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Interview: Hahn Family Wines Looks At The Future

March 21, 2017

California’s Hahn Family Wines has reshaped its portfolio over the past few years, increasing focus on higher-end wines like its Hahn SLH ($25-$35), Smith & Hook ($25) and Lucienne ($50) brands to complement its quarter-million-case Hahn Winery tier ($15). With its $25-and-up portfolio flourishing, Hahn, which has been growing revenues at around 15% annually in recent years, is aiming to double in size over the medium term. SND’s editors recently met with chairman Philip Hahn, president Tony Baldini and general manager/director of winemaking Paul Clifton to discuss the road ahead.

SND: What are your biggest challenges as you look to continue expanding at the premium end of the wine market?

Hahn: It’s a matter of getting the little Santa Lucia Highlands (SLH) AVA where it needs to be. That’s been going rapidly. The industry itself has changed so much lately. You see this dramatic upscaling of price and quality. It’s what the distributor wants, what the customer wants. For us, our connection to the AVA and actually having a family-owned story are advantages. It will take another four or five years for the Santa Lucia Highlands to gain the recognition it deserves as a truly a unique area for Pinot Noir.

Baldini: One concern is what’s happening in the California labor market. That’s going to drive price. Maintaining quality while managing cost will be key. Retailer and distributor consolidation is an issue too. We’re investing in relationships with retailers by hiring more chain folks, and building relationships with our distributors. There aren’t many mid-sized companies left. We’re family-run, family-controlled, focused on quality and estate-based. Those are rarities, and we’ll play with those cards.

SND: How is your distributor profile comprised?

Baldini: No one distributor is more than about 20% of our business. We make decisions based on what’s right for a given market. We’re not seeking alignment based on economies of scale. Some distributors may offer more insight into the on-premise, or some may have more strengths in chains. We need to understand those differences across each individual market.

SND: The Hahn SLH tier of Pinot Noir and Chardonnay has been in double-digit growth. How large can it get?

Clifton: The angle is to build these wines up to the capacity we have. We can go up to about 25,000 cases on the Chardonnay, and up to 50,000-60,000 cases of Pinot depending on the vintage. We’re about halfway there on both.

SND: How does the SLH AVA compare with Sonoma in terms of pricing per acre?

Baldini: SLH is probably a third to half the price of Sonoma. There aren’t a lot of transactions that are public in our neighborhood, but you’re probably talking about $60,000-$70,000 per acre. It varies a lot based on vine age and other factors. In Sonoma Valley you’re probably looking at $150,000 an acre.

SND: How does your new product pipeline look?

Hahn: We’ve been testing a rosé for a while, in a different style from Provence. Much more luscious, with a deeper character and darker complexion. This stuff has a punch to it, and customers have taken to it, so we’re planning to do a limited rollout.

SND: Direct-to-consumer sales are a hot topic in wine right now. How big is DTC for Hahn?

Baldini: DTC is a relatively small part, about 5% of the business. We have a tasting room in Soledad where we get about 15,000 visitors per year. This spring we’re opening a tasting room in downtown Carmel, which will be a showcase for our wines. We expect it will give us another 20,000-30,000 visitors annually, providing a new growth avenue.

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