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By September 16, 2015 0 Comments Read More →

Beverage Diversification Key to Success in Competitive Marketplace

By Elizabeth Hans McCrone

Cross Beverage BrandsThere’s little doubt that the alcohol beverage industry is shifting. Consider this:

  • Tasting room menus in upstate New York are as likely to offer craft beer samples as Riesling or Cabernet Franc these days.
  • A well-established vineyard in Ohio became the first in the state to add a craft brewery to its operations, resulting in exponential growth.
  • In northern California, a Sebastopol winery brewed its first batch of craft cider in 2014 and now can’t keep up with the demand.

If these stories are any indication of what’s driving current alcohol beverage consumption, wineries that heed the call to diversification may be the ones positioning themselves for future success.

Take Chris Condos of Horse & Plow, an organic, biodynamic winery in northern California, for example.

Condos and his wife Suzanne, both winemakers, began their company in 2008 with a commitment to sustainability and to high quality, hand crafted wines. They started out with a modest production of 600 cases, which has grown to more than 4500 annually. They’ve enjoyed their achievements and pride themselves on sourcing organically grown grapes from Sonoma, Mendocino and Napa counties.

The couple was in for a real surprise when they purchased a 75-year old Gravenstein apple orchard in the Sebastopol area in 2012 and decided to try their collective hands at cider making.

“It started out as a little home, fun project that we could do out of our barn,” Chris recalls. “Our first commercial vintage was in 2014. It was crazy how successful it was.”

According to Condos, “demand is way outpacing the supply for cider, especially micro-ciders.” Horse & Plow made 500 cases last year; they will double their production this season. But Condos doesn’t see the recent popularity of cider interfering or competing with his wine business. Indeed, he’s optimistic about the overall concept of diversification.

“No, I don’t think people are giving up wine for cider,” Condos attests. “I think more people are branching out from beer to cider… cider and beer are linked up.”

“Diversity is a great thing on the agriculture side,” he goes on to say. “It’s a benefit to have apples and grapes instead of the monoculture of just vineyards or just apple orchards … the more people that are making cider the better. The competitiveness will only help the industry to produce better ciders.”

In the northern foothills of the Catskills Mountains near Charlottesville New York, the KyMar Farm Distillery has begun its own version of branching out, not from wine, but into it.

Quote Winery Got BeerThe company, which makes apple brandy, apple brandy liqueur and a sorghum-based spirit, has been distilling since 2011. According to co-founder and distiller Ken Wortz, when KyMar Farms went full-time and opened a tasting room, the need for beverage alternatives became obvious.

“It became important to have at least a couple of wines on the menu,” Wortz says, “so we could attract, say, a husband and wife, one who likes wine and one who likes spirits.”

Wortz and his team set about bringing in some Chardonnay and Cabernet Sauvignon grapes from New York’s Niagara region to address the issue. The results have been distinctly positive.

“It’s perfect,” he affirms. “We honestly do have something for every palate and taste.”

Like Condos, Wortz is encouraged by the growth of craft brewing industry and the nationwide implications that it has for his business.

“The current numbers show that craft brewing accounts for 15 to16 percent of all beer sales,” Wortz testifies. “The craft brewing industry is driving people toward acceptance to try other products. Craft distilling is less than five years old, really. Give it another 15 years. It would be nice to see craft distilling take that much of the market share.”

Market share is also on the mind of Tony Debevc Jr., the Managing Partner and Head Brewer at Cellar Rats Brewery in Madison, Ohio.

Cellar Rats Brewery is an offshoot of Debonne Vineyards, a winery that has been in Debevc’s family since 1916. Debonne boasts that it is the first winery in Ohio to add a brewery to its operations, which it did in 2008. Debevc, who is also VP of Operations at Debonne Vineyards, says the brewing was his idea.

“Beer was something I wanted to do,” Debevc admits. “You can only get so creative with a Chardonnay or Cabernet. With beer, you can get it done in 28 days and there’s so much variety … wine barrels, fruit barrels, different kinds of hops. … Every brewer across the United States is like an artist. It’s like their own rendition of a painting.”

Debevc notes that the addition of 10 craft beers to the 23 wines on the menu has fueled the family business in a big way.

“We have people who come to visit the winery and say ‘let’s just stay here. They’ve got beer.’ It hasn’t taken a hit on wine sales … it’s really gotten to where one goes with the other.”

Debevc does express concern about what he calls the “bursting of the craft beer bubble.” Citing a market that’s currently saturated with artisan beers, Debevc worries about shelf space competition for his company’s off-premise sales.

“If that sku isn’t making the average numbers for that (shelf) spot, you’re out and another guy is in,” Debevc warns. “With craft beer there’s zero customer loyalty. It’s getting cut throat because there are so many options.”

If the New York State Liquor Authority’s (SLA) numbers are correct, they bear out Debevc’s assessment that craft brewing across all categories is on the rise, creating more consumer options – and competition – than ever before.

The SLA reports that since 2011:

  • Farm wineries in New York have grown by 60 percent.
  • The number of micro-breweries has grown by nearly 200 percent
  • Cider producers have increased seven-fold, from 5 to 35.
  • Farm distilleries have increased from 10 to 78.

Jim Trezise, President of the New York Wine and Grape Foundation, recently submitted a paper to a wine marketing conference panel outlining his beliefs that such competition should be perceived as good, rather than threatening, for business.

In the document (emphasis his) he sums it up this way: “Consumers, especially Millennials, like to have choices in the beverages they drink, not only among brands within a category, but across categories.

“Some tourists visiting winery tasting rooms simply do not like wine, but they do like beer, spirits or cider, so giving them options can increase tourist traffic and revenue.

“On policy issues, 90% of the time the four categories are in agreement and can present a much stronger united front than just one (like wine).

We can choose to either expend negative energy trying to minimize the opportunities for our “competition” or pool positive energy creating a bigger pie for everyone.”

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