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Marketing Strategy of Delicato Vineyards, Inc.

Marketing Strategy of Delicato Vineyards, Inc.

Discuss Marketing Strategy of Delicato Vineyards, Inc. within the Marketing Management forums, part of the PUBLISH / UPLOAD PROJECT OR DOWNLOAD REFERENCE PROJECT category; Statistics: Private Company Incorporated: 1973 Employees: 220 Sales: $110 million (est.) NAIC: 111332 Grape Vineyards; 312130 Wineries Company Perspectives: For ...

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Marketing Strategy of Delicato Vineyards, Inc.
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Anjali Khurana
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Marketing Strategy of Delicato Vineyards, Inc. - December 16th, 2010

Statistics:
Private Company
Incorporated: 1973
Employees: 220
Sales: $110 million (est.)
NAIC: 111332 Grape Vineyards; 312130 Wineries


Company Perspectives:
For more than 75 years, the Indelicato family has been crafting fine wines while assembling a portfolio of world-class estate vineyards. Today, Delicato harvests more than 10,000 acres of vineyards across the top grape-growing regions of California. These range from the coastal cool of the legendary San Bernabe Vineyard in Monterey, one of California's oldest grape-growing regions, to the rolling foothills of Lodi.
A celebrated team of highly experienced winemakers has brought decades of expertise to bear on these remarkable grapes, to create Delicato wines of distinctive character, memorable quality, and exceptional value at a variety of price points.
Our vision is to establish Delicato as a leading Coastal winery and perpetuate our name in California winemaking by participating in its foremost grape-growing regions: the Central Coast, North Coast, and Central Valley; and developing a range of well-respected, well-recognized wine brands that are the best in their class.


Key Dates:
1924: Gaspare Indelicato plants grape vines on his Manteca, California, farm; later he sells the fruit to home winemakers.
1935: Indelicato and his brother-in-law, Sebastiano Luppino, open Jasper and Sam's Winery.
1940: Sam Jasper Winery makes and sells about 15,000 gallons of wine a year and charges 95 cents a gallon.
1964: The Indelicato family purchases six large fermenters and triples their winery-production capacity.
1973: Delicato Family Vineyards is incorporated.
1975: The winery builds a tasting room and corporate offices at the Manteca Vineyard.
1983: The winery begins its traditional annual Delicato Charity Grape Stomp Festival during Labor Day weekend.
1988: Delicato buys the 12,000-acre San Bernabe Vineyard estate.
1994: Chief winemaker Tom Smith is hired.
1995: The company purchases 800 acres of vineyards near Lodi, California.
1997: Delicato releases 5,000 cases of its own premium-brand wine under the Monterra label.
2000: The company opens an executive office and retains a public relations firm in the California wine capital, Napa.
2001: Delicato is named "Best USA Wine Producer" at the International Wine and Spirit Competition and wins six individual medals including a gold for its Monterra 1998 Merlot.
2002: The winery's 2000 Shiraz wins two awards at the California State Fair Wine Competition.


Company History:

Delicato Vineyards, Inc. is one of the largest family-owned and operated winemakers in California, where 90 percent of the U.S. wine is produced. The privately held company cultivates over 10,000 acres of vineyards in the state's central valley and coastal regions and, between its two wineries, it turns out about 20 million gallons of wine each year. Annual sales are estimated at $110 million. Starting as a Prohibition-era farm that grew grapes for home winemakers, Delicato has grown successful as a "winemaker's winemaker," contracting to make and sell bulk wine for other brands to bottle under their own labels. The practice continues to be the mainstay of Delicato's business. Starting in the mid-1990s, however, the winery began an earnest push toward producing and selling wine under three of its own brands, and a number of its releases have won awards. Among Delicato's vineyard holdings is the 8,100-acre San Bernabe Vineyard in Monterey County, which claims the distinction of being the largest single grape-growing property in the world.

Gaspare Indelicato Plants First Delicato Vines

Gaspare "Nono" Indelicato, founder and patriarch of Delicato Vineyards, arrived in central California in 1912 from Sicily. The 18-year-old immigrant heralded from generations of farmers who planted grapes among their crops and enjoyed making their own wine. While picking grapes in a Lodi, California vineyard, Indelicato met Italian-born Catherine, or "Caterina." They married in 1921. Two years later, Indelicato borrowed money from a bank in order to buy and farm a 68-acre onetime dairy ranch in nearby Manteca, impressed by how the landscape resembled his Sicilian homeland. Caterina's twin sister and her husband Sebastiano Luppino lived on the farm with them and, in 1924, Indelicato and Luppino planted small plots of Carignane, Mission, and Zinfandel vines for making their own wine. The poor farmers soon discovered that their grapes could also bring in cash. Home winemakers, plentiful after Prohibition was enacted in 1919, were allowed to produce up to 200 gallons yearly for personal use, and Indelicato sold and shipped grapes to winemaking families in Chicago and on the East Coast, helping him to keep current on his loan payments.

Like many, Indelicato's fortunes dipped in 1929 with the Depression. But the repeal of Prohibition in 1933 hurt even more. Demand for wine grapes fell and prices plummeted to under $5 per ton as home winemaking dropped off. Some area farmers plowed under their vines or lost their land. A friend of Indelicato had to plead with the bank to keep it from foreclosing on the Manteca farm. Rather than give up on grapes, Indelicato and Luppino in 1935 decided to try their hand at large-scale winemaking. Working in an old hay barn, the men and their wives took turns working the hand-operated wine press to squeeze their fruit, then fermented the juice in wooden vats borrowed from neighbors. Their first vintage yielded 3,451 gallons of red wine. For marketing purposes, the winemakers Americanized their names--Gaspare became "Jasper" and Sebastiano became "Sam"--and launched Sam Jasper Winery, using road signs to advertise.

The winemaking business took off. Local families--mostly Italians--bought Sam Jasper wine for 50 cents a gallon, which Indelicato often delivered in his truck. The partners opened a cellar to age their wine, added vineyards to maintain a consistent supply of grapes, and continued with wholesale and retail wine trade. Gradually the winery gained a reputation as a reliable producer of good everyday table wines, and began making bulk wine that other winemakers used to blend with their own wines, or simply bottled and sold as their own wine. Functioning as a "vintner's vintner" became the foundation of the Indelicato business. By 1940, Sam Jasper Winery was making and selling about 15,000 gallons a year and charging 95 cents a gallon. By 1944 the price jumped to $1.90 a gallon. Profits from the business enabled Indelicato to build a new brick house and he and Caterina took their only trip back to Italy.

Three Sons Expand Business: 1950-1987

In the 1950s, Indelicato's three sons--Frank, Anthony, and Vincent-- joined the business. The winery also introduced and experimented with new wines under the Sam Jasper label. Among them were Green Hungarian, Sauternes, and Pink Tingle, a lemon-flavored white wine aperitif and forerunner of the wine cooler. The company bought grapes to supplement its own vineyard harvests and, by 1955, bulk wine production had reached 74,107 gallons and continued to climb in the following years. Yet, when Gaspare Indelicato passed away in 1962, the winemaking operation was still a small, struggling family affair. Anthony served as winemaker, Vincent as a sales representative, and Frank as cellar manager. The business took a significant leap forward two years later. In 1964, the Indelicatos had six giant, glass-lined concrete fermentation tanks shipped in on railcars from Texas, expanding the family's winemaking capacity to 403,000 gallons--triple the volume produced the previous year.

In 1973 the Indelicato brothers incorporated the business and renamed it Delicato Vineyards. Around the same time wine consumption began to accelerate in the United States. Smaller, well-known California coastal wineries that did not have the production capacity to keep up with the demand turned to Delicato. The company supplemented grapes from its own 120 acres of Zinfandel vines at Manteca, and 300 acres of varietals near Lodi, by purchasing fruit from the Napa, Sonoma, and Santa Barbara Counties. Delicato production soon surpassed the 1 million gallon mark. In 1975 the winery built a tasting room and corporate offices at the Manteca Vineyard.

The third generation of Indelicatos began working at the winery at the start of the 1980s. Delicato also raised its visibility in the local community. In 1983, the winery began its annual Delicato Charity Grape Stomp Festival during Labor Day weekend. Over time the tradition came to draw thousands who sampled wine, ate pasta, and participated in grape stomping, a time-honored grape-crushing technique. Meanwhile, the winery continued producing bulk wine sold under other labels with some limited bottling of varietal wines under a Delicato label. Several of its wines collected medals in wine-judging competitions. For its 50th anniversary in 1985, the winery brought in a winemaking consultant to help develop its 1983 Carneros-Napa Valley Cabernet Sauvignon.

San Bernabe Vineyard Purchase: 1988

By the mid-1980s the Indelicato family saw the market moving from generic, blended wine to varietals. Wine consumers wanted Chardonnay instead of "white wine" or Cabernet Sauvignon rather then "red wine." Delicato began to shift from growing and crushing grapes for generic-wine production to growing and processing grapes for the premium-varietal market. The first step came in 1987 when the company purchased 110 acres in the middle of a vast, 20-square-mile vineyard and ranch in Monterey County near King City. Delicato began building a winery there with a capacity to crush 40,000 tons of grapes. Then the following year it bought the entire 12,640-acre estate for an undisclosed amount.

Known as the San Bernabe Vineyard, the historic grape-growing property was developed according to a master plan and laid out in 212 vine blocks for efficient planting, watering, and harvesting. Wine industry experts believed the property's 8,100-acre vineyard was the largest contiguous vineyard in the world and estimated it contained more than a quarter of all Monterey Country grapevines. The previous owners, the Prudential Insurance and the Southdown Companies, had hired an independent farm management company to grow grapes and market them. Between 15 and 25 of California's leading varietal wine brands--including many boutique wineries in the Monterey area--had purchased their grapes from San Bernabe.

The Indelicato family believed the San Bernabe had the potential to produce varietal grapes and wines that could challenge the acclaimed offerings from the Napa and Sonoma Counties to the north. A year after the acquisition, Delicato began a gradual replanting of the vast vineyard. With its 13 soil types, 22 microclimates and extensive wells, reservoirs and canals, viticulturists had the luxury of matching grape varieties with environments that brought out the most desirable characteristic in the fruit and wine. Delicato eventually cultivated 27 grape varieties at the vineyard, most for commercial sale, and a few for experimental purposes. San Bernabe brought Delicato considerable attention and praise. In a Business Wire article, San Francisco-based wine industry analyst Jon Fredrikson called the purchase "a bold and brilliant move" and "quantum leap forward" for Delicato. "It follows the Indelicato family's strategy of shrewd, conservative management that controls production costs, allowing it to fit efficiently into the structure of today's wine industry and benefiting future generations as well," Fredrikson said.

Soon after, Delicato garnered some unwanted publicity. In the late 1980s, California's supply of Chardonnay and Zinfandel grapes began to shrink due a small harvest and growing consumer demand. With prices rising spectacularly, state authorities suspected that some grape-growers and brokers might exploit the situation by selling cheaper grapes and passing them off as more costly varieties. Delicato was among the wineries that unknowingly bought grapes in 1988 from a broker who misrepresented them. Delicato recalled and replaced the Zinfandel wine it produced, and cooperated with a U.S. Attorney's investigation. But federal authorities charged the winery with not keeping required records of the purchase after learning of the deception. In 1992, three Delicato employees pleaded guilty to record-keeping charges and the winery agreed to pay a $1 million fine. In the wake of the grape-swapping scandal, the winery also began including a controversial clause in its paperwork that required grape-growers and brokers to promise "under penalty of perjury" that the fruit they delivered was 100 percent consistent with a variety shown on delivery tags.

Developing Premium Wine: 1990s

Delicato entered the 1990s with Vincent Indelicato as new company president and ranked as the nation's 12th largest vintner. The winery located within the San Bernabe Vineyard had a capacity to produce 2 million gallons of wine. The Manteca Winery had been enlarged to produce up to 44 million gallons, and had an 11,000-barrel computerized aging warehouse adjacent to it. And Delicato's vineyard holdings continued to grow. In 1995 the company expanded its 1,250-acre Lodi vineyard--dubbed Clay Station--by buying 800 acres of the defunct Borden Ranch residential development for $2.7 million.

The Indelicato family had produced and marketed wine bearing the Delicato label since the early 1980s, but it was not until the 1990s that the winery made a serious push to move from bulk wine to its own brands of bottled varietals. In 1994, Delicato hired veteran California vintner Tom Smith as its chief winemaker. Two years later, in 1996, it introduced the Delicato Family Vineyards brand, an inexpensive, everyday table wine bearing a distinctive blue label. Eager to overcome its image as a bulk wine producer, Delicato also began developing an even higher-quality product, a brand featuring the distinct attributes of Monterey County fruit that could compete with North Coast wines. Made with San Bernabe grapes, the Monterra label debuted in 1993 in Delicato's tasting room. Wider distribution commenced in 1997, when the winery produced 5,000 cases of wine predominantly sold in the U.S. restaurants and wine shops, and select international markets.

By the end of the decade Delicato had become the fifth largest winery in California. It sent about 12 percent of its production to overseas markets such as the United Kingdom, Sweden, and the Benelux countries, and stood 10th among California wine exporters. About 90 percent of its total production volume still consisted of processing bulk wine for other wineries. Over 40 wineries bought Delicato grapes; its wineries crushed and processed about 12 million cases per year for vintners such as Beringer, Canandaigua, Robert Mondavi, and Sutter Home. Another 1 million cases appeared under the inexpensive Delicato Family label. Monterra production had risen to around 60,000 cases. At San Bernabe, Delicato sold about 80 percent of the crop on contract or custom-crushed the fruit for wineries such as Bonny Doon, Estancia, Kendall-Jackson, J. Lohr and Joseph Phelps. Smith reserved the rest of his prized San Bernabe grapes for the Monterra and Delicato lines. Meanwhile, Vincent Indelicato stepped down as company president and Eric Morham, the first nonfamily executive, filled president and CEO roles in 1999. And, signaling its intentions to compete in the premium-wine market, Delicato in 2000 opened an executive office in the California wine capital Napa, and retained a public relations firm there to help promote its brands.

Reaping the Awards

Delicato's efforts to become a source of premium-wine grapes and its own premium wines paid dividends in July 2001 when it was named winner of the "Best USA Wine Producer" at the International Wine and Spirit Competition. Smith and third-generation family member Chris Indelicato, received the trophy at a black-tie event in London. The winery also won a total of six individual wine medals, including a gold for its Monterra 1998 Merlot. Afterward, the San Francisco Chronicle singled out Smith as one of its "winemakers to watch."

The same year the winery debuted a third brand. During the late 1990s, Delicato embarked on what became known as the Halo Project, an effort to create world-class, ultra-premium wine. The result was released in 2001 when 5,000 cases under the Delicato Monterey Vine Select label, retailing for around $40 a bottle, were released.

More good news followed during the early 2000s. An A.C. Nielsen market research report identified the Delicato Family Vineyards brand Shiraz (Syrah) as the top domestic Shiraz brand in the United States and number three behind imported Australian brands Rosemount and Lindermans. The winery's 2000 Shiraz also won two awards at the California State Fair Wine Competition. Later that year Beverage Dynamics, a leading beverage merchandising publication, recognized both Delicato Family Vineyards and Monterra brands in its annual survey of beverage industry sales leaders. The publication noted that Delicato Family Vineyards had shown 27.6 percent sales growth over the last four years, establishing it as one of the three fastest-growing premium-wine brands in the United States. The Monterra brand, it reported, had shown 25.7 percent growth since it was introduced in 1998. Wine & Spirits magazine, a popular national consumer wine publication, also named Monterra and Delicato Family Vineyards "Value Brands of the Year" in their June 2001 issue. The recognition continued into the next year when the Indelicato family was honored at the 2002 Legends of California annual fund-raising wine auction and dinner for contributions to the state's wine and grape-growing industries. The award had previously been won by such heralded California wine producers as the Mondavi and Sebastiani families.

Principal Subsidiarieselicato Monterey Winery; Delicato Vineyards (LLC).

Principal Competitors:Golden State Vineyards; Bronco Wine Company; Arroyo Secco Vineyards.
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