Recent sales data from the wine industry hasn’t been great, and some smaller wineries are looking to fix their problems by turning to spirits.
With depletion volumes for wine down -7.5% in 2023 according to SipSource data, winemakers have been turning to new strategies to find growth. While canned wine and ready-to-drink cocktails present one avenue to reaching younger generations, other winemakers have turned to diversifying their portfolios in spirits for the first time. Some see the opportunity to apply their experience in luxury products to a new category, others are approaching the shift as a necessary move to survive a changing climate.
Tapping Into The Luxury Drinker
Foley Family Wines (FFW) is one of the larger wine companies to make a recent high-profile move into spirits: the Sonoma Valley-based company with more than 20 wineries and vineyard properties launched a distillery operation in Minden, Nevada last year. It tapped Chip Tate, the founder of Balcones Distilling as master distiller for innovation, citing eagerness to add a full-range of luxury spirits to its portfolio.
Other family-owned leaders in wine, such as Gallo, have built on existing distribution networks to find new opportunities in spirits. Spirit of Gallo was launched in 2021 as a distinct brand to focus on the development of spirits and RTDs, and has found success with leading RTD High Noon.
But smaller wineries have also been gradually moving into spirits. Some say they are applying the branding of wine to spirits and tapping into their networks of wine fans. El Negocio Tequila is one of them, which first sold for a whopping $10,000 at auction late last year. The splashy entrance was for charity purposes, but co-founder and Napa Valley vintner Adam Craun said auctioning off the tequila was a way to create buzz in a room full of legendary Napa Valley producers and wine collectors. Craun is founder of Memento Mori whose +$300 wines have developed a cult following.
The tequila will sell for less— SRP is $90 for the Blanco— but El Negocio’s connection to wine and its Memento Mori sister label are more visible with higher-end expressions that spend time aging in barrels previously used to age Memento Mori.
“In the spirits business, marketing strategies have traditionally focused on branding and cocktail culture,” said Craun. “In stark contrast, our approach to wine marketing emphasizes vineyard origin, vintage specificity, and meticulous food pairings.”
As a nod to its collectors and tequila aficionados, every bottle from El Negocio’s premiere vintage is individually numbered for authenticity, he added. But that strategy is nothing new in agave spirits: tracing distillers, agaves, and batches fueled the cult following that catapulted mezcal into the mainstream.
Even if translating wine’s marketing ethos to tequila strikes a chord among a captive audience, there are logistical issues winemakers are forced to consider too when jumping into spirits. Plus, spirits are also facing a downturn, with the growth profile for higher end spirits reversing over the last year.
“While we’ve been able to leverage our existing relationships with distributors and wine retailers to an extent, we’ve encountered a distinct set of challenges in the spirits category, where regulations and control are more stringent due to the elevated alcohol content,” said Craun.
Winemakers largely benefit from direct-to-consumer shipping that also allows for wine clubs, as well as tasting room sales. The legislation for distilled spirits is much different and varies significantly state-by-state, but for some wineries tackling those hurdles is an expansion that they hope is worth it in the long run.
Spirits As Sustainability
In 2020, wildfires tore through the Pacific Northwest, with the smoke ruining the harvest of many of the area’s vineyards. Like other winemakers have done in California, the team at Newberg, Oregon-based Patricia Green Cellars turned to distilling the tainted wine. They partnered with local distiller Lynsee Sardell of Big Wild Spirits, and together bought a local distillery, Dogwood Distilling, that was up for sale to ensure the long-term viability of the spirits project. This year they released two whiskeys as their first products.
Permits to sell wholesale are still pending, with only sales allowed for now to the state controlled liquor store. But the spirits are selling direct at the winery, and gained a spike from its mailing list over the holidays.
In the future, finding use for a possible spoiled harvest is only part of the transition.
“How can we keep going, but yet be sustainable, even in the midst of something like these great weather tragedies that we’re having?” asked Jim Anderson, Patricia Green Cellars owner and head winemaker.
As climate change continues to change how crops are grown, the move into spirits allows the winery to source from local farmers beyond the yearly wine harvest and develop other streams of revenue, with less possibility of something going wrong.
The distillery will continue making the vodka and gin that Dogwood was producing, as well as non-grape Oregon agricultural products, such as a blueberry Eau de Vie and an apple brandy that will be bottled this year.
Like a few other companies, Sardell is applying a “winemakers approach to whiskey” by incorporating a sense of place with local whiskey grains, and she argues that the new products can support a larger ecosystem.
“So much of the grain literally was grown like two miles away from the distillery, so it keeps the economy in motion despite climate problems,” she said.