Identity Flexibility -- A Look at Changing AVAs
February 02, 2018
How important is AVA labeling and what effect does changing the AVA have upon brands? When sourcing grapes from prime AVAs becomes too difficult or too costly due to recent vineyard acquisitions, smaller harvests, or prices that are too high, what do wineries do? Is it possible to move from, say, a Napa AVA distinction to a California AVA?
At last week’s Unified Wine & Grape Symposium, a panel of experts, moderated by Wine Opinions founder John Gillespie, examined the importance of AVA labelling and the effect changing a brand’s AVA has on its bottom line.
"Whether defined as ACs, DOs, or otherwise, they boil down to two elements: a unique and defined place along with a name by which that place is known," he said. More than 3,600 defined appellations worldwide are "vying for their share of the world market of wine," said Gillespie. There are 240 AVAs in the United States, 139 of which are in California.
Gillespie asserted the value of appellation is best demonstrated in the rise of Provence Rosés. France’s percentage of the Rosé market share in the U.S. has increased commensurate to the increased bottle price Rosés have commanded lately. It also holds a disproportionate dominance in the $20+ category—90 percent of all Rosé sold in the United States—thanks to the positive associations with the Provence labelling.
Gillespie did point out, however, that sometimes a brand name can outweigh place in the consumer’s mind, with Kendall-Jackson Vintner’s Reserve Chardonnay a prime example of a wine identified with California rather than any of its AVAS.
Adam Lapierre MW, recently named vice president of wine at Wine Access, was previously the head buyer for Lidl, the fourth largest retailer in the world known for discounted and private label wines. Based on Lidl’s market analysis, he detailed some of the ways in which consumers considered place and wine purchases.
According to Lapierre, there is a prominent level of fragmentation, and each price point is associated with a different “place” labeling: country of origin in the $7 and below category, state in the $7 to $15 range and more specific regions and AVAs for those wines priced above $15.
"With the market so fragmented we were ambivalent as to how we needed to craft our assortment, deciding to find ways to leverage the AVAs to create a structure to our assortment," he said. Essentially, how do you let the customer know why one Cabernet Sauvignon is $2.99 and another is $19.99? In his words, the labeled AVA can help communicate that.
Changing the Brand’s AVA
Duckhorn Wine Co.’s CMO Carol Reber detailed how the company was able to successfully change the AVA (from Napa-sourced grapes to Sonoma) and price (from near $50 to $25) of its second label Decoy brand following the recession of 2008.
"It's not a recipe for success you want to do every day," Reber said. “With the economic downturn of 2008-2009 the new owners were looking at their entire portfolio possibly going to pot.” Instead, they leveraged their second label of Decoy by making a “Hail Mary” pass. As Reber tells it, the company was “drowning” in estate fruit from Napa because Duckhorn consumers were not going out so often. Decoy Napa Valley was launched in 2010 in finer shops and casual wine-oriented restaurants, which enabled consumers to drink a $50 bottle of Napa Cabernet for $25 and created profit margins as low as 5 percent.
Once the economy improved, sustaining Decoy with its original fruit source and price point wasn’t feasible, so Decoy transitioned from a Napa brand to a Sonoma-sourced brand. “The appellation change was an absolute non-event,” said Reber, adding that its brand equity held the course. “You’ll see that migration of other California brands over time…with many brands built that way.”
When Michelle Perry joined Constellation as its VP of fine wine marketing, she was told, "If you can't handle change, don't come here." As part of Constellation’s autonomous fine wine division, TRU, she inherited a complex portfolio and sales structure which includes the marketing and sale of Meiomi. The 1 million case brand is sourced from three counties—Monterey, Santa Barbara and Sonoma—and considerable consumer research was performed by the company to determine if including county names mattered. Though initial research found that it was the wine’s flavor profile and bottle shape that had consumers coming back for more, Perry and her colleagues found that emphasizing the three counties and the blending of their fruit in marketing collateral was a key element to Meiomi’s success.
“It gave us solid ground to keep them…and since then we’ve launched a multi-appellation Rosé,” she said.
The Rise of Oregon
Morgen McLaughlin, director of the Willamette Valley Wineries Association (WVWA), started with the WVWA in 2017 and is tasked with building the Oregon brand, which has seen phenomenal growth. "There is a lot of excitement in Oregon now, and we’re seeing strong DTC growth in percentage of volume with value growing in the double digits,” with statistics dating to 2014 citing Oregon wines accounting for 0.4 percent of wine volume sold at retail outlets tracked by Nielsen while accounting for 3.6 percent of domestic wine shipped DTC according to ShipCompliant and Wines Vines Analytics, the data arm of Wines & Vines.
“Years ago, it wouldn’t be much of a surprise to hear that many consumers were unaware of Oregon’s location, let alone its wine industry, so labeling wines as Oregon rather than Willamette Valley was often enough,” she said. McLaughlin said that has changed and the positive connotations associated with Oregon—its rusticity, simplicity, sense of modesty and collaboration, authenticity of local products—have grown in tandem with the rise of Pinot Noir’s popularity and its association. "Oregon didn't start with a Pinot Noir message but it evolved over time," she said, noting that varieties such as Pinot Gris and Chardonnay are doing well but aren't as readily identified with Oregon.