K-J repositions its brands for the future

By increasing the price, reducing production and using only estate-grown fruit for its top brand, Kendall-Jackson may provide a much needed boost to the super-premium category.

With his seventh straight Tour de France title, Lance Armstrong established himself as one of the greatest sports athletes in the modern era. The world of wine has its share of formidable competitors as well. One of them is winemaker Jess Jackson, proprietor of Kendall-Jackson Wine Estates, Sonoma County's largest wine company.

Over the past two decades, Jackson, a former practicing lawyer, has established his own reputation as a maverick, visionary and creator of his own wine empire. In 2004, his family-owned business ranked eighth in Wine Business Monthly's list of the Top 30 U.S. wine companies, with estimated annual sales of $5 million. And much like Armstrong did on his bicycle, Jackson has done in the wine marketplace: single-handedly controlling his own destiny with a mixture of sharp intelligence, well-executed power moves and an unquantifiable amount of sheer determination to stay ahead of the pack.

This style of savvy marketing was once again evident in early August 2005 when Jackson surprised the wine industry by announcing that he was strategically repositioning his top brand, Vintner's Reserve Chardonnay, by increasing the price by a dollar to $12 per bottle, reducing production from 2.3 million to two million cases and using only estate-grown fruit to improve the quality of the finished product.

To further embellish and market this image, the new Vintner's Reserve label features the catchy phrase, "Jackson Estates Grown" in reference to fruit grown on property either owned or controlled by the company.

According to Kendall-Jackson spokesman George Rose, this new strategy has been in the works for nearly three years. Rose said it originally began as a response to a number of precarious circumstances that were beyond the control of the winery—and, for that matter, the wine industry. These predicaments included: slow wine sales following the 9/11 crisis; the tumultuous collapse of many powerful dot.com companies and, more recently, the rise of new foreign and domestic competitive brands that have led to fierce competition in the premium-priced segment of the market.

"The past few years represent a period when the winery took hits from every possible angle," said Rose. "But instead of just resting on the tradition that he built up over the past two decades, Jess Jackson decided to look into the future and take advantage of a rare opportunity to move forward, by increasing the quality of the wines K-J produces and repositioning Vintner's Reserve as an affordable luxury brand."

In essence, Jackson's power move is designed to separate the full line of K-J wines from the rest of the fighting varietal category. The pertinent question thus becomes: Can this type of upgrade work?

The surface answer is that there is no better time than the present to test these waters. According to data collected by ACNielsen, as of July 2005, supermarket sales of super-premium wines priced $12 to $15 were up 26 percent—a 9 percent increase over the 17 percent growth rate of wines priced $9 to $12 during that same period.

Economic analyst Jon Fredrickson of the Woodside, CA-based wine consulting firm Gomberg, Fredrickson & Associates, said that moving such a large amount of wine out of one segment and into a higher-priced category has the possibilities of benefiting all parties involved: the winery that can make profits off their capital investment, the stores and restaurants that make a nice profit from the increased price margin and, ultimately, the consumers that are able to find more diversity in the number of quality super-premium wines on store shelves.

"Right now, any growth in a house that Chardonnay built. From the initial batches made in the early 1980s, when Kendall-Jackson winery was still in Lakeport, Lake County, to the 2004 vintage recently released from the large-scale production facility in Santa Rosa, the Vintner's Reserve Chardonnay is best known for its signature profile, featuring fruity tropical flavors, butterscotch, integrated French oak and a touch of sweetness on the finish.

In essence, it is a house-style of wine that has hit a perfect chord with a broad range of consumers and earned it the cherished ranking as America's top premium Chardonnay, in terms of both annual sales and volume for an unprecedented 15 straight years. Now, all they have to do is turn it up a notch.

The Central Coast is one of the main spots where this bar has been raised. Until the past decade, the majority of the fruit used for this program was sourced from North Coast and Santa Barbara appellations. Today, nearly half of the grapes used in the blend come from Monterey County.

"Twelve years ago, Monterey was still trying to find its own identity," said Ullom. "Now, the focus has finally reached a point where vineyards are more focused on the 21st century-style of viticulture, and [they have] redeveloped with all the appropriate rootstock, clones, innovative farming practices and better overall fruit quality."

Canopy management is the key to this equation. New techniques used by the Kendall-Jackson vineyard management team include: vertical shoot positioning, multiple wire systems to control sun exposure, leaf removal, conspicuous monitoring of crop yields and the technical advantage of picking at night with automated harvesting machines. Besides Chardonnay, the other white grape variety grown in the region is Riesling. Most of the Sauvignon Blanc is from Lake County, with smaller percentages from San Luis Obispo, Sonoma, Solano and Mendocino counties.

In the red wine category, the landscape has changed as well. Most of the Kendall-Jackson Cabernet Sauvignon and Merlot plantings are now primarily located in elevated vineyards on mountains, hillsides, benches and ridges.

In his one-page letter, appropriately released to the media on Independence Day, Jackson explained this focus in more detail: "As I've said for two decades, growing grapes on the sides of California's cool coastal mountains and ridges builds character—not only in the character of the wine, but also the character of the people growing the grapes. It's not easy growing grapes in the mountains. Nor is it inexpensive. It's a real test of patience and determination."

One of the main concentrations of K-J's red grape plantings is in the mountainous region above Sonoma County's Alexander Valley. Like a patchwork quilt, these small pockets of well-groomed vineyards are custom fit to the terrain, with the appropriate selection of clones, row directions, slopes and angles.

Ullom said the advantage of working with grapes grown in such unique conditions will only improve as the vines mature. "These locations are like a candy store for kids, only in this case it's for winemakers."

Other prime locations for red wines are located in Sonoma, Napa, Lake and Mendocino counties. So instead of using more generic references to the North Coast or California appellations, many of the new releases will feature the more germane names of the tri-county appellations on the labels.

In addition to increasing production in other varietal categories, such as Syrah and Zinfandel, plans are also now in the works to significantly increase the production of Vintner's Reserve Pinot Noir to 100,000 cases over the next decade, with most of the fruit coming from the Central Coast.

ustom fit the needs of each wine program.

"Now that we have further defined the direction for each brand, it's exciting to look into the future and know that we control our own destiny," said Ullom. "It's kind of like finding missing pieces to a puzzle and putting them in place. Except this time it's all about making the right applications at each vineyard and expressing these special characteristics with the winemaking process." wbm

Christopher Sawyer 

Christopher Sawyer is a journalist, wine consultant and sommelier based in Sonoma, CA.