in our current issue
Issue: July 2008
Taking the Lead

by: Tim Teichgraeber
Chris Fehrnstrom, President of VineOne, the premium and super-premium division of Constellation Brands.
 
Chris Fehrnstrom, new President of VineOne, talks to Tim Teichgraeber about what the future has in store for the brands that he’ll be steering: Clos du Bois, Woodbridge by Robert Mondavi, Blackstone, Ravenswood, Hogue Cellars, Rex Goliath, Toasted Head and Black Box

After Constellation’s 2007 purchase of the substantial Beam Wine Estates portfolio, which included Clos du Bois, Geyser Peak, Wild Horse, Gary Farrell, Atlas Peak and others, it became clear that even Constellation wasn’t big enough to absorb its recent acquisitions without a little bit of re-organization. If they simply brought the Beam group in as an independent division, Constellation would have had five separate sectors that weren’t sensibly divided and were not optimizing productivity.

Today Constellation has been re-ordered into three divisions: Centerra, the entry-level, value-oriented brands; VineOne, which is focused on the premium and super-premium segments of the business; and Icon Estates, which covers the ultra-premium and luxury brands. Chris Fehrnstrom, president of Constellation’s Icon Estates division since 2005, was recently tapped to head the new VineOne division.

After earning his MBA from the University of North Carolina in 1992, Fehrnstrom headed west to work in the beverage industry. “It wasn’t something I had targeted specifically. I spent my high school years through college working at restaurants; therefore, I was familiar with wine and enjoyed the discovery that went along with it. I remember that the first wine I ever opened was a Lancer’s rosé . . . and it spilled all over the patron,” Fehrnstrom recalls.

Serving a brief stint as an investment advisor before gaining his MBA, Fehrnstrom headed west to take a job as a marketing manager for E. & J. Gallo in Modesto, and helped launch the Gallo of Sonoma line. Later, he would work as a business unit manager at Ocean Spray before returning to the wine business as VP of marketing at Chandon Estates; he then served as general manager at Wine.com for two years before joining Constellation’s Icon Estates division in 2002.

Established Brands
 
The VineOne portfolio offers exceptional value, personality and creative packaging.

In general, Fehrnstrom is optimistic about the wine category overall, and especially the premium ($8 to $11) and super-premium ($11 to $15) categories that have seen strong recent growth and make up the core of Vine One’s portfolio. That said, each of the VineOne brands—including some of the very well-established labels like Clos du Bois, Woodbridge and Blackstone—faces unique challenges for the future.

“What’s probably changed since the time I started in the industry is that the large national accounts, both on- and off-premise, represent a larger percentage of the business,” says Fehrnstrom, “And those accounts are more willing to put recognized brands on their lists. Even luxury accounts like Ruth’s Chris, Morton’s, McCormick & Schmick’s are absolutely targeted toward making sure that their lists have both recognized brands as well as esoteric offerings.”

Fehrnstrom concedes that smaller, independent restaurants have probably become more resistant to putting established brands on wine lists, and that poses a challenge for major wine companies marketing well-known brands.

“I think there’s a great opportunity for experimentation with wine, particularly on-premise,” says Fehrnstrom. Still, he says, some restaurants are forgetting that there are consumers out there who want reliable wines from wineries they already know.

“We’re trying to tell them that established brands are actually a positive for consumers. Many consumers don’t want an esoteric wine; they want something that they’re comfortable with.”

Chris Fehrnstrom unwinds with a glass of Ravenswood Zinfandel and foosball.
 
The Project Genome market research study commissioned by Constellation a few years ago divided wine consumers into a number of different categories, each with its own purchasing tendencies.

“We know that the 15% of consumers known as ‘traditionalists’ want to see traditional wine labels. There’s another 15% segment called ‘savvy sippers’ that are the same way. They want to see a known brand, and if they see a wine list that isn’t familiar, they’re not going to order wine; they’re going to order nothing at all,” says Fehrnstrom, recounting his own experience with a wine list full of lesser-known small-production wines.

“Three weeks ago I went to a restaurant with my wife. There was nothing on the list that I recognized, so I did the reasonable thing that most patrons do: I relied on the waiter.” Fehrnstrom says he asked for a glass of the waiter’s favorite of the three Syrahs on the list. “He gave me his choice, and it was terrible. I felt that I had just spent $10.50 on a dud.” Next he asked for a Cabernet recommendation, with the same result. Offering recognized brands on wine lists is a consumer need many restaurants are just realizing.

One of Constellation’s recent acquisitions was Black Box, the super-premium box wine brand built around high-quality, even appellation-specific varietal wines selling for around $20 per 3-liter box. No other segment of the wine business is growing faster than the so-called bag-in-box category. Even retailers such as Target have found that nicely-packaged box wines appeal to value-conscious consumers, and because of packaging efficiencies, they can deliver extra value.

“Black Box is a really unbelievable phenomenon. The proposition is so simple that I wish I had thought of it,” says Fehrnstrom; “putting a high-quality wine into a bag-in-the-box that not only over-delivers on quality, but allows the consumer to store the wine without worrying about spoilage and oxidation. And the added plus is its eco-friendly packaging. It’s all these different elements coming together that create an intriguing consumer proposition.”

VineOne even intends to reintroduce the way that Black Box was initially sold to accounts. “The original owner would call on an account with a decanter and ask the buyer if they wanted to taste the new wine he was selling,” says Fehrnstrom. “They’d taste it and the buyer would say, ‘That’s great, but how much is it?’” Then the salesman would pull out the box and tell the buyer it costs the equivalent of $7 a bottle.”

In the short term, it’s the struggling American economy that may pose the most immediate challenge. “I think it’s going to be a tricky year,” admits Fehrnstrom. “We’re optimistic that with the right quality, with the right marketing, with the right sales focus, our brands will continue to outgrow the competition; but I see challenges ahead for anyone competing in the entire table wine segment. I believe that in the long-term, volume growth may decline, but dollar sales growth should not.” Many imports have raised their prices given currency exchange rates, and many California wineries have already begun raising prices due to the current and impending shortages of grape supply.

“If a consumer was spending $15 on a bottle of wine every couple of nights at home during the good years, when times get tough, they may go to an $8 or $10 bottle,” says Ferhrnstrom. After the last economic slow-down, people spent less at restaurants, but continued to spend money on wine that they brought home; Fehrnstrom sees this as a pattern likely to be repeated in these difficult times.

On the upside, the weak dollar creates new opportunities overseas, particularly with the Woodbridge by Robert Mondavi and Ravenswood labels. “We continue to believe that we can grow those brands in the U.K. and in Asia in a way that benefits the brands and the company overall,” says Fehrnstrom. American wines are also seeing strong growth in Canada, where the Canadian and American currencies have equalized.

Education Initiatives
 
VineOne also intends to continue the intensive wine education initiatives that Beam Wine Estates pioneered with its Wine Academy programs. “We’ve taken the Beam Wine Estates program and expanded it so that we have seven educators on our team, and it’s being headed up by Peter Marks, MW, who had been the head educator at Copia for many years. Our intent is to deliver the best wine education not only for our employees but also for the trade,” says Fehrnstrom. The program offers custom-tailored education sessions to VineOne sales staff, key accounts and wholesale partners.

The goal, according to Fehrnstrom, is to “differentiate all of the brands in a way that’s unique and relevant to the target consumer, and also to make sure that we give the wineries the tools that they need to do what they do best—make great wine. It’s a misconception that because you’re a large wine company, everything tends toward the mean. Nothing could be farther from the truth in how we operate. Every winery and brand has its own distinct style and way of operating”

VineOne, Brand by Brand

VineOne President Chris Fehrnstrom offers his appraisals of the VineOne portfolio.

Clos du Bois
Clos du Bois is one of Alexander Valley’s most renowned wineries, known for its elegant, soft and approachable wines. “Clos du Bois is a brand targeted toward the 25- to 34-year-old female who enjoys a sense of sophistication and great quality, and the marketing is geared toward that audience.” Fehrnstrom sees continued growth opportunities.

Rex Goliath
A Central Coast brand based around over-delivering approachable premium varietal wines, with the added personality and fun folklore of a 47-pound rooster. “Last year we went through a short phase of slowing growth, but it has picked up again,” says Fehrnstrom.

Woodbridge by Robert Mondavi
Robert Mondavi’s vision was not only to create American wines that competed with the best from Europe, but to put a great bottle of wine on every table in America. “We’ve seen three to five percent growth since acquisition, which is tremendous for a brand that’s seven million cases strong,” says Fehrnstrom.

Blacksone
“This is a traditionalist California brand that grew with the Merlot category, but it always had tremendous word-of-mouth growth behind it,” says Fehrnstrom. “An easy-drinking, fruit-forward wine that delivers above its price point.”

Ravenswood
“A little more bold and in your face, with incredibly distinctive packaging. Founding winemaker Joel Peterson remains involved and has always tried to blend wines from this Sonoma-based winery true to the Zinfandel varietal.”

Toasted Head
“Irreverent not only because of the fire-breathing bear on the label, but also because of some of the advertising and packaging changes we’ve been looking at,” says Fehrnstrom of the brand that’s still based on Dunnigan Hills fruit.

Black Box
“An unbelievable phenomenon,” notes Fehrnstrom. Great quality wine in eco-friendly, cost-saving packaging.

Hogue
“All about the Northwest and Washington state. We think it has a tremendous upside. Hogue in particular really over-delivers for the price point,” says Fehrnstrom. “The Hogue Reserve Cabernet is one of the best red wines from the Pacific Northwest.”

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