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Interview, Part 1: Tom Steffanci, President, Deutsch Family Wine & Spirits

September 4, 2019

Deutsch Family Wine & Spirits has embarked on a new chapter of growth in recent years, driven by the explosion of the Josh Cellars brand, which surpassed 2.6 million cases on a 23% increase last year, according to Impact Databank. SND associate editor Shane English recently caught up with Deutsch Family president Tom Steffanci to discuss the rise of Josh Cellars and other key brands across the portfolio.

SND: How is the Deutsch Family portfolio positioned, from a big-picture perspective, as we head into the latter part of the year?

Steffanci: We’re now in the first year of a new five-year cycle. The brands that we’re bringing into our portfolio are, by and large, wine and spirits brands that we think we can scale. We’ve chosen to do acquisitions over brand creation. We’ve chosen a price point center of gravity, which for spirits is super-premium and luxury, and for wine is the $11-$25 price point. We’re coming off a five-year period in which we grew our profitability at an 18% compound annual growth rate (CAGR), and our revenue at 10% at CAGR. That was a dynamic growth period, and it was led by Josh Cellars, but we had 10 brands growing double-digits. We’ve seen spirits become much more important to our business. Overall, we had revenue growth of 8% last year and depletion growth of 3.2%.

SND: Josh Cellars has excelled, reaching over 2.6 million cases last year. What’s driving that growth?

Steffanci: We’re extremely focused on the quality of the wines. In addition, I think we have a name, packaging, and story that consumers find walks a fine line between elegant and approachable. Our expected growth going forward is 17%, and the brand today is growing at 22%. We’re actually ahead of the planned growth that we had on the brand.

SND: What’s next on the agenda for Josh?

Steffanci: We’ve tested a Pinot Grigio from California and have had very good success. It’s a little more ripe, and has more weight than the Italian style. That’ll be launching nationally early next summer. This fall, we’ll be launching a Prosecco extension nationally. The Prosecco has a large, silk-screened “Josh” featured on the glass, so it’s a striking, unique package, and quite a departure from what we’ve done previously. We’ll also be launching a Josh Reserve Cabernet Sauvignon that’s aged in Bourbon barrels in the early summer next year.

SND: What’s the update on Yellow Tail?

Steffanci: We’re fortunate in that Yellow Tail is gaining share. We’re experiencing low single-digit declines in total, but we’re taking share against our competitors. And we have bright spots: Chardonnay and Pinot Grigio are growing at a pretty good clip, and Cabernet continues to perform fairly well. We’ll continue our involvement with the Super Bowl, but not in the traditional sense. We’re going to do a takeover with YouTube, rather than run a traditional Super Bowl spot during the telecast this year.

Deutsch Family Wine & Spirits―Top Ten Brands
(thousands of 9-liter case depletions)
Rank Brand Origin/Type 2017 2018 Percent
Change1
1 Yellow Tail2 Australian Table Wine 7,350 7,203 -2%
2 Josh Cellars3 California Table Wine 2,160 2,646 23%
3 Layer Cake Multi-Origin Table Wine4 440 477 9%
4 Luksusowa Polish Vodka 275 270 -2%
5 Barone Fini Italian Table Wine 136 129 -5%
6 Hob Nob French Table Wine 137 112 -18%
7 Villa Pozzi Italian Table Wine 79 72 -9%
8 Fleurs de Prairie French Table Wine 20 70 250%
9 The Crossings New Zealand Table Wine 72 68 -5%
10 Redemption American Whiskey 53 67 26%
Total Top Ten5 10,722 11,115 4%
1 based on unrounded data
2 excludes Bubbles
3 includes Reserve
4 includes imports and domestic (California)
5 addition of columns may not agree due to rounding

Source: IMPACT DATABANK © 2019

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