jacobson: Do the French ever take it back to France?
Moone: They haven't yet. We have sold some in Japan; just a little
teeny bit went over there. I'm not sure what the perception of
California-French sparkling wines will be around the world,
whether they'll be received or of interest. Probably not. The
French French Champagnes around the world will probably be the
ones that travel for a long time.
Acquisition of Souverain Cellars
Jacobson: In 1986 you bought Souverain Cellars. How did that come about?
Moone: It came on the market. I had a tremendous interest in getting
a winery in Alexander Valley or Sonoma. I've really liked
Alexander Valley Cabernet Sauvignon. I've followed it for
years. Like, Justin Meyer's Silver Oak 1981 is wonderful.
You'll notice that you see a case of Silver Oak sitting over
there [laughs]. This interest was not just passing; we were
the second bidder on Chateau St. Jean, as an example.
The strategy developed as Beringer began to reach its
maximum capacity. With our wonderful organization and
marketing, sales, and production people, why would we just let
64
it sit here and not use it? There was also the desire to move
to new appellations, because I think, long-term, Alexander
Valley will be known for a couple of grapes, Napa Valley's
going to be known for a couple of grapes, and Santa Barbara is
going to be known for a couple of grapes. Our interest was to
get into each of those appellations, and to enter the sparkling
category. So we've done all those things.
So it was strategic to look to Sonoma. In addition, a lot
of the Beringer White Zinfandel grapes come from Sonoma, and
those growers wouldn't bring them over the hill here to Napa
forever, we knew that. If we could get a large facility that
our growers could use, where we could crush the juice there and
then bring it here for fermentation --or ferment it there and
then bring it here --it would be a wonderful continued source of
Beringer White Zinfandel.
That brand at the time had been growing, so we needed more
capacity. We didn't want to enlarge the Beringer facility any
more. So for all those reasons we went to Chateau Souverain.
We bought it for $10 million, and sold off part of the assets
for about $3 million and capitalized it at just a little under
$7 million, so it was just a wonderful, wonderful acquisition.
It just couldn't be built for that; maybe today it couldn't be
done at all, with the large ponding systems and everything.
So that was the strategy, and from there it was to
revitalize Chateau Souverain. It was never in, say, as bad
shape as Beringer was back in the sixties, but it was in bad
shape. We wanted to revitalize it with great quality wines,
and to feature the restaurant over there. The wonderful
marketing vehicle was their restaurant. We had our chef
program here; we had a great chef who needed a place to go and
grow, Gary Danko, one of Madeleine Kamman's proteges. We put a
million dollar extension on the restaurant. Have you been
there?
Jacobson: No, I haven't eaten there, but I've tasted wines over there, so
I've seen it.
Moone: The restaurant is just fabulous. Gary's phenomenal. The
restaurant has been on the cover of the San Francisco Chronicle
food section two or three times, and Gary has been on the cover
of Wine Spectator, as you saw. And he just got named Food and
Wine magazine's Top Ten Chef. So the place is packed. We're
actually making money on the restaurant, believe it or not.
It's unbelievable. Even I have to know somebody to get in
Chateau Souverain Chef Gary Danko, 1989.
65
there on Saturday night now! Who'd have ever thought that?
the restaurant's doing fabulous, and it's adding a lot of
prestige to our venture.
So
The vines we took down to 65,000 cases, and this year
we'll sell 130,000 cases and maybe a little more. We're right
on track to bring it back to where I'd like to be: about
200,000 cases and maybe $10 million in revenue. I'd be real
happy at that level. In addition, we make a lot of money there
because we run it at full capacity. We've surpassed it because
of the White Zinfandel from Beringer. So it's a great
opportunity for us that we can develop this business without a
lot of profit constraints.
Acquisition of Asti Winery
Moone: As our volume has grown, we had a chance to buy the Asti winery
up the street, which I bought last year. We'll actually crush
more grapes at Asti than we will at Chateau Souverain, and it's
at full capacity. That was a wonderful buy. We bought that
for $6 million, which included 340 acres of bench land which
we're planting in Cabernet sauvignon. The land alone was worth
the purchase price, and I can't believe nobody bought it except
us [laughs]. It was wonderful.
Jacobson: Was the land primarily what you bought it for?
Moone: No, we bought it for the excess capacity in the North Coast
that we needed. We'll crush 18,000 tons there. It's going to
be a big facility for us. We'll actually be adding capacity at
Asti next year. We've done a lot of demolition and cleaned the
place up, and we have no intention of operating it as a winery,
or a brand located in a winery. It's just to fill in our needs
for excess crushing capacity and to plant the vineyards out.
We've planted the first eighty acres, and it's just gorgeous-
all bench land that will be all Cabernet sauvignon, and we'll
drive that for Chateau Souverain.
66
Chateau Souverain Brand
Jacobson: How does the Chateau Souverain brand fit in, then, with your
wine portfolio?
Moone: Really well. It's our entry from Alexander Valley and Sonoma.
Distributors need an entry from Sonoma. It's interesting to
look in Sonoma- -there really aren't a lot of large wineries
over there. I think one of the largest is probably Chateau
St. Jean, which puts out about a couple hundred thousand cases,
and Clos du Bois is a couple hundred thousand, and we're a
hundred and thirty [thousand]. I think we're probably number
three and heading to number one fast. We'd like to be the
largest in Sonoma, and also to be the best. And to taste our
'86 Alexander Valley Cabernet, it's as good as Justin's [Justin
Meyer's Silver Oak] '81. It's sensational, really good. So
we're on our way.
Tom Peterson's the winemaker-- fabulous , fabulous
winemaker, yet to be proven in the North Coast. But Professor
Olmo called him the number one graduate he's ever had from
Davis. He's really bright. He was a Stanford undergrad (Olmo
trained him at Davis) and had been research enologist and
manager of grower relations, as well as winery production
manager, for the Monterey Vineyards for Taylor Cellars before
he moved up here. I think we got a real diamond, and he'll be
shining publicly soon with a lot of talent.
We're doing the front yard at Chateau Souverain as I
speak. We're going to put a big gate in, and we're putting
trees all up the road, removing the road and cleaning up the
creek. We're putting a big balustrade staircase in, and it's
going to be just gorgeous. We're lighting it all at night, and
you can drive up there. And we're planting the whole vineyard
in Cabernet sauvignon in front, so it will be a beautiful,
beautiful place.
By next spring it'll be something. Oh, and we're putting
a slate roof on the building, too; the whole building will have
a slate roof. We're making it a little more chateau- looking,
and a little less of the Dutch kiln look, so that will change
its appearance quite a bit. It will be kind of a neat place
two or three years from now, when it all comes together. It's
a very long-term play, but I think a very good one.
67
Jacobson: You changed the name from Souverain Cellars to Chateau
Souverain?
Moone : Yes, I like the way Chateau stacks on Souverain, the way it
looks. And it separated them from us. It's interesting that
it was the original design of Souverain to be called Chateau
Souverain. When you go way back to the 1940s, their original
brand plans all had Chateau Souverain as where they were going
to take it for their upper-end wines. It's kind of neat;
that's what happened. It wasn't real original, we Just liked
it [laughs]. And, seemingly, there are more chateaux in
Sonoma. It's a word they use over there a lot more. You know,
Chateau Diana is there, and Chateau St. Jean; there are quite a
few. So it seemed to sort of fit the whole feeling of the
place. And it is a chateau- looking place, too, so it did
everything we wanted it to do.
Acquisition of Estrella River Winery
Jacobson:
Moone :
Jacobson:
Moone :
In '88 you also bought Estrella River Winery.
We sure did! [laughs]
How did that come about?
purchases .
There have been a flurry of vineyard
Yes, we needed vineyards. We loved the vineyards; that was
vineyard -driven. It's an eight hundred -acre Cabernet sauvignon
vineyard there. It's all BV cloned and is of tremendous
quality. Paso Robles is a hotter area, as you know, than the
Santa Barbara coast. Our interest in that was to get some
Cabernet sauvignon for our Napa Ridge brand, and at the same
time it got us entrenched in the Santa Barbara region, which
was our third step of the appellation dream that I started
with. It allowed us to do that. It was in bankruptcy, and it
was a very complex acquisition; a lot of people at each other's
throats made it real complex. Anyway, we finally pulled it off
and bought it for $13 million.
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Meridian Brand
Moone : We had a consultant here named Chuck [Charles] Ortman, who had
been working with us on Chardonnay for about three years.
Chuck, you know, did St. Clement and was a winemaker at Spring
Mountain and Heitz Cellars. He owned a brand called Meridian,
which he was going broke with. It was a horribly under
capitalized deal and it needed a lot more capital. He wanted
out of that, and he just wanted to become a winemaker. His
daughter was at Cal Poly San Luis Obispo, and he'd made a wine
in Edna Valley from the [Jim] Nivens grapes, so he knew the
area well.
So we bought the brand, and I loved the name Meridian.
We're redoing the winery and putting in $8 million worth of
changes this year to add capacity for our vineyards. It's
going to be a complete new introduction. We've sold off all
the Meridian wines that existed, for the most part; there are a
few left. In January of next year we'll introduce Meridian to
the U.S. marketplace. It's got a very exciting label concept,
and it'll come out with an Edna Valley Chardonnay and a Santa
Barbara coast Chardonnay. Then we'll add Cabernet and some
other wines- -some Rhone-style wines- -as we go along. Chuck
Ortman 's moved down to the Santa Barbara area and is a full-
time winemaker for us. He's moving his family there.
So the transition was wonderful. Here we had Chuck
Ortman, one of the greatest winemakers in Napa Valley. He had
a great name and is a person who knows those grapes. It's the
first time somebody of his stature has gone to the Santa
Barbara coast. Generally they desire to come here. We're
really convinced that we can make fabulous, fabulous wines
there. So we're investing in that area, and that'll be the
third leg of our California triad, if you will.
Jacobson: Does Meridian, then, aim to be a premium wine brand, along with
Beringer?
Moone: Yes, it will come out at a high price. It'll come out at a
higher price than Chateau Souverain, but less than Beringer.
69
Other Vineyard Purchases
Jacobson: But some of the vineyards were purchased to provide Napa Ridge
with grapes?
Moone : Yes. If they all sold as Meridian, we'd obviously be very
happy [laughs]. But that would be a lot of Meridian at that
price. If it does, wonderful. We bought vineyards down there--
we started off with our Cat Canyon vineyard, which was a seven
hundred-acre parcel with four hundred acres planted to grapes.
Planted in '81, one of the original McCarthy vineyards, it's
just a gorgeous facility- -a great facility. And we bought it
at a great value .
When we did that, a couple of people called us about it--
were we interested in some more? And we saw some things that
were really interesting, so we bought Sisquoc Vineyard from the
Nivens . It was a very different kind of vineyard up there.
It's a real sandy soil there on the Sisquoc River up on the
plateau. It has a quick-ripening history to it, which give it
real unique taste characteristics.
Then we bought the San Antonio Vineyard, which is 22,000
acres of grapes. It's huge. It has, I don't know, nineteen
lakes. That's in Santa Maria. It borders up on the town of
Santa Maria and the Vandenberg Air Force base property, and it
runs four and a half miles south of town. It's a 4,500-acre
parcel of land. It's just one of the great pieces of land in
California. We just really got a great buy on that one, too.
So we're in these vineyards at a price where we can farm
Chardonnay for a long, long time at a great price. We're
grafting to Chardonnay as fast as we can- -literally, seven or
eight hundred acres a year. They're about half Chardonnay as
we bought them, and this year they'll be about two- thirds
Chardonnay. Next year they'll be about three -fourths
Chardonnay .
Chuck Ortman's just thrilled about the quality from all of
these, so our Santa Barbara coast Chardonnay will be a blend of
those three vineyards, and they're just fabulous. Of course,
the '87 Edna Valley, in the Orange County Fair, just got the
award above the gold medal, the four gold. So it's coming out
with all flags flying. We'll have some great wines.
70
jgy for Developing
Brands
Moone : We're not volume-oriented down there. Again, it's the same
strategy that we have at Chateau Souverain. Underneath Chateau
Souverain we have the Beringer White Zinfandel supporting the
winery. Underneath the Meridian winery we have the Napa Ridge
wines supporting the winery. So the operation will grow and be
cultured, and it will take its own time and we don't have to
rush it. And we'll birth it. My hope is that in ten or
fifteen years, when the other wines may not be quite as
important, we'll have Meridian, Chateau Souverain, and Beringer
all established, all on their own, all very profitable, and all
paid for.
Jacobson: Do you see the Napa Ridge brand as not being as important in
ten to fifteen years?
Moone: No, I see it being more important than today. But it won't
matter. The idea is to birth the assets and to make sure that
we've utilized the assets. So I'm more asset-driven and
strategically driven on the upper end than I am volume-driven
on the lower end. Our real goal is to colonize these and to
have not just Beringer, but three Beringers--one called Chateau
Souverain and one called Meridian.
Jacobson: Were any of the vineyard purchases in Santa Barbara intended
for the champagne?
Moone: They could be, of course. They really could be, although the
champagne facility is six hundred acres of its own and has
about 150 that are planted now. So there's plenty of room to
grow there. I think we'd probably like to keep that as estate
if we could.
I think the champagne or sparkling wine category's going
to be tremendously crowded in California in the next five
years. All the big, well-known wineries are producing a
hundred thousand cases each for a market that's about a half a
million cases right now. It's going to be a blood bath. So
we're going to take it real small [laughs], and keep our image
while they end up flopping around. Then, if we want to expand
it, we'll look at it in five years. That's kind of our
strategy; we're going to stay small and watch the big boys go
chop each other up for a while.
71
Foreign Investment and Long-term Business Orientations
[Interview 3: 26 September 1989 ]#//
Jacobson: Wine Spectator ran an article on foreign investors in September
1989, commenting on how foreign investors have the financial
muscle to cover for fifteen to twenty years of negative cash
flow with all the improvements and whatnot that they make. How
well does that generalization apply to Beringer's success
story?
Moone: I don't know. I don't think being able to withstand negative
cash flow is strictly a foreign concept. I would cite the fact
that there are 640 wineries in California now, and most of them
are not foreign owned, and they certainly have negative cash
flows that these people are dealing with in setting up for the
future. Certainly wineries have negative cash flows at the
start. Because you're starting literally everything from cash--
for example, you don't get revenue from a Cabernet Sauvignon
vineyard for eight years. (You get grapes in the fifth year,
and then you age it three years in the winery.) That's a long
carry. But there are plenty of people willing to do that.
To me, it's more of an industry segmentation. IBM, as an
example, is a technology leader that's taken its product around
the world. The French have been dominant wine people who have
taken their products around the world and are now investing
here in vineyards . So I look at it more as an industry
phenomenon than, perhaps, a "foreign" phenomenon. Now, new
investors have come into the area- -the Japanese- -and their
investment strategy I think is more drink-oriented, a la
Suntory and Sapporo, which is a large beer company. There it's
a product diversification, with marketing back to Japan on the
products as a side benefit. I think we're also seeing the rich
Japanese investor, much like the rich U.S. investor here, who
wants to own his own winery because it's pretty chic. So
you're seeing some of that.
It's pretty hard to simplify why somebody's more
successful. The one thing that leads to success in the wine
business is obviously to know that the business is long term,
and that you're not here on the short term. People who come in
with a good long-term understanding of it seem to do better.
I guess the gist of that article is that large U.S.
corporations have not been successful in the wine business, in
that they have quarterly balance sheets and quarterly earnings
72
statements, and their stock must go up every quarter or the
president is fired. With that kind of "go, go" environment,
they're not going to get into a business like this. Well,
that's a shame. If they mean that, in terms of performance,
then that's true. They're at the mercy of the people who make
investment decisions on computers, and not necessarily on the
long haul. I think the European and Japanese investors who buy
stock are much more long term in their orientation, and they'll
stay with a company longer.
Jacobson: That's a very interesting point.
Ownership Changes
Jacobson: I noticed that there were a lot of ownership changes here at
Beringer. General Shopping was an owner at one point, and then
the Labruyere family. What was the influence of those owners?
Moone: A lot of those were fairly strange. But the basic problem
there was that Nestle operated in a lot of businesses that
entailed alcoholic licenses, from restaurants to hotels. So
under the tied house laws the company couldn't be owned by
Nestle. That was in what I would call the formative stages of
their involvement with us . They sold parts of the company off
over time so that the company didn't conflict with these laws.
Since then the laws have been basically rewritten and changed,
so we bought ourselves back. Basically the asset always stayed
with Nestle, however.
Jacobson: Were all those changes basically on paper, or was it more than
that?
Moone: They were real sales, but they were sold off as marketing
rights, as an example, as opposed to the asset. So the
marketing of the company was held by General Shopping and they
did the marketing of the product in the U.S., just so that it
wouldn't conflict with those tied house laws.
Labruyere, in fact, is still very interested in our
company. While it is wholly owned by Nestle, actually as of
the first of this year, he's become an investor in some
vineyards. We like him around. He's really a sharp guy. He's
a vineyard grower in Macon, France, and is one of Georges
Deboeuf's very best friends, and also Paul Bocuse. So when
73
we're in Europe we interface with him, and he's been very
helpful to us in developing our European business. He's sort
of a confidante of ours.
Jacobson: What about General Shopping? What was it like when they were
the owners?
Moone: That was just for a short period of time. It was more of an
off-shore transaction of ownership. It didn't affect anything
here.
Jacobson: So other than with Labruyere there was no noticeable impact
with any of the other ownership changes?
Moone : No .
74
IX EXPORTS
Jacobson :
Moone :
I wanted to ask you about exports ,
markets?
What are the most promising
Exports are important to us . I am driving our company towards
exports. The reason for that is that I think if you are going
to be a successful company in the next decades, you'll have to
have a world reputation in wines. Our desire is to establish a
worldwide reputation, and obviously to do that you have to be
in all the great markets of the world.
European Market
Moone: We began this venture, really, going back three years ago, and
it's been very successful. I'll take them in segments. We're
in Europe- -we have a warehouse in Belgium. Our most successful
countries are Denmark, Sweden, England, and Switzerland, but
we're in all twelve of the European countries, including
Iceland and Italy—from Reykjavik to Rome! --with varying
degrees of success.
Our idea is to sell one case correctly, as opposed to a
hundred cases incorrectly. So we're there to get in the right
restaurants and establish our reputation. It's very good. We
sold nineteen thousand cases of Beringer last year in those
markets, and this year it will be around thirty to thirty-five
thousand cases, which is almost all Chardonnay, Sauvignon
Blanc, Cabernet Sauvignon, and a little bit of White Zinfandel
in England. We're real happy with that, and we plan to expand
our brands by introducing Chateau Souverain and Meridian in the
upcoming years .
75
Japanese Market
Moone: In the Pacific Rim countries, Japan is our next large target.
We've sold six thousand cases in the last calendar year in
Japan through the Godu Shousay Company. It's been very
successful. There White Zinfandel is the largest seller, and
Chardonnay is the second biggest seller. I really feel that
Chardonnay is going to be a huge item in Japan in the long
term.
We market Chateau Souverain through the Snowbrand Company.
There we introduced it in November of last year, and they did
two thousand cases through August of this year. So I'd call
that a very successful introduction. Our projections are
30+ percent growth. We obviously were exceeding that, but now
with a larger base we'll grow at least 25 or 30 percent this
coming year. So we're very optimistic about Japan.
In fact , as you know I just returned Saturday from a week
there. It's very interesting. California wines are now the
number two selling wines; we passed Germany. The standard of
excellence is still France, and they look to France as their
leader, if you will. As an example, they go to the Hospice de
Beaune auction. They're flying ten thousand cases of
Beaujolais wine to Japan. It's a huge event. We need to get
them to things like the Napa Valley wine auction and do some
more California promotions to get that comparison to the
French .
Jacobson:
We basically sell in the one to two thousand yen market, a
very popular price; a thousand yen is about eight dollars.
That's a reasonably priced market, but on the upper end the
Japanese tend to pay five, six, and seven thousand yen for
French wines and not California wines. We need to get over
that hurdle in the next couple of years .
What kind of wines are sold in the one to two thousand yen
market?
Moone: Oh, the Beringer White Zinfandel, as an example, is sixteen
hundred yen. Most Californians are twelve hundred yen. Our
Beringer Chardonnay is twenty-four hundred yen, as is our
Cabernet Sauvignon. That relates to, say, a Gevrey-Chambertin
and a Pouilly-Fuisse , so we're pretty attractively priced
there- -competitively priced. The Chateau Souverain Chardonnay
sells for two thousand yen, and you might see a Wente
E. Michael Moone at Beringer winery,
76
Chardonnay for sixteen hundred yen. It's relative to what's
here. And we're getting some action.
Jacobson: What do you think accounts for the growth in popularity of
California wines to the extent that they have surpassed German
wines in Japan?
Moone: Well, the White Zinfandel in the taste spectrum certainly has
been a big contributor. Another one is the huge number of
visitors to the U.S. --Hawaii and the ma inland --and to the
California wineries. We have a big long-term advantage,
probably even on France because I think the Japanese look to
California as high image in clothing and food. Certainly the
French restaurants have been there for years, so they have this
kind of old guard quality, and we need to work hard to overcome
that. We have the big advantage, though, with the number of
people visiting us. If we handle that correctly, Japan will be
a great market for us in the long term.
We're in Hong Kong and Guam and places like that out there
that are fairly small- -mostly hotel business.
Trade Barrier Issues in Canada and Japan
Moone: Canada is the other major opportunity for us, and Canada has
been very discriminatory against U.S. wine products while
pouring beer and spirits across our borders and protecting a
really ill-conceived wine business in Canada that has,
basically, one or two percent Canadian grapes and blends cheap
wine from around the world. They're not allowing U.S.
listings. As an example, we have twenty-eight listings per
province in Canada; the French have four and five hundred
listings. So we need to break down those trade barriers, and
that's all it is in Canada. It's going to be a huge market
when we do.
The new trade agreement that Agriculture Secretary Clayton
Yeutter did is good, but the provinces aren't going along with
it, as you probably know. Canada has an unfair trade practice
with the U.S. wine industry. We filed on that, and we'll
continue to move forward on that. When the doors finally come
down, Canada will be a big market for us. My bet is that we
would easily get to 10 percent of the total Canadian market,
which would be four million cases of wine for the U.S. I'd
77
like to see that occur within a couple of years. I'm active on
that in industry affairs; I keep the pedal to the metal on that
one.
Jacobson: Trade barrier issues in Japan must be of some concern, too.
Moone: Well, they treat us pretty fairly on wine. I mean, they treat
us like the French, and they treat us like anything else. They
protected a small business there for a while, but basically I
don't see any barriers to entry there. They're very into
things like sorbates; they're death on those, so you want to
make sure you have sorbates less than a hundred parts per
million or not have them at all in your product, which is what
we're doing.
The marketing distribution barriers are tough, but there's
a lot of interest in California wines, so if you're over there
and aggressive you're going to get someone to represent you.
You have to know the channels of distribution, and you have to
understand that Japan's a long-term market.
Wine Marketing and Distribution in Japan
Jacobson:
Moone :
Jacobson:
Moone :
Jacobson:
I would think that getting the right person to represent you in
Japan would be important, because the distribution channels are
so complicated.
That's correct. We have wonderful companies there that
represent us, so we're really pleased with them. They're two
of the best marketing companies in wine and spirits in Japan.
How do they go about marketing your wines there?
They do the same things we do here! They have little displays
they build, they have consumer offerings for wine openers and
T-shirts and bottle accessories, and mail-ins. Actually, their
laws are even a little more liberal than in the U.S. There
they can do some of those things, and in some of our states we
can't do those. They have contests for their sales people,
they have trade tastings, consumer tastings,
wine experts who write about wine.
Then they have
Do they place wines more in restaurants and hotels than in
grocery stores?
78
Moone : No. They have to have special licenses, but the grocery stores
are getting those. In fact, I was just in one independent
grocery store in a middle class area, a really nice little
independent store. They were selling seventy bottles a month
of Chateau Souverain off the shelf. It was very nice. And, of
course, they are in hotels.
We just sent our chef over; Pat Windisch, our executive
chef, was in the Palace Hotel, the most prestigious old hotel
in Japan. They had large pictures of Pat all over the lobby,
and a huge blow-up of our Rhine House, and they called it
California Wine Month. They had a menu of California wine and
cuisine for the whole month. It was a fabulous promotion. We
sampled thousands of people in a nice environment . Very
successful. So they do things like that.
Jacobson: Is the grocery store just now beginning to open up to
California wines?
Moone :
Yes.
Wine Marketing and Distribution in Europe
Jacobson: In Europe, are there different challenges involved in, say,
getting on the wine list in restaurants?
Moone: A little bit. They have a section on wine lists called New
World Wines. There they put U.S. wines, Australian wines, and
Chilean wines . "New World" is anything other than Europe
[laughs]. So that's where you find us. We'd be like an
Alsatian wine would be here- -you'd see it on some wine lists,
and you'd try it once in a while with dinner, but we're not a
mainstream item at all.
Where we're selling in Europe is in retail stores and in
hotels; hotels are doing California promotions. Airlines are
important in sampling a lot of first class passengers; whenever
they fly to California, they'll have a Beringer Chardonnay or
Cabernet Sauvignon in first class. We have that now with
Swissair, as an example, and with Delta on their international
flights.
Then if you just enter the taste spectrum of the English
market with Sauvignon Blancs , where Sauvignon Blancs from
79
Jacobson :
Moone :
Jacobson:
Moone :
Jacobson:
France got very high in price, and suddenly the U.S. is a
dollar cheaper per bottle, and that British purveyor likes
ours, they'll really sell a lot. It's a little more retail-
oriented in Europe than restaurant -oriented.
It's that price -sensitive a market?
Sure. They're purveyors, and they brought wine to England from
all over the world for years. While France has been their
neighbor, we can land a case of wine in London with freight
almost the same as the French shipping across the channel. So
we're very competitive there. They love clarets, and we make
wonderful quality Cabernet Sauvignon. They're going to pay
twenty dollars for a French wine, and if they see one of ours
sitting there for fifteen dollars and it's good, they're going
to buy it again. So, yes, we're making strides there.
What about the EEC and the Common Agricultural Program?
they change how well California wines do in Europe?
Will
Oh, things are going to change. Certainly the Spanish wines
will become very prevalent in Europe, and Italian wines will
become very formidable branded items. The French will probably
suffer, and I see California probably holding our own in that
environment. But I don't see the French selling a lot more
wine in Italy [laughs], and I don't see the French selling a
lot more wine in Spain. I think wine's very provincial.
However, the French, given a good-valued, well-marketed product
in a supermarket, won't care if it's French or not. Whereas
the Italians might. I don't know, I'm just guessing. But I'd
say it will certainly change.
Will California lose much of its price advantage that it now
has?
Moone: I don't think so. No,
for us, equal access,
now.
I think there'll be a wide open market
Europe's basically wide open to us right
Targeted Export Assistance Proeram
Jacobson: Have you ever taken advantage of the Targeted Export Assistance
Program?
80
Moone: Very little. Some people do, I know. They write off their
trips and things like that. We just haven't done it. I
suppose we should.
Jacobson: More paperwork than it's worth?
Moone: Yes, I think so. It pays for my trip; I have to get all these
forms and get five hundred dollars back. But I forget about
it. I'm not slighting the fact that the funds are there. I'd
much rather see the funds spent on advertising like they have
in Japan and the promotions they did. They took the U.S. boat,
The California, over there. There are just lots of promotions
that the industry's done that are very, very good for us,
basically via the California Vine Commission. Those
expenditures have just been terrific, and they total about
$10 million this year, you know.
Developing Brand Recognition in Foreign Markets
Jacobson: How difficult is it in a foreign market to develop brand
recognition? To what extent have you had success in that?
Moone: We've been successful because we make great wines, and I don't
say that facetiously. Our Private Reserve Cabernet Sauvignon
can travel anywhere in the world and be as good as anything
made anywhere , and there are people who love that kind of wine .
So the wine has to speak, to a great degree. Establishing your
own image, though, takes years. We're so new in this, at three
years, to say that we have some great image. We have a nice
image in the countries that we operate in, but certainly not
what we'd like it to be, nor where it will be in another
decade.
We have people in those markets; we have a full time
person in Europe who does nothing but represent us, hold
tastings, and talk to people and consumers. We'll be hiring a
Japanese person to come to the U.S. here and work with us for a
year. Then we're going to have that person go back to Japan
and be our manager in Japan. Next summer or so we'll hire
somebody, and our volume will be at the level we can support
them two years from now. So we're going to have our own
employee in Tokyo within two years. We're making those kinds
of efforts. They start adding up and paying off.
81
Japanese Distribution Companies
Jacobson: I would think it would be difficult to rely on the distribution
companies in Japan.
Moone: Veil, they're awfully good. They're such dedicated workers,
with high standards. They kill for us every day in every way.
They're very good. If our distributors in the U.S. were as
good as they are in Japan, we'd sell twice as much wine.
They're very good.
Jacobson: It's not a problem with their having many, many products to
represent?
Moone: No, actually they have fewer products. Like in California they
only take one or two. One of our distributors, Monmoussen, the
big brand, sells about forty thousand cases. Beringer is
number two at six thousand cases. The other biggest brand is
the German Golden Oktober. They sell twenty-five thousand
cases, and they believe Beringer will outsell that someday.
No, they're very small, loyal, but they're parts of huge
companies and have all kinds of distribution sub-networks. No,
that's not the problem. In fact, that's the solution.
[ laughs ]
Benefits of Import Experienced
Moone: I think it's important to know that one thing that has helped
us in exports is that we are an importer. We understand how to
represent a brand here, so we know what our expectations are
"there." The fact that we sell Travaglini Gattinara in the
U.S., and the way we handle and comport ourselves in that
brand, shows us and gives us the expectation that we would have
on the outside. So we do understand; we've been in their
shoes .
Focus on High Image Wines
Moone: Our sales will be in excess of $1 million this year in exports,
which is just about 1 percent of our total sales. I would like
82
our export sales to be approaching 3-4 percent of our gross
sales. It's going to skew by product, obviously, so right now
our goal is that ve would have at least 10-12 percent of our
Cabernet Sauvignon be export, as an example, because it's a
high image wine that travels around the world, et cetera. But
we don't want to disrupt the U.S. market, where we're also very
short of Cabernet Sauvignon. So we're balancing this by item,
if you will. We're looking at it in all ways to balance our
total business.
Jacobson: What is the percentage breakdown for the other wines for
export?
Moone: Oh, they would be lesser. I could see 5-10 percent of our
Chardonnay business, maybe 10 percent of our Sauvignon Blanc
business. Then we'd be down to 1-2 percent of our White
Zinfandel or Chenin Blanc business, those kinds of things.
While the total sales of the company are small, individual
items could be quite significant. That's the point.
Jacobson: Is part of the idea to get your absolute highest quality items
out there?
Moone: Highest image, highest quality items, exactly. Those are the
wines we want to have establish our reputation and be a
beachhead for the brand for years to come .
83
X CULINARY ARTS
Scholarships for Chefs
Jacobson: All right. Shall we move on to culinary arts? Beringer has
been very active in establishing a culinary arts program here,
launching it, I believe, with some scholarships for chefs in
1981.
Moone : Yes, we started off with giving scholarships to the Culinary
Academy in San Francisco. The idea was to develop culinary
cuisine centered on freshness and local availability of product
to marry with our wines . This concept was really brought to us
by Tor Kenward, our public relations director. I'm a great
lover of Burgundies , and when I went to Burgundy I had Boeuf
Bourguignon and Burgundy. I had a tear in my eye, and I
thought, "This is really neat." Cat on the hearth, and all
that stuff. [laughs] Straw on the walls. I said, "We need to
have this in California."
of this started.
That's how that recipe or food part
As we moved into that program, it became obvious that it
was good for us. Our customers loved it, customers being wine
writers, retailers, restaurateurs, and good friends of the
winery. We kept enlarging that, moving more and more into food
and finding out more about it. We found out that the wine that
won our tasting, as an example, wasn't always the wine we liked
with our food. That led us to believe that we needed to be a
better food wine. I think the California wines going back to
that time were a little clumsy and heavy and overly oaked.
So we started adding more emphasis to tasting with food,
and wines that go well with foods --and vice versa, making foods
that went better with our wines. That's been a happy effort.
84
I think we're totally centered, as our wine is a food in our
minds; it's to be enjoyed with a meal.
That's led us to where we now have Madeleine Kamman here,
who is one of the world's great chefs. She has this American
School for Chefs at Beringer. Our executive chef is a protegee
of Madeleine, Pat Vindisch. She's been in Europe and most
recently in Japan, as we discussed. Her other protege is Gary
Danko, and he's at our restaurant at Chateau Souverain. Gary
was our executive chef here, and when we bought Chateau
Souverain with a restaurant, we put Gary there immediately.
He's just an outstanding chef, as is Pat.
Hudson House Renovation
Moone: So we have a wonderful program. We've just redone our Hudson
House, which was a $2 million adventure. The Hudson House was
the original house on the site of the Rhine House, built in
1851 and moved when they built the Rhine House. David Hudson
was an interesting fellow, by the way. He was a member of the
Bear Flag revolt who went over and arrested Vallejo. They
designed the California state flag on that raiding party. They
stopped off at a whorehouse and got a white sheet and some red
panties, cut a bear out and sewed it on the sheet, and that
became the California state flag, which I think is fitting,
[laughter] Vallejo was really quite cooperative in that, as
you remember, and invited them all in for a drink and showed
them how to take him to Sacramento. He went on to become our
governor.
Anyway, this house is of historic significance. We think
Vallejo's even slept in it, et cetera. It's a neat place. The
$2 million renovation was to have two kitchens, one we could
teach in and another was the demonstration kitchen. Then there
would be a state-of-the-art place to eat and serve. We wanted
to take the old house back to its grand style. So it's quite a
project. We do have the largest dedication to a food program
in the Napa Valley. This year we'll serve about ten thousand
meals. There's no bill for this; it's strictly us
entertaining. It's at an extremely high level, so we're not a
restaurant. Whereas at Chateau Souverain we're open to the
public and have that pleasure also. It's two different
concepts, both with a lot of interest.
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Chateau Souverain Restaurant
Moone: The idea of Chateau Souverain is to carve us a segmentation.
We're one of four restaurants in wineries, so it's a great
asset for us.^
When we took the restaurant over it was doing about
$600,000, including the Friday night fish fry. It was a sort
of a profit center for a failing operation, so we closed it and
redid it. We've added eighty wines of the area. We don't just
have Chateau Souverain wines there; we have eighty wines from
the Alexander Valley and our friends at the surrounding
wineries. The restaurant will do $1.2 million this year, and
it's by reservation only most Saturday nights. It's just
drawing rave reviews in every sense of the word, and that
really makes a nice statement about Chateau Souverain for the
long term. So it's a marketing asset.
Jacobson: I believe Chateau Souverain is also doing wine and food
seminars for the public. How long have those been in effect,
and what was the aim there?
Moone: I think it was to broaden consumer awareness of our expertise,
and to offer something that's entertaining in the wine country.
That's just a natural extension of our program, and Gary's
really good at that kind of stuff. He's been all over the
world and can quickly demonstrate some things to people that
would be a hands-on approach to cooking. We're only open there
nights, by the way, on Thursday through Saturday. We do cater
some nice private events that are very prestigious for us to
do. And, of course, we're open every day for lunch.
Madeleine Kamman's School for American Chefs
Moone: We'll broaden Madeleine's program next year to include a few
consumers . The current chefs have to be chefs for three years .
They spend two weeks with Madeleine, and it's limited to forty
chefs a year. So it's ten classes of four. They would just
die to spend that time with her. She's really quite a person.
We had five hundred applications the first year, and I think
LSee pages 64-65.
86
she's got over a couple thousand this year. It's quite a
program, and really we haven't publicized it that much. The
classes have been magnificent. I've handed out the diplomas at
two or three of the graduating classes, and they love it. And
we love the food. [laughs]
Matching Food and Wine
Jacobson: To what extent, if any, has the culinary arts program been
fueled by neo-prohibitionist sentiments?
Moone: Really, not much. It's been fueled more by our desire to match
our wines with food. When I travel in Europe- -for example,
when I'm in Switzerland and have these really light Swiss wines
with their filet de perch, it's just magnificent. Then you
come back here and a Chardonnay can taste so clumsy and heavy.
The same applies if you're in Beaujolais and you have this
wonderful light red wine with chicken, and you come back here
and have a real heavy Cabernet Sauvignon.
You have to say, really, if we're going to succeed as an
industry, we've got to have wines that people can really
appreciate with their meal. We need to understand that and
make wines that are that way. So we're really consumed by
that, not by "we want to sell more wine with food." And the
motivation has never been the prohibition movement. I don't
call it a neo-prohibition movement; I just call it a
prohibition movement. It's always been here, and I don't think
it's been all that successful. But I'm a contrarian.
Jacobson: Has your winemaker, then, changed his style and even his
approach to making wine?
Moone: Oh, very much so. We've had consultants here from France, from
the first-growth winemakers to Georges Deboeuf . Currently Jean
Louis Monderot is here from Chateau Le Tour, and Georges
Deboeuf from Beaujolais is here. He works with our winemaker
on techniques that we find interesting in tasting European
wines. We have a research facility here with Jim Dotson, who
has a double doctorate in enology and viticulture and does
research fermentations --over a hundred each year, speeding .-p
the information we gain from our own vineyards about everything
from rootstock to grape type to yeasts to temperature. I mean,
Madeleine Kamman in the demonstration kitchen at Beringer Vineyards School for
American Chefs, 1989.
87
each of these that he's doing could be a doctorate; they're
fabulous .
A
We're compressing that information, and what we learn
there on an evolutionary scale we move into our production
here. We've learned things there on barrel fermentations of
Chardonnays and must chilling, as an example, that have allowed
our wines to be more complex, lighter, with more tastes.
They're better and have more of a lilting taste. Our
Chardonnays have just gone crazy at Beringer, and the reason
for that is all this effort we're making.
It's not just a simple thing, saying that we should make
lighter wine. People have done that, and they put less alcohol
in the wine and have less flavor, and they end up with a crummy
wine. Some very good wineries are guilty of that right now.
They have no idea what they're doing. It's not as easy as it
sounds. It never is, obviously. We think we're onto some real
solid turf for what we're doing with our wines, and it's
reflected in our business.
Jacobson: Does Madeleine ever come and taste the wines?
Moone : Sure, we taste everything. We do things like take a Sauvignon
Blanc--! know they did this the other day- -and ten bell pepper
soups. We tasted our vintages of Sauvignon Blanc with the ten
bell pepper soups (bell pepper goes quite nicely with Sauvignon
Blanc), and we found one that we liked with that soup. Then
she took that soup and made a variation of ten more soups, and
found the one we liked the most there. That's the wine she
served with that soup.
So we're technically into tasting dishes. And, of course,
she's technically so competent that she knows that the taste of
a buttery Chardonnay is good with something else. I mean,
she's been doing this for years with French food. Yes, she can
tell you structurally why something will do something well with
something, and it will.
Jacobson: Has she ever made suggestions about winemaking in and of
itself?
Moone: No. She's only been here a year. She hasn't done that yet.
She's really done more of matching foods with our wines. I
might say that we're at the stage where we've gotten over all
the rough spots. I mean, I don't think we have the kind of
88
wines we had six years ago. She would definitely have said
something then.
We had a problem wine this year, in a certain sense. It
was our '87 Private Reserve Chardonnay. It was very fruity,
just from the vintage; it was a very strange vintage. That
wine we really have to watch what we serve with, and generally
she'll serve an '86 Private Reserve Chardonnay instead of the
'87. So she just sort of ignores the vintage. [laughs] We
have a great depth of wines that she can pick from. She can go
back to '78 Private Reserves, and '77s. Generally, we're
serving older wines. She has a great range to choose from, and
she selects the ones she likes.
I have to tell you, it's the best meal you'll ever have in
the United States. You'll have to come up here and enjoy one
of our meals, because it's that good.
Jacobson: There's nothing like a meal with the wine and food matched.
Moone: We'll go over there after this and I'll introduce you to her
and show you around the Hudson House, because it's quite a
thing .
89
XI INDUSTRY ACTIVITIES AND CONCERNS
Market Development Committee. Wine Institute
Jacobson: I wanted to ask you about your industry activities. You've
been involved on the Market Development Committee for the Wine
Institute for the last three years. What issues have you been
focusing on?
Moone: There I've focused on reviving the committee, first of all, and
focusing its efforts. It was not a real active committee. It
was basically made up of a lot of PR people from the vineries.
There were many new and fractured efforts. There was a big
committee on health, and then we had various prohibition
concepts. The Market Development Committee was really not
focused on any of these . There was a huge hue and cry over
this three-year period to advertise wine as healthful, as an
example, which I resisted, and which is also illegal- -or if you
do it, it is quite complex.
Anyway, I had to guide us through this period of time and
revive an interest in what I think are the major issues, what
we should be saying about wine to the consumer. And to get the
industry together to do it was difficult. To do this we had a
task force here at Beringer and brought in a guy from the
Stanford Research Institute, Jay Ogilvy. We had quite a
session to basically get people focused on what we should be
doing. We basically got the leadership of the wine industry
and the Wine Institute here.
My thinking is that we need to focus on wine as an
everyday beverage , and make it more part of what America is .
Now, that's pretty simple. But I don't believe people drink
wine for health, and I don't believe they'll not drink it
because it's not healthy- -which I don't believe it is, and I
don't believe the people who use it would think that. The
cancer scares we've had when we measure parts per billion; the
fetal alcohol syndrome prompted labels warning mothers not to
have alcohol when they're pregnant, which I think is
90
informational. I don't think we lose much when we lose the
pregnant women market .
I think the concerns of people about what that says about
wine are exaggerated. They put wine up on this pedestal--!
mean, I think we're a consumed product that people need to have
information on. It contains sulfites, and I fought the
industry to put it on the labels. I think that's a good move
for those people who want to know about that .
So while there's been some misinformation generated by
those things, we need to inform people intelligently and fast
enough about them. We'll have the same questions come up when
the new labels start. I think there's a place for consumer
information on every product today, and wine should be included
in that. I'm a vocal consumerist, and I think also that the
fact that we moved our industry to do that has been a
tremendous defeat for what you call these neo-prohibitionists
who want to tie us up in knots and do other things with us . In
fact, by doing this they even reduced our product liability, so
to me it's been a great victory for us.
Jacobson: How have they reduced the industry's product liability?
Moone: When something's on a product that tells you that it's a
warning, you have less liability than if you don't give some
type of warning. The fetal alcohol syndrome is more of a
touchy case because here you have some live, screwed up child
that is purported to have been caused by someone who drank too
much, and the jury is sitting there looking at this poor thing.
Whereas with cigarettes you're dealing with somebody who died
from cigarettes, but they're gone; they're not there! So you
can have this great sympathy movement , but in fact the recent
cases have ruled that people who drink should know that there
is a danger of getting drunk and you shouldn't do that. The
fetal alcohol syndrome has yet to be proved anywhere .
In fact, there's so much misinformation around about these
categories. As an example, there are purported to be five
thousand babies per year born in California with this fetal
alcohol syndrome. But the government's own statistics only say
there's something in the neighborhood of twelve to fifteen.
Somebody makes up a number and throws it out there, and it gets
bandied around, and the next thing you know it's in front of
Congress and in front of people.
91
Formation of National Wine Coalition
Moone: We of the industry need to combat what is real misinformation,
and for that we formed the National Vine Coalition, which I've
been on the board of since its founding. I was in on the
hiring of John Volpe, the new director. That's going to be a
huge, wonderful new entry for us to really inform people. He's
from the Chamber of Commerce , where they really do these
studies in great depth through legitimate forms, and then
really merchandise them back to the government as they should
be done. We need our own voice in that.
Expansion of Premium Wine Business
Moone: I really am an optimist in this, and I don't think it's a major
concern of the industry. I think that consumer attitudes are
important, obviously, and I think people are moving in the
right direction in wine. That's because premium wine is
growing so greatly. Premium wine is a wine drunk with meals as
opposed to just a jug wine, which is a glass of white wine over
a bar or something. It's nice to have a glass of wine if you
want an aperitif, but I see our business becoming more
traditional. Now half the dollars in the industry, over
$1 billion, are in the premium arena, growing at a hundred
million a year. I get great strength from that.
Jacobson: Does the expansion of the premium wine business represent an
expansion in the consumer base?
Moone: The consumer base this year on table wines is up 1 percent.
You've probably seen a lot of things saying that wine's down,
but it's not down. It's down if you take a look at it in
parts; wine coolers are down. But I think that was a fad that
went up and was going to come down anyway. But traditional -
based table wines are up 1 percent. There is a slowing in the
premium wines. They had been growing at a 20 percent rate
through June, and they say they are up about 6 percent. But
that base is screwed up because of people shipping some in for
•'•Later query: Could you not drink a non-premium wine with a meal?
Response: "It ruins the meal! Chardonnay at $5- $6 is not duplicated in "jug"
wines. Reds are very poor."
92
tax reasons a year ago, and for the sulfite label. There were
a lot of changes going on last year in the base period that
changed that. I'd say they're up more like 10 percent; still
down from 20 percent , but up about 10 percent .
But up 10 percent ain't bad, also when you consider that
we're out of wine. We've used all the inventories, we've moved
all the vintages up that we can do, and we're out of wine. On
that basis, we get more wine, and I would think we're going to
go back and continue to grow again. I don't see any resistance
to our product in that sense. I do see us raising prices,
which could be bad. As we've run out of grapes we're raising
prices, some of us, because we're paying more for grapes. So
we need to get more grapes and be competitive, and keep moving
the business as a good value to the consumer.
Advertising Wine as an Everyday Beveraee
Jacobson: Are prices an issue of concern to the Market Development
Committee?
Moone: No, that's not the concern there. The Market Development
Committee focused on making wine an everyday beverage , and to
that degree we have an advertising campaign through the Wine
Institute. We're test-marketing it in three markets with
media- -television, radio, and print. It's really a human
interest focus on wine. Like, one of them has a lobster
fisherman who says, "I know I don't look like a wine drinker,
but I enjoy coming home and selecting the wine for the night's
meal."
Or another one is a woman saying, "My mom came over for
dinner last night, and I was surprised when she asked if I had
a glass of wine. I didn't think she drank wine-- 'I thought you
only drank wine on special occasions'. 'Well, then let's
pretend it's your birthday'. We had one of our best meetings."
A real human interest story that you could relate to, that
talks about wine as being an okay beverage. I think the ads
are quite strong, and we're testing how they do. The ads say,
"It's being brought to you by the winemakers of California."
which personalizes it, as opposed to saying, "Brought to you by
the Wine Institute."
93
So we're focusing on some testing, and I would think we
will learn more about how we do that. I also want to make sure
that you understand that I'm not saying that wine should be an
everyday beverage like milk or soft drinks. It has been
purported that in order to sell more wine we need to be as
pervasive as soft drinks. I really think that's stupid and
unrealistic.
I think wine's benefit is that it's not like Coca Cola,
and it's not like an iced tea. It's special, and I think it
should always keep its special place. I'm more jealous of that
than other people, I guess, and I think a lot of this is
diatribe by people who would like to be good marketers , and who
would like wine to be just taken out of their hands or
something.
But I don't think we're ever going to be to the point
like, say, the Milk Board, where we say, "Good for every body."
I think that's a horrid campaign. It hasn't worked, either, on
its $30 million a year forever. [laughs] I also don't see us
budgeting our funds for that kind of thing. Hopefully we'll
come up with some kind of campaign that will make sense.
We're making statements in a lot of areas. We've
reorganized ourselves, we've added a marketing person at the
Wine Institute: we brought Jerry Vorpahl in, so we've
strengthened John De Luca's arm in that sense. We've focused
the industry on what we think are our critical issues.
Health Issues and AWARE
Moone: There's still this segment that really thinks that "wine and
health" is important, and they've spun off into this AWARE
group, where they send out these little stupid postcards that
talk about wine and cancer. Now, that's just absolutely crazy.
The reason that's crazy is that no matter what you say to a
person who's opposed to you on a health basis, they will always
publish their evidence.
Moone: Every time you raise that issue- -there was an article that said
wine cures cancer, for example --someone will publicize a
negative issue. So why bring up something if it doesn't truly
94
matter. Ann Landers had one the other day, where some gal
wrote in and said that wine reduces heart attacks by 35 percent
(which it does, in moderation), and heart disease is the number
one killer, and we could save millions of lives if everybody
had a glass of wine, and it cures cancer, and all this, and
it's served in hospitals. Ann Landers just slammed it and said
that here at the Mayo Clinic they'll never serve wine.
I mean, every time you bring up what seemingly sounds so
good to the person that perceives it in that manner, someone
else is going to slam it, and therefore you get the counter
point of view. Well, why raise those issues, especially if
they don't matter? I think we need to focus on real issues of
wine as an everyday beverage and its enjoyment with meals, its
tradition, and its history. There are several ways we can do
that , obvious ly .
Wine and the American Heritage
Moone: Another one that I'm really driving to complete is the Thomas
Jefferson Foundation. Thomas Jefferson had the first great
wine cellar in the U.S. He was the founding father, he was the
president, a brilliant person. His wine cellar was great, and
some of the wines are showing up at auctions around the world.
We want to rebuild his original wine cellar to entertain people
from the Washington, D.C., area- -congressmen, et cetera — and to
publicize his quotes and learn about his activities in wine,
which were considerable. He made his own wines and was very
proud of it . He took them to France and drank them with
LaFitte -Rothschild and things like that.
So there's a wonderful history there for us to partake of.
His quotes were just marvelous , about what wine meant to him in
his life. Those kinds of things really say a lot to our
industry, and we need to preserve them and capitalize on them.
Those are the kinds of things I want to put our efforts into.
Jacobson: It's a great way to connect wine to something in the American
heritage .
Moone: Exactly. That helps make a statement that it's part of our way
of life.
95
National Wine Coalition
Jacobson: Is the National Wine Coalition planning to launch an
advertising campaign of its own?
Moone: Not yet. It may pick that up. That could go to John Volpe if
he wished. Right now the advertising campaign is run through
the Wine Institute; it's called the California Wine Promotion.
The National Wine Coalition will involve importers in wines of
all states, and we need the focus there, because we don't want
people to be jealous of just the California wine industry, over
93 percent of the production in the country in gallonage.
There's a wonderful new burgeoning wine market. Wine is
now produced in forty-two states, and this is politically
significant because all the senators in all the states are real
excited about that and they like their own industry. It's
provincial; those people in their own places will drink their
own wines and love them. So we need to encourage that. We
don't want them to feel that we're against them, so we need to
found and to fund a national coalition (which we've done), and
then to have it draw strength from the whole country, and to
literally be perceived in Washington for what it is: that it
represents all the wineries of all the states and the imports
in the country. There's a void right now, and that's why we
did that.
I could see the day when perhaps there may not be a
California Wine Institute as powerful as it is today, that the
National Wine Coalition could be the speaker for the country.
That could happen over time.
Importance of Industry Affairs to Beringer's Success
Jacobson: You've also been involved with the California Wine Commission.
Moone: Yes, I'm on the board there, and I've also been on the Napa
Valley Vintner's board. I chaired the Definition of a Winery
Committee here with Andy Beckstoffer for the grower alliance we
put together to "define the wineries, "^ which will be done at
pages 96-97.
96
the end of this year. It was quite time consuming,
been pretty active in industry affairs.
So I've
I really felt at the time I started this, going back four
years ago, that the industry was a critical element to our
company's success. And while our company was very successful,
the knockout factor could be that if we got some giant
prohibition in the industry, or some horrendous taxation issue,
those kinds of things had a chance of affecting us. So I spend
a lot of time in defining and helping to work on those issues
in the country.
I headed the national delegation to Washington, D.C., for
the Wine Institute, as an example. I was chairman of that for
one year. You know, I got involved in what I'd call the
tougher issues of our time and tried to guide the industry with
some leadership in those. That's where the motivation came
from, and I feel good about what we've accomplished.
Definition of a Winery Committee
Jacobson:
Moone :
Why don't we take some of these one by one.
a Winery Committee--?
The Definition of
It was here in the Napa Valley. We're up to a couple hundred
wineries in Napa. Tourism has been an issue, as has the
environmental impact of wineries --how many can we have, are
they cluttering the hillsides and the views and Highway 29?
Should we have warehousing at the wineries or down valley in an
industrial area? Should we have tourists? Could all wineries
have tourists? Basically it's been a pretty unstructured
arena, so the county has been asked by the grand Jury process
to investigate this, which is their charge.
This has been a splinter group from the growers wanting
wineries to buy only Napa Valley grapes [laughs], and for some
other groups to eliminate tourists completely. Anyway, what we
need to do is put some definition in this that we can give to
the county and say that as growers and vintners we are pretty
much in agreement that this is the way to put some limits on
winery size.
97
For the first time we're going to be dealing with limits
on wineries --how much you can grow, how much space you can use
on the land that you have for your winery. We defined all
that, and wrote it all up- -what defines a winery that can have
tourists, or tourists by appointment, hours — so the county will
regulate it. We've signed off on it as vintners, and so have
the growers by the growers' boards. It's now in the EIR study,
and the final recommendations will come in hearings this fall.
By January 1, it will be law for Napa County.
Jacobson: There must have been some tough compromises to make.
Hoone: That was a hot potato) [laughs] It still is; there are still
some issues. But I think we've done a good job of defining it.
Jacobson: How did you resolve the issue of how many tourists?
Moone: We did that by size of winery and by facility. As an example,
let's say you have a ten-acre site. You can only use a certain
portion of your grounds for the winery, so on that size range
you can only have tourists by appointment. It goes on from
there. It's just defined by volume. You basically have to
have a forty-acre site to be able to have open tourists. You
have to have a special permit also, but generally you would get
that with a forty-acre site. Only ten acres can be used for
the winery, including the ponding system. We were pretty
specific on the whole thing, as to how it's related.
Then how you grow your winery- -you can only grow up to
20 percent of your foot path, which is basically the winery and
its parking lot. So you have to be more effective within your
space; you can't spread out all over the place. You can't buy
a five-acre site and then make this huge winery. We wanted to
stop things like that. We wanted to eliminate wineries in the
viticultural areas- -hillsides and protected areas of the
valley. We didn't want tourism in those areas. It's quite
defined.
Wine Train
Jacobson: Did you take on the issue of the wine train?
Moone: No, not in that. But I've been fighting the wine train
economically and politically. I'm not against trains; I'm
98
against that train and the guy that runs it. He's been not a
good listener. He believes the train can do what it wants
because it's a government, U.S. -regulated industry. We fought
him because we wanted to have an EIR, and wanted him to tell us
how he was going to proceed via the state laws, as any other
state business would. We fought that in the courts and we won--
so far; he's appealing that process.
We want the Public Utilities Commission to oversee his
activities. The reason for that is that he has never said how
he will handle the number of people that he brings to St.
Helena, ever. And with 450,000 people coming to this small
community- -he's said, basically, in twenty-five passenger
buses --well, that's sixty to seventy buses going downtown
through St. Helena. St. Helena's not ready for sixty or
seventy buses. We don't take buses at our winery. You'll
notice there are no buses here at Beringer; we don't allow
them, and many other wineries don't. Where is he going to take
them? None of this has ever been discussed, let alone the
impact on railroad-road crossings, noise, pollution, the real
effect on traffic --which won't be anything positive, in my
opinion; it will be negative. All those things need to be
studied, and he's refused that. So we fought him on that
basis, and hopefully he'll have to come up and answer those
quest ions --like any other business would in this community.
Grower-Vintner Relations
Jacobson: How would you describe grower -vintner relations? Have they
been improving?
Moone: They are improved, vastly improved. Basically, this committee
did a lot to improve them, and we've had a good alliance with
the grower leadership here in the valley. There are still
areas for improvement, but generally it's good. We have good
growers in the valley here.
Jacobson: Has the California Wine Commission tackled some of those
grower-vintner relation issues?
Moone: No. That's not their charge. Their charge is more the
taxation of all wineries, through grape taxation, to raise
funds for wine activities. We tried a joint commission with
99
Jacobson:
Moone :
Jacobson:
Moone :
vintners and growers , and that was horrible . The reason that
was horrible was the attitude of certain growers, particularly,
I think, the San Joaquin Valley growers, who have much
different problems than the North Coast growers . I think
that's where the thing fell apart. There was a real resentment
directed at the Wine Institute, which never should have
occurred. It was just through naivete about what the growers
thought the Wine Institute was --that it should have been out
marketing wine, when in fact the Wine Institute's charge is the
legality of trade barriers.
They [the growers] never see the amount of work we do in
that respect. They just want to take all that money and throw
it into an advertisement that shows some guy with a hard hat
coming home saying, "Honey, let's have a glass of red wine
tonight , " which would have been the worst thing we could have
done at the time- -you know, to fly in the face of "Let's
increase consumption." [laughs] All we did was fight each
other for two years, and finally we just said, "To hell with
them; let's get out of here and get our own commission." We
did, and we moved away and have been happy ever since. I don't
know whether they're happy or not in that respect, but we're
happy .
Are there any prospects for unity?
No, not again. [laughs] Let them do their thing. Let us
market it, and let them grow them. [laughs] No, I don't want
to go through that again.
How are the San Joaquin Valley growers' problems different from
those in the North Coast?
Well, they're more subject to declining sales of wine coolers,
as an example, and concerns about what they are going to do
with their grapes, and how is the government going to help
them. We don't care about that here. And if premium sales
were down and their sales were booming, they wouldn't care
about us, either [laughs], so it's a two-way street.
Growers of California, 1984-1987.
100
Napa Valley Vintners
Jacobson: You've been part of the Napa Valley Vintners for how long?
Moone: A long time. I was on the board for two years, and was
supposed to be the president last year. But I couldn't do it
because of taking on the new company with Nestle . I had to
reallocate my priorities. I'm also the secretary of the Wine
Institute now. I'm moving through those chairs, and that just
happened this year. I'm going to make an effort to move off
the Market Development Committee [laughs]. I picked up a new
company called Sunmark in St. Louis. It's a good-sized candy
company; it does about $170 million a year in sales. That
company reports to me now, so I've got a broadening activity.
Jacobson: It reports just to you? It's not connected to Nestle or--?
Moone: No, it's not connected to the Wine World. I'm president of
this company, and the guy who runs it, Jim Gagliarducci,
reports to me .
Jacobson: My goodness, where do you find the time?
Moone: I know, I don't! My life is changing a little bit, so I need
to focus on fewer issues, basically.
Jacobson: Has the Napa Valley Vintners' membership been valuable?
Moone: Yes, that's been a really good one. We had the election here.
Wines were a big issue, and we put together the first big
campaign. We had a band and two or three hundred people coming
along. That was from what was called a "grower issue"; that's
what really got us organized and going on that issue. If the
wineries would have had to use 100 percent Napa Valley grapes,
it would have put probably 50 percent of the winery workers out
of jobs in this county. So the vote came down to a jobs issue,
and nobody really understood the jobs issue. Plus the biggest
land grab in the history of the valley would have occurred,
which would have been great for the growers who wanted to sell
out, because the wineries would have all had to go buy more
land quickly.
So it was a really stupid issue, and we had some
politicians who supported it who were up for election. They
didn't know what they did. We stood up and threw them out of
office. I don't know if we did it for the good of the valley,
101
but we certainly won it on our issues. It's probably one where
we might have won the battle but lost the war [laughs] , but
we'll see. Anyway, we did it.
So we became politically aware for the first time, and
politically powerful for the first time. I think that's a
lesson this valley will learn for a long time- -that we are the
industry of this valley, and we need to do a better job of
telling our story to the leadership and politicians of the
valley, and we haven't. We're not doing that, hopefully we're
a little better. Since then we've made peace with him and the
growers and gotten together, and I think we're all moving in a
good direction. So far it's been a good year for that.
Wine Industry's Economic Contributions
Jacobson: You just mentioned the importance of telling your story to
politicians and leaders of the area. What about, in connection
with that, selling the economic contributions of the wine
industry to the state?
Moone : Well, we really need to do that. We have to do that. You
know, we have a huge investment. We're a wonderful industry in
that sense; we don't get government subsidies. They have
$32 billion in agricultural product subsidies, and we don't get
those. We've drawn ourselves up by our own boot straps with
our own investment, we're competing with the great wineries of
the world, we're exporting and growing our exports around the
world. We're exactly the model of what the U.S. government
expects our industries to be doing to be competitive in the
world.
At the same time we employ thousands of people in the
$7.50 to $12.00 an hour range, who wouldn't have another job.
A lot of them can't read and write, and they're well-paid.
They're highly skilled in our area. So we do a lot of neat
things. Yet we're being fought by the government --the
Pollution Board, for example, wants to have us put scrubber
caps on all our fermentation equipment because a by-product of
the heat exchange is CO 2 and we put out a little bit at the
fermentation time. It would cost the industry millions of
dollars to do this; it would cost this winery probably $4-$5
million to do that. I said to the person at the EPA, "This
could put our industry out of business," and he said, "I don't
102
care if your industry goes out of business. We don't need you.
If people want to buy the wine, let them buy it from a foreign
country." So our own government on the one hand is saying
we're wonderful, and on the other hand they've got some son of
a bitch who doesn't care if you go out of business.
Veil, we need a policy in the government that puts a
proper order to industries and competitiveness. Sometimes it
gets out of balance. Right now it's probably a little bit out
of balance. The same thing with labeling and the hassling of
us on some of those issues. In fact, there's a point where
they're just hassling and not real consumer issues- -they're
more political. We need to be more like the Japanese and the
Europeans in the United State in that respect- -more
commonsensical--and not just listen to the squeaky wheel, the
little 1 percent of people who yell and scream and make
50 percent of us wonder what the hell we are doing that for.
That's our political system, I guess.
Jacobson: Are economic contributions that the wine industry makes
something that the National Wine Coalition--?
Moone: Oh, definitely. The amount of taxes that we're already paying,
sure, and excise taxes — the regressive taxes; we're always a
sin tax. We're always being hit on those things, and of course
we'll be hit again. We're being hit at the state level. All
the governments are out of money, so we're being hit
everywhere. But if our consumption goes down, then their
revenue goes down. What they all say is, "Well, we're going to
keep the same amount of sales." They put it in their budget,
and then they don't get the money. Then they're back in the
same old trap again.
In fact, the best thing they can do to get money is to
leave us alone, because we're growing and paying tons of taxes
now. Let us continue to prosper. That story we need to tell,
and we are telling it. But we need to tell it better, more
often, and more professionally.
Jacobson: You need to tell it in Thomas Jefferson's rebuilt wine cellar.
Moone: Exactly. It crossed my mind [laughs]. And there are people in
the government who understand this --you know, the leaders in
Congress. Not enough, but there are some.
103
Wine and Spirits Wholesalers' Association
Jacobson: You are also a member of the Wine and Spirits Wholesalers'
Association. What is your involvement there?
Moone: We're just a member there. We go to the annual meeting, show
our products , and all our distributors come by and taste our
wine and tell us they love us. That's about it.
Jacobson: How has that been helpful, just in terms of an annual event?
Moone: In the initial stages it was to get distributors and to get
distribution all over the country. Now that we're a very
mature company with distribution everywhere, it just gives us a
chance for their top management to see our top management.
We're so busy we really don't get to see each other enough, so
at least for that one bit of time we get to sit down for an
hour and talk.
Wine Industry Culture
Jacobson:
Moone :
Would you say that there's a wine industry culture?
there is, how would you define it?
And if
Well, there's certainly a wine industry culture of commonality
among all of us that are involved in making and producing
wines. To some degree the people who grow grapes are in the
same culture; they share in it. It's a real pioneering kind of
spirit. You know, we're not a business that's a big major mass
media business; we're kind of a belly-to-belly business, where
you really have friends that support you and buy wine and
things .
And it's one of sharing. I mean, if someone calls up and
says, "We need a tractor," or "I've got something I need to
ferment , " if we have the place for it , we do it . Then when you
go out in the street it's competitive as hell, and they're
trying to take you off a wine list [laughs]. But here in the
environment of the valley it's a wonderful fraternity.
They're also good people who are real capitalists; they
put their money where their mouth is. They bellied up to the
old bar and bought the vineyards and built their wineries, and
104
they're out there tasting it and talking about it. It'
wonderful. They're real committed people.
Transcriber and final typist: Judy Smith
105
TAPE GUIDE -- E. Michael Moone
Interview 1: July 24, 1989 1
tape 1, side a i
tape 1, side b 13
tape 2, side a 25
tape 2, side b not recorded
Interview 2: September 12, 1989 37
tape 3, side a 37
tape 3, side b 47
tape 4, side a 62
tape 4, side b not recorded
Interview 3: September 26, 1989 71
tape 5, side a 71
tape 5, side b 81
tape 6, side a 93
tape 6, side b not recorded
INDEX -- E. Michael Moone
106
affirmative action, 13
Alexander Valley, 63, 64, 66
Almaden Vineyards, 20, 21, 34
Anderson, Wally, 11
anti- alcohol movement, 86, 90
appellations, 64, 67
Aquilano, Tom, 16
Asti winery, 43, 65
AWARE (American Alliance for
Research and Education), 93-94
Beckstoffer, Andrew (Andy), 95
Bel Arbors brand, 53
Beringer Vineyards, 16-17, 37-49,
50, 63
advertising, 40-41, 46, 47, 48-
49, 58-59
airline business, 32, 78
brand, 20-21, 30, 32, 35, 74, 81
building a national sales
organization, 22-23
culinary arts, 83-88
distribution, 32, 46
focus on 750 milliliter business,
45-46
market research, 38-39
marketing challenges in the early
'70s, 20-21
ownership changes, 72-73
personnel, 17-20
pricing, 22, 43-44
public relations, 48-49
rebuilding the winery, 39
relationship with distributors,
23-24
renaissance of the label, 37-38,
45
role of foreign investment, 71
salespeople, 25-26
School for American Chefs, 49,
84, 85-86
streamlining the portfolio, 44-
46
vineyard acquisition and
management, 18, 41-42
wine competitions, 47-48
winemakers, 39-41
Berry, Jan, 4
Berry, Richard, 4
Biane, Jon, 26-27
Biggar, Jim, 20
Bras, Bob, 16, 21
Brown- Foreman, 28-29, 55-56
Bureau of Alcohol, Tobacco, and
Firearms, 33-34
C & B Vintage Cellars, 16, 55-60
California Wine Promotion, 92-93,
95
Canada as a wine market, 76-77
Carter, Rick, 26
Cat Canyon vineyard, 69
Cesario, Michael, 26
Champagne Deutz , 62, 63
Chateau Le Tour, 86
Chateau Souverain, 20, 24, 27, 30,
41, 43, 49, 64-65, 66-67, 68, 69,
70, 74, 75, 78
restaurant, 64-65, 84, 85
see also Souverain Cellars
wine and food seminars , 85
Chateau St. Jean, 63, 66
Christian Democrats [Italy], 28-29
Clos du Bois winery, 66
Coleman, Bill, 11
Common Agricultural Program, 79
Communists [Italy], 27-28
Danko, Gary, 64, 84, 85
De Luca, John, 93
Deboeuf, Georges, 57, 86
Definition of a Winery Committee,
95-97, 98
Dotson, Jim, 86-87
107
Edna Valley, 68
EEC, 79
England as a wine market, 78-79
Estrella River Winery, 67
Europe, exports to, 74, 78-79, 80
Fee, Knight, 23
fetal alcohol syndrome, 89-90
Fetzer Vineyards, 45-46, 51
fighting varietals, 50-54
Fontana Candida winery, 27-29, 30,
55-56
Food and Wine. 64
Foster, Bill, 26
Gagliarducci, Jim, 100
Gallo, E & J, winery, 5, 15, 50, 58
General Shopping Company of
Luxemborg, 72, 73
Glen Ellen Vineyards, 51, 52, 53
Godu Shousay Company, 75
Gruppo Italiano Vini, 27
Higgins, Linda, 25
Hudson, David, 84
Hudson House, 48-49, 84
Hulse, Fran, 47
imports, 29, 55-60
Inglenook, 20, 21, 45-46
Isenberg, Ted, 14
Japan as a wine market, 75-76, 77
78, 80, 81
Jefferson, Thomas, 94
Johnson, Bruce, 4
Johnson, Randy, 4
Jones, Gary, 26
jug wines, 20-21, 29, 35-36
Kamman, Madeleine, 48, 64, 84, 85-
86, 87-88
Kay, Guy, 17-18, 19
Kenwood, Tor, 83
Kidel, Ray, 9
Klenz, Walter, 19
Labruyere family, 72-73
Landers, Ann, 94
Los Hermanos brand, 17, 20-21, 27,
29-30, 31-36, 46, 51
airline package, 31-32
declining sales, 35-36
light wines, 33-34
Maher, Richard, 13-14, 21-22, 31
Maison Deutz, 56, 57, 61-63
Margve, Dario, 25
Mason, Bob, 16, 23
McClelland, David, 10, 12-13, 25-
26
McGowan, Inez, 31
Meridian Vineyards, 20, 30, 32, 41,
68, 69, 70, 74
Meyer, Justin, 63, 66
Mondavi, Robert, winery, 45-46, 50,
51, 53
Monderot, Jean Luis, 86
Monmoussen, 81
Moone , E. Michael
career at Procter & Gamble, 9-
14
cooking interest, 8
early responsibilities and
training at Beringer, 16-17
early years, 1-2, 3-5
fraternity experience, 4-5, 7-8
involvement with Sunmark company,
100
joining Beringer, 6, 15-16
university education, 2-3, 7
wine interest, 4-7
Napa Ridge brand, 30, 49, 50-54,
67, 69, 70
Napa Valley, 64, 96-98
Napa Valley Vintners, 99-101
National Wine Coalition, 91, 95
Nelson, Mars, 3-4
Nestle, S.A., 42, 72
Nightingale, Myron, 18, 19, 39-40
108
Nivens, Jim, 68, 69
Ogilvy, Jay, 89
Olmo, Harold P. , 66
Ortman, Charles, 20, 68, 69
Paul Masson winery, 34, 37
Peterson, Tom, 20, 66
Powell, Vate Levatus , 13
Predergast, Claire, 16
premium wine business, 35-36, 91-
92
Procter & Gamble, 9-14, 25-26
restaurant wine sales, 35-36, 53-
54
Rhine House, 78
Ryan, Bill, 14, 19
Safeway Stores, Inc., 20
San Antonio vineyard, 42, 69
San Francisco Chronicle. 64
Santa Barbara area, 52, 64, 67, 68,
69, 70
Sbragia, Ed, 19, 40-41
Sebastiani Vilneyards, 21, 29
Silver Oak, 63, 66
Sisquoc Vineyard Wine Cellars, 69
Snowbrand Company, 75
Sonoma area, 64, 66, 67
Souverain Cellars, acquisition, 63-
65
sparkling wine business, 70
Steinhauer, Bob, 18, 41
Sutter Home Winery, 51, 52, 53, 59
Tardivat, Jean, 62
Targeted Export Assistance Program,
79-80
Tchelistcheff , Andre, 18
Thomas Jefferson Foundation, 94
Thompson, Janelle, 25
Tonjum, Jim, 18-19, 47, 48
Torrance , Dean, 4
Travaglini, Jean Carlo, 56
V<jJ.pe, John, 91, 95
Vorpahl, Jerry, 93
Wallingford, Dick, 19-20, 27
Windisch, Pat, 78, 84
Windsor Vineyards , 5
Wine and Spirits Wholesalers'
Association, 103
wine business, long-term nature,
71-72
wine consumption, 91-92
wine distributors, 16
Wine Growers of California, 98-99
wine industry
culture , 103
economic contributions, 101-102
government regulations, 101-102
health issues, 89-90, 93-94
product liability, 90
Wine Institute, 95, 96, 99
Market Development Committee,
89-90, 92-93
Wine Spectator. 39, 56, 64, 71
Wine Train, 97-98
Wine World, Inc.
exports, 74-82
importance of industry affairs,
96
premium brand development, 70
reshaping product lines, 29-30
vineyard purchases, 64, 65, 67-
69
Winefood Consortium, 27, 55
winery tourism, 96-97
Yeutter, Clayton, 76
Zonin brand, 56, 58
Grapes Mentioned in the Interview:
Cabernet sauvignon, 65, 66, 67, 71
Chardonnay, 41, 52, 61, 69
109
Chenin blanc , 43
Pinot noir, 61
Zinf andel , 43
Wines Mentioned in the Interview:
Asti Spumanti, 58]
Barenblut, 21, 37, 45
Barolo, 57
Beaujolais, 57
Brunello di Montalcino, 57
Cabernet Sauvignon, 6, 21, 32, 37,
38, 39, 43, 44, 45, 51, 53, 54,
63, 66, 68, 74, 78, 79, 80, 82
Centanni, 28-29, 56
Champagne, 56-57. 61-63
Chardonnay, 32, 37, 38, 43, 44, 45,
48, 51, 52-53, 54, 59, 68, 69,
74, 75, 78, 82, 87, 88
Chenin Blanc, 82
Emerald Dry, 37
Frascati, 27-29, 30, 55-56
Fume Blanc , 44
Camay Rose , 45
Gattinara, 56
Grey Riesling, 4
Grignolino, 37, 45
Malvasia Bianca, 4, 21
Orvieto, 57
Rioja, 56
Sauvignon Blanc, 43, 51, 53, 74,
78-79, 82, 87
Traubingold, 21, 37, 45
Vouvray, 57
White Zinfandel, 42-44, 50, 51, 53,
54, 64, 65, 74, 75, 76, 82
Zinfandel, 5, 53
Lisa S. Jacobson
Born in San Francisco. B.A. cum laude, Pomona College, majoring
in history; studied at Oxford University. Experience in market
research and museum research.
Editorial assistant and alumni news editor, Public Affairs
Office, Pomona College.
Research manager, interviewer, editor, and writer with private
oral history organization, specializing in business history.
Since 1986, researcher, interviewer, and editor with Regional
Oral History Office, in fields of business history, wine
industry, and social history.
1242
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