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Interview, Part 2: David Kent, CEO Of The Wine Group

July 17, 2012

In the second part of Shanken News Daily’s interview with David Kent, The Wine Group CEO discusses the company’s entry into the ultracompetitive vodka market, the key factors in Franzia’s success and the rationale behind some of TWG’s biggest deals.

SND: You launched a Cupcake line of flavored vodkas last year that did nearly 60,000 cases in its first year. How are they doing this year?

Kent: Cupcake vodka was our first foray into spirits. We intended to make a little, sell a little and see how it went. It wasn’t a difficult decision, because we had to protect our intellectual property. Cupcake wine was emerging as an icon of the Millennial consumer, and other companies hoped to play off our success with a knock-off vodka. But we didn’t have the discipline to rein in the trade’s enthusiasm for the brand. We thus skipped the test market stage and shipped far more vodka than we intended. Once Cupcake vodka was on the shelf, we learned that we didn’t really understand how to communicate flavors to the consumer. People thought that Original, which was unflavored, should taste like cake batter or vanilla. And hardly anyone seemed to know what Chiffon was. Fortunately, the consumer response to the vodka’s quality and style was very positive, and several flavors such as Frosting and Devil’s Food have established strong positions in their segments. Over the past six months we placed a hold on new production and distribution in order to fix the communication. We’re now rolling out a redesigned label, and we’re eager to start brand-building again. We’re committed for the long haul.

SND: Franzia is the largest wine brand in the U.S. market with over 25 million cases depleted in 2011 and growing. How do you explain its success in the boxed wine, economy-priced category?

Kent: We prefer to define wines priced under $4 on a 750-ml. basis as “popular-priced,” since many of their consumers don’t fit the classic definition of an economy shopper. Just ask our friends at Trader Joe’s. Popular-priced wine consumers know what they like and know what they need to pay for it. Franzia is an extraordinary brand because it appeals to consumers across all age and income demographics. It’s built on the idea that consumers prefer fresh, affordable wine to stale, potentially overpriced wine. It works.

SND: You signed an agreement to become the exclusive U.S. importer of Trapiche wines from Argentina effective April 1. What are your plans for it?

Kent: Trapiche is one of Argentina’s flagship brands. It fits perfectly with our “velocity” brand portfolio—brands that are either number-one or number-two in their respective segments. We will relaunch Trapiche in the coming months, selling all its major types and tiers, and not simply Malbec.

SND: You purchased Almaden and Inglenook in 2008, and then sold Inglenook last year. What’s your view on Almaden since the deal?

Kent: We continue to be pleased with the Almaden acquisition. We were prepared to redeploy 20% of its volume to other brands in order to eliminate 80% of Almaden’s SKUs, which we did. This was essential to conform Almaden to TWG’s unique “Few Fast Moving SKU” business model. Previously, the brand had a mountain of redundant sizes, types and price tiers reflecting the old GAMIT (Gallo Almaden Masson Inglenook Taylor) jug wine paradigm where the objective was to block out as much retailer shelf space as possible. That model is no longer relevant to modern retailers—it’s not a real estate game anymore, but rather a dollar velocity game. We significantly upgraded the Almaden wines and packaging, relaunching it as the first premium 5-liter. The brand is responding: past 12-week consumer takeout, as measured by Nielsen, is up 9.5% on volume and 12.6% on value.

SND: What about the sale of Inglenook?

Kent: Regardless of economic impact, selling the Inglenook trademark so that Napa’s most historic estate could be reunited with the name was the right thing to do. The California wine industry has been very good to TWG in the 30 years since we were spun out of Coca-Cola in a management buyout, and my partners and I were fortunate to be in a position where we could make this happen.

Look for the full-length version of our interview with David Kent in the September 1&15 issue of Impact.


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