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Interview, Part 1: Marc Goodrich, COO, Banfi Vintners

August 1, 2012

Banfi Vintners, long one of the U.S. market’s top wine importers, lately has been looking to expand into the domestic wine business. In January 2011, the company announced the acquisition of Pacific Rim Winemakers—a deal that included Washington wines Pacific Rim and Sweet Bliss as well as Oregon’s Rainstorm label. This past March, Banfi signed a letter of intent to buy Sonoma’s Kenwood Vineyards from F. Korbel & Bros. owner Gary Heck. That deal fell through earlier this week, but Banfi looks likely to continue seeking expansion into domestic wine. Shanken News Daily recently spoke with Banfi COO Marc Goodrich about the company’s recent activity.

SND: What’s the next step for Banfi, now that the Kenwood deal has been terminated?

Goodrich: We’ll continue to focus on our core business, which is very healthy, and continue to look at opportunities to grow as they become available. We had been interested in California for quite a while, and we’ve looked at a number of opportunities over the past seven or eight years, seeking brands with sufficient scale and quality reputation to fit with our portfolio.

SND: You’ve opted to maintain separate sales and marketing for Pacific Rim. What’s the reason for that?

Goodrich: At about 200,000 cases, Pacific Rim is still in its infancy. With 7.5 million cases in our portfolio, we were concerned that it could get lost. We spent a lot of time with Pacific Rim, and we liked what we saw.

SND: The deal showed that you’re certainly enthusiastic about Riesling….

Goodrich: We like to be in a leadership position, and Pacific Rim is certainly a leader in the domestic Riesling category. It’s also a leader in terms of overall production in Washington. We believe the Pacific Northwest has a very strong future. Last year we saw a bit of a slowdown in Riesling consumption, mainly because of the Moscato craze. But long-term, we think Riesling has a great future in the U.S. and abroad.

SND: What about the other brands in that deal?

Goodrich: Sweet Bliss is a brand that launched just prior to the acquisition. There are three wines: Sweet Red, Sweet White and Sweet Pink. They compete in the $10 price point, which has become a very hot category. Sweet Bliss is probably in the neighborhood of 40,000 cases after a bit more than a year on the market. And Rainstorm, an Oregon Pinot Noir and Pinot Gris, just launched in March.

SND: Last July you formed a partnership with Concha y Toro under the Excelsior Wine Company umbrella. What was the motivation behind that?

Goodrich: We acquired a small importer named Excelsior Wine & Spirits in 1988. At the time, Concha y Toro was doing about 90,000 cases with Excelsior in the U.S. market. Since then, we’ve grown the brand in the U.S. to 3 million cases. During those years, Concha y Toro has expanded its global business. They’re now producing roughly 30 million cases worldwide. We needed to reset our relationship with Concha y Toro and spent six months with them trying to figure out the best way to move forward. They have their own distribution operations in major markets like the U.K., Germany, Asia and certain parts of South America. And we wanted some security with the brand. We’ve invested a lot of time and money building Concha y Toro over the years. So we came to an agreement to go forward as joint venture partners in the U.S., handling sales and marketing. We thought the brands were large enough to justify a focused and specialized sales force. Excelsior also includes Trivento, Little Black Dress and Five Rivers, but not the Fetzer brands.

SND: How is Concha y Toro performing in the U.S.?

Goodrich: It’s doing quite well overall. Last year we took a price increase on Frontera, so toward the end of the year we saw a little softening in the business, which one would anticipate in a very price-competitive category. But the brand is responding well the first part of this year, and we think it will emerge strongly. Casillero del Diablo is Concha y Toro’s flagship brand at about 3 million cases worldwide. This year we hope to do about 400,000 cases of that in the U.S. It retails at about $10 and has received very good critical acclaim, especially for a wine of that size. We just started TV ads on Casillero for the first time in the U.S., in Florida.

SND: Is Banfi less interested now in being a traditional importer with an agency agreement, and more interested in having an equity position in brands in its portfolio?

Goodrich: We don’t have any interest in walking away from the agency business. It’s been the backbone of our business from the start. We still have close to a 45-year relationship with Riunite, the brand that took this company to the next level back in the late ’70s. We’ve got many other family wineries with whom we’ve had great relationships over the years. We’re not actively soliciting new agencies, but should the right opportunity come along, we would certainly look at it. We like to enter into long-term relationships. We invest a lot of time and money in building brands, and it’s hard to justify that if you’re on a three-year contract.

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