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Terlato Striking Gold With The Federalist, Seven Daughters Wine Brands

August 3, 2016

At the end of 2015, Terlato Wine Group ended its relationship with its top brand, Santa Margherita, which had pioneered the Pinot Grigio category in the U.S. more than three decades earlier. To fill the void, Terlato launched its own Pinot Grigio import and further expanded its wine portfolio with two rapidly growing brands, The Federalist and Seven Daughters, at the $15 to $20 price point. Lake-Bluff, Illinois-based Terlato has also diversified further into spirits and food. As a result, revenues are up 27% midway through 2016, and annual sales are now approaching $500 million. CEO Bill Terlato met recently with SND’s Lee Murphy to discuss progress.

SND: The play “Hamilton” is breaking records on Broadway. Is it benefiting The Federalist?

Terlato: We introduced The Federalist four years ago with a Dry Creek Zinfandel, with Hamilton on the label. Back then, of course, the musical wasn’t around. We just thought Hamilton was an interesting historical character. That first Federalist wine retailed at $39, and it sold well. But we realized that if we could get other Federalist wines under $20, the brand could really resonate. The idea was to target millennial males in the same way that our Seven Daughters label has targeted millennial females. So we introduced more wines to The Federalist line, including a Zinfandel with George Washington on the label and a Cabernet Sauvignon with Benjamin Franklin, both with fruit sourced mostly from Lodi or Dry Creek Valley in Sonoma. We also got creative with our pricing. Most of the wines are now at $17.76 at retail and $14.92 on promotion. This fall, we’ll be adding a new Zinfandel aged in Bourbon barrels. It will be priced a bit higher, at around $23.

SND: So has the musical played a role at all?

Terlato: It’s hard to tell. The brand was growing significantly before “Hamilton” came to Broadway. It’s actually available at the theater during intermission. The play certainly has heightened awareness of the man and the entire Federalist period. We’ve been promoting it further with special sales during holidays like the Fourth of July and Presidents’ Day. The Federalist is now the fastest-growing of all wines with $1 million or more in sales, according to Nielsen. Two years ago we sold 8,000 cases. Last year volume hit 100,000 cases and this year it’s on track to reach 250,000 cases. For the 2016 harvest, we’ve secured enough fruit to produce 425,000 cases. We’re considering some new line extensions—a Merlot and a Sauvignon Blanc are both possible. We think The Federalist can become a million-case brand.

SND: Seven Daughters, also in that price range, is growing fast as well.

Terlato: Seven Daughters sold 175,000 cases last year and is growing at 20% annually, which means it should reach 210,000 cases or more this year. Moscato is the big driver there. It’s produced in Italy and has become a big seller in restaurants. We’ve recently extended Seven Daughters with the launch of 250-ml. cans at $14.99 a four-pack. Portability and convenience is important in bringing more wine to picnics and ballgames. We want Seven Daughters to be sold in major league baseball stadiums, to be sipped with a straw. We produced 40,000 cases in cans and thought it would last all through this year, but it sold out in the first month of summer. We’ve got to make more. Seven Daughters appears headed toward the 500,000-case mark before long.

SND: So it appears that Seven Daughters and The Federalist are replacing the 600,000 cases you lost with the departure of Santa Margherita.

Terlato: In retrospect, Santa Margherita’s departure was a good thing for our company. It took a lot of time and energy to keep growing that brand, and in the process we weren’t fully developing other parts of our business.

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