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Charles Krug Sees Price Hikes, DTC Channel Drive Growth

January 3, 2018

Napa Valley-based Charles Krug Winery has placed an increased focus on its direct-to-consumer business over the past two years, and co-proprietor Peter Mondavi, Jr. says the effort is paying off. While the winery’s overall depletions are roughly flat year-over-year at about 80,000 cases, value is on the rise thanks to the increasing direct-to-consumer contribution and an 8% bump in retail pricing over the past year.

Direct-to-consumer sales currently make up about 9% of Charles Krug’s volume, Mondavi Jr. notes, but account for an outsized share of overall dollar value, at around 28% of the business. Peter and his team are focused on upscaling the brand’s image and further boosting value growth by cultivating direct-to-consumer sales with exclusive products. “The wine club is the holy grail,” he says. “It’s the dominant and driving component of the DTC business, both financially and numerically.”

Among Charles Krug’s releases as DTC exclusives are a number of vineyard-specific Cabernet Sauvignons, a Malbec, a Sauvignon Blanc, a Petite Sirah and a Zinfandel Dessert Wine. In price, they range from $35 for the Zinfandel Dessert Wine to $135 for the Voltz Vineyard Cabernet Sauvignon.

The Charles Krug Family Reserve line also targets direct-to-consumer sales in addition to the on-premise. The Family Reserve range consists of Generations ($60), a Bordeaux-style blend, and a Howell Mountain Cabernet Sauvignon ($85). Meanwhile, the Charles Krug estate tier continues to comprise the majority of the business. It includes a Napa Valley Cabernet Sauvignon, Merlot, and Sauvignon Blanc, as well as a Pinot Noir and Chardonnay from Carneros. The Cabernet (around $30) accounts for roughly half of the winery’s output—around 40,000 cases. “We currently have about 850 gross acres, with a little over 400 acres planted,” Mondavi Jr. notes.

Charles Krug has also been working on readying its vast library of back vintages—totaling about 10,000 bottles and dating to 1944—for sale to restaurants and the DTC market. But Mondavi Jr. says the endeavor has proved challenging and is still in development. “There’s a lot of work involved with respect to going through the whole inventory and making sure the quality is there,” he says, adding that everything from pricing to the pros and cons of recorking older vintages has to be considered.—Shane English

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