(This was a group project)
The winery/vineyard industry in Oregon is highly competitive, especially in the southern part of the state, along the Interstate 5 (I-5) corridor. The weather and climate in this region make growing agriculture a potentially lucrative business, and because of that, there are more than 100 wineries between Roseburg and Ashland. Del Rio Vineyards, located right off I-5 in Gold Hill, Oregon, is one of the largest vineyards in Southern Oregon
As a vineyard, Del Rio grows grapes as a supplier for other wineries on nearly 1,000 acres in a region that is renowned for its climate. As a winery and winemaker, Del Rio competes for shelf space in stores with other local and regional wines. How does Del Rio stay competitive in an industry where large companies and small wineries compete for people’s palates? It is more than just making and selling wine; there is art, chemistry, and probably a little luck.
Del Rio Vineyards’ estate is on historic property with a colorful history. It has expanded and grown since it opened as a vineyard in 1997 and grows mostly Pinot Noir, Sangiovese, Cabernet Sauvignon, Syrah, Cabernet Franc, Merlot, Grenache, Pinot Gris, Malbec, Chardonnay, Viognier, Riesling and Muscat. Del Rio sells mostly its Pinot Noir to other wineries in climates that tend to be more wet. The recommended marketing plan includes continuing to target both Millennials and Baby Boomers with an emphasis on women, who, statistically, are the most likely to purchase wine. Highlights of the plan include expanding online presence with online events, converting the tasting room to meet new rules for physical distancing, and adding the option to include food pairing products to round out a take-out meal combination.
Objectives include increase profitability while addressing several potential threats, including the COVID 19 pandemic, potential smoke taint (caused from summer wildfires in Southern Oregon), and expanding its national markets by expanding and improving the wineries online presence and networking through social media and its Rio Club.
Budget recommendations include re-allocating funds to invest in technologies that may help decrease operation costs while increasing efficiencies, along with costs saved due to furloughed employees due to potential pandemics in the future, and cross training and, during harvest, use new strategies to maintain distancing protocols if required. That might include the use of more tractors. A single worker usually harvests a row, which can be hundreds of feet long.
Legal Name and Form
Del Rio Vineyards, LLC
Nestled in the hills of Gold Hill, Oregon, the Del Rio property traces its history as far back as the 1850s in the small community of Rock Point. John B. White, who fought in the Rogue Indian Wars from 1855-1856 and was given the lush land for his services in the battle, founded the small community (Del Rio Vineyards, 2020). White eventually sold the land to L.J. White, who constructed a hotel and bridge on the property. The Rock Point Hotel was completed in 1865. For the rest of the 19th century, the hotel was the centerpiece for the small community of Rock Point, which at this point had a post office and several homes. When the Southern Pacific Railroad decided to cut through White’s property, he moved to California, leaving the land and hotel to his wife and sons to continue to run.
By the turn of the century, F.K. Deuel and other investors purchased the hotel, and surrounding land, and turned the property into an 800-acre orchard (Del Rio Vineyards, 2020). Thanks in large part to the climate of Southern Oregon; Deuel was able to grow pears, apples, cherries, peaches, apricots, walnuts, and filberts. Del Rio Orchards flourished during the “pear boom” of the early 1900s, competing against the likes of Samuel Rosenburg and his sons, Harry and David Rosenburg, who founded Bear Creek Orchards in Medford. The Deuel family continued to own the orchard and hotel until 1997 when Lee and Margaret Traynham purchased the land. The Traynhams, with the help of Rob and Jolee Wallace, transformed the third-generation orchard into a wine grape vineyard. The previous hotel now serves as the tasting room. The winery is in the red barn, which previously housed the Del Rio Orchard’s fruit packing plant. Today, Del Rio Vineyards has more than 300,000 vines, 13 varietals, and 17 clones.
Since 1997, Del Rio Vineyards’ mission has been to grow premium grapes and make award-winning wine (Del Rio Vineyards, 2020). Del Rio’s slogan is “Great grapes, great wine, great times.” The historic and scenic property also plays host to several events and special occasions during the summer months, including a concert series, weddings, and parties.
Rob Wallace, a fourth-generation farmer from Arbuckle, California, oversees the property’s vineyard. The vineyard stretches high up into the mountainside and harvesting for most of the grapes, which requires knowledge, awareness, and skill, is typically between August and October, depending on the grape. If there are more birds around vines, the grapes are ripe. Rob’s knowledge of farming and harvesting is the key element to Del Rio’s success.
Jolee Wallace is the business and operations manager. She oversees the marketing of the vineyard and winery and handles the logistics as the grape distributor for vintners in Oregon and California. She serves on the District 6 School Board and is running for Oregon State Senate for District 2 in 2020. But there’s more to it than just growing grapes and making wine. Rob explains:
“We have the farming company, the construction company, the trucking company, a winemaking company, a distribution company, a retail company, an events center—I mean it’s a lot. We have teams that cover all of that and Jolee and I kind of oversee it without killing each other. We don’t just sell grapes and wine. We sell processing, farm work, bulk wine, private label work, all kinds of things. When they did freeway construction out here, it literally shut our tasting room down, but it didn’t slow down our business because we have so many different things going on. We have a lot of diversification and we have an extraordinary team that keeps all of that running.” (Daspit, 2019).
Jean-Michel Jussiaume is the winemaker for Del Rio Vineyards. Jussiaume, who is originally from Loire Valley in France, has been with Del Rio since 2008. Jussiaume grew up in a family of winemakers and started his career at 19. He completed a six-year program in winemaking and learned more about the trade traveling through Hungary, Australia, South Africa, and the United States. Jussiaume credits the terroir (the geographical location) of the vineyard's setting between the low mountains and the Rogue River as well as weather conditions for setting the vineyard apart. "Because of our grapes and being in the Rogue Valley we are able to produce great Pinot Noir and Pinot Gris," Jussiaume said (Bullard, 2014).
Fellow Frenchman, Aurelien LaBrosse, is Jussiaume’s assistant winemaker. Initially, LaBrosse was part of an internship program but has worked full-time at Del Rio since 2014.
Del Rio Vineyards is in Gold Hill, Oregon, right off the Interstate 5 (I-5) at exit 43. It's located in an area that has an ideal climate for growing, which also means there are a lot of wineries. The location, once called Rock Point, is highly visible on the freeway. The vineyard takes advantage of its prime spot by advertising with large billboards going north and south on I-5. There are disadvantages to being next to the freeway as well. When construction on the Interstate near Gold Hill occurred several years ago, the exit near the vineyard was closed, affecting traffic to the tasting room. Del Rio purchased the historic Birdseye Ranch, across from the river, about a half of a mile from its current location, in 2016. The 165 acres is where Del Rio planted its Pinot Noir grapes. These grapes are part of Del Rio’s distribution.
Del Rio Vineyards has been in business since 1997. It is known more as a distributor of grapes than a winery. With its purchase of the historic Birdseye Ranch in 2016, the vineyard continues to expand and grow. Del Rio Vineyards’ success as a distributor allows it to make and experiment with new wine labels and invest in marketing not only its wine but also the property itself.
Product or Services Offered
Del Rio Vineyards originally began operation solely as a grape distributor and is currently a distributor of grapes to other various wineries throughout the state. The vineyard started making wine in 2001 and renovated the Rock Point Hotel into a tasting room that same year, and then the estate winery was added in 2004. The capacity has gone from 28,000 gallons originally to over 600,000 gallons today (Daspit, 2019). Del Rio Vineyards bottles three labels: the original “Del Rio” brand, “Rock Point” which retails at a lower price point, and the “Jolee” label, which is more of a dessert wine. The “Jolee” is the biggest seller of the three labels (Daspit, 2019). In 2007, to reach a broader audience, Del Rio added a wine club membership to its website. Members can sign up online and pay a fee to get wine delivered to them quarterly.
Industry Size and Growth Trends
Worldwide, the wine market is enormous. According to one analyst report, the global market was trending positively over recent years, although growth was slow: “While volume and value advances in Europe are moderate, the U.S. continues to inch forward as the world’s most valuable wine market, worth $34.8 billion in 2017. France is the second most valuable market at $16.7 billion, followed closely by China at $16.5 billion. As with other products, China is expected to increase its consumption of wine going forward and overtake France” (Elfman, 2019, para 6). Other analysts report similar trends: “World wine consumption is stable and estimated at 246 million hectolitres. In the early 2000s, global wine consumption increased significantly and reached a peak in 2007-2008. Since 2009 consumption has been relatively stable” (Karlsson, 2019, para 13).
Technology is benefiting wineries across Southern Oregon, allowing for increase direct to consumer business, i.e. via the Internet, but also in other ways as outlined in a recent industry report: technology is utilized to improve production, predict yields, harvest, and package products(industry tap, 2019). Drones are utilized to manage irrigation, understand pest issues, and smoke damage. According to the Industry Tap news service, the use of compressed air by wineries, large and small, account for 36-68% of the energy consumption of wineries and is a critical technology allowing for wineries to meet a growing consumer demand.”
Oregon wines are playing well on the international stage. According to a Forbes report published in September of last year, Oregon wine sales are growing both in North America and internationally. Oregon wine sales expanded from $550 million in 2017 to $607 million in 2018 (Micallef, 2019b). They were buoyed by a 19% increase in direct-to-consumer shipments, according to the Sovos/Wines Vines Analytics 2019 Direct to Consumer Wine Shipping Report (as reported by JV Micallef, 2019b, para 6). Micallef explains that between 2017 and 2018 the Oregon wine industry experienced a 12% increase and the highest growth rate in planted acreage included the Umpqua and Rogue Valley AVAs.
The same contributor, Micallef, in an earlier Forbes report describes how the Rogue Valley AVA was established in 1991 and represents the driest and warmest vineyard geography in Oregon bordering the State of California and located 55 miles from the Pacific Ocean. This location provides a unique Mediterranean-like climate, irrigated by the Rogue River and its many tributaries. The following is his description of the unique qualities of a Southern Oregon Vineyards wines (Micallef, Jul 2019a):
“Grapes are picked at night, to reduce oxidation, by mechanical harvesters. The diurnal temperature variation in this part of the Rogue Valley AVA can vary from 15 to as much as 40 degrees F.
The resulting wine is very floral, with pronounced strawberry and raspberry aromas and crisp acidity. There is a slight carbonic maceration resulting in a cotton candy note. Rosé has great potential in the Rogue Valley. It’s surprising that its production isn’t greater or more widespread” (Micallef, 2019a).
Unfortunately, currently in spring of 2020, Southern Oregon is experiencing a severe drought (The United States Drought Monitor, 2020). This may have a negative impact on product amounts and quality through the remainder of the year, as conservation efforts are generally required at this level in agricultural areas. It also infers a greater risk of forest fires and potential smoke damage.
Wine has been around, seemingly forever, and cultural differences have as well. “As a species, we’ve been making wine or other grape-based fermented drinks since 7,000 BCE, nearly 9,000 years ago” (industry tap, 2019, para 1). After all the first recorded miracle of Jesus’ ministry was when he turned water into wine – clearly, it was a part of Jewish culture around at the beginning of the western calendar. Some cultures thrive around wine, others have banned it completely. The most established markets are in Europe, including places such as “…Portugal, Italy, and France (which) have the highest per capita consumption at over 35 liters per person per year” (Elfman, 2019, para 2). In China, studies indicate people enjoy mixing wine with soda, and it is one of the largest markets in the world due to its population along with the USA and France (Elfman, 2019).
Consumers preference for wines varies with age: baby boomers are currently the dominant consumer group for wine, Gen-Xers are the fastest growing group, and millennials are not as enthusiastic wine consumers as might be expected representing only 17% of the market– according to one industry report (McMillan, 2020). This may be in part to differing economic challenges faced by Millennials.
Two of the greatest threats to the industry have roots in both ecological and environmental sources. Environmental as outlined above and ecological or referring to living organisms may be a stretch of our understanding - as viruses do stretch our understanding of what life is. “But today, scientists do appreciate viruses as the simplest of all living life forms (Villarreal, L. P., 2008).” Environmentally, as related to global warming and the growing scarcity of pure clean water.
The most imminent threat is of ecological origin. These are unusual times, certainly unprecedented in our lifetime. The COVID-19 pandemic is having deleterious effects on the wine industry, globally, in the U.S., and no doubt in the Rogue Valley as well. Prior to March of 2020, the global industry was growing slowly; slow but steady. “A new report from Wine America – the national association of American wineries – reveals how the COVID-19 pandemic is affecting the US wine industry. The headline figure shows that the industry’s total financial loss in March due to Coronavirus is $40.4m” (Wilson, 2020, paras. 1,2). This is considered an under-estimate.
From a political view, it is interesting liquor stores and groceries are considered essential services even during the current pandemic. The code of federal regulations (CFR) defines and regulates what is considered wine as well as the AVA (agricultural viticultural area), in layman’s terms the specific and often unique geographical area of origin. The Rogue Valley AVA is designated in the CFR as a delimited grape-growing region of the United States, completely within the Josephine and Jackson counties of Oregon with distinguishing features (eCFR 2020, sec, 4.25). Chapter 9 of the CFR Title 27 provide the exact boundaries for the Rogue Valley AVA and for any wine product to be advertised or promoted as originating in this AVA it must be made from grapes, 75% of which must be grown in this AVA (eCFR 2020, sec 4.25, para 2i). The Rogue Valley AVA has a unique climate, soil, and weather patterns with differing microclimates well suited for several different grape varieties.
A strong economy is another important positive driver of the wine industry. The industry is sensitive to the economy, but different segments of the industry may be affected differently. For example, in declining economy wine will still be purchased but premium wines may not be as popular and may provide lower margins (McMillan, 2020). Much of the historical long-term growth of the industry over the past decade is attributed to a strong and growing economy. As previously stated, the COVID19 pandemic is already having a negative impact.
Winemaking is a competitive industry. In the state of Oregon, where the industry has been growing at a greater rate than the global average there are 793 wineries adding an average of 2 new wineries a month in 2018, with 24 new wineries (JV Micallef, September 2019). In the Rogue Valley, “There are 88 vineyards, 33 wineries and 37 tasting rooms in the region, most of which are found along the Rogue or on one of its three tributaries (Micallef, 2019a). Some of the best known include; Del Rio Vineyards, Pheasant Brook Vineyards, Kriselle’s, Cliff Creek Cellars, Agate Ridge, Steel Ox Vineyard, 2Hawk Winery, Irvine and Roberts, Valley View, Weisinger Family Winery, Eden Vale Vineyards, Pebblestone Cellars, Dancin Vineyards, Belle Fiore (one of my favorites), Augustino Estate, Cowhorn, Plaisance Ranch, Schmidt Family Vineyards, Troon Vineyards.
Appendix A provides data from several wine and winery rating services providing a sense of how Del Rio compares with other recommended wineries in the Rogue AVA. Given that there are over a hundred wineries in the RogueAVA, we chose a sample of some of the higher rated competitors for benchmarking purposes. Del Rio is less recognized than Foris winery based on searches on the Wine-searchers.com (international online market), but it is well recognized by local consumers via Yelp or the American Wine Guide online service. Del Rio is well positioned among other wineries recommended by wine critics and services for its wine scores, tasting room, service, consumer feedback (i.e. Yelp) and overall value.
Strengths (Internal): The Rogue Valley AVA and resulting unique flavors and climate for grapes is a strength. This provides a competitive edge that is not easily duplicated. Del Rio’s location and colorful history augment this advantage and can be leveraged, especially against newer entrants. Since it is also a distributor, which is an additional strength, this differentiates them from many competitors. Wine competition in Oregon is highly competitive and Gold ratings are difficult to achieve, although Del Rio, did receive a double gold in the 2019 Oregon Wine Contest for their Pinot Gris (2019 OWC).
Weaknesses, or areas for improvement (Internal): There may be opportunities to better understand consumers in growing and emerging markets and use direct marketing, especially as the COVID 19 Pandemic plays out – which may take years given the possibility of future additional waves.
Opportunities, what are the opportunities for the future? (External): Continuing to grow direct-to-consumer marketing especially across growing, e.g., U.S., and emerging, e.g., China, markets is an opportunity to increase sales. There may also be opportunities to expand the vineyards and widen distributions, as the Oregon wine industy has seen recent growth as previously outlined.
Threats, what threats are present? (External): In the near term, the current pandemic and resulting economic downturn is the greatest threat. The current drought may also impact production in 2019. This may also lead to a potential fire and smoke threat as well. As the economy returns, keeping an eye on all areas of technology advancements will become important to maintain a competitive advantage.
According to a report from the Wine Market Council in 2018, Del Rio's target market would more likely be the retiring population ages 54 – 72, which account for 34% of wine consumption, and well as those in the ages range of 24 – 41which account for 36% (Thach, 2020). Distinguished professor of wine, researcher, and journalist, Dr. Liz Thach, has helped determine that 40% of American adults consume wine. Of that, 56% account for women, and 44% account for men who consume wine (Thach, 2020). Also, wine consumption correlates to the individual's level of education. For example, 57% of American wine consumers held at least a college degree, and 60% of American wine consumers held a post-graduate degree (Conway, 2019). It is also shown that those who earn a higher salary are more willing to consume wine, as one study shows that 38% of Americans who make $75,000 or more will choose to consume wine as their preferred alcoholic beverage. Also, 34% of American wine consumers make an annual earning between $30,000 and $74,999 (Jones, 2015). Furthermore, 57% of wine consumers are married, 47% work full time (25% are retired), and 73% of wine consumers owned a home. Besides, according to the Wine Market Council, 71% of wine consumers were Caucasian (non-Hispanic), 14% were Hispanic, and 9% were Black/African American (WMC, 2017). Although there are varying demographics for wine consumers, Del Rio's Target Market consumer is primarily an educated, Caucasian, married woman. Furthermore, the target market is female between 30-60 years of age; they earn $75,000 or more a year, works full time, and owns her home.
Del Rio Winery has a historic property that is home to one of the most extensive vineyards in Southern Oregon. Although Del Rio Winery resides in Gold Hill, Oregon, it serves a wide range of the general population in the Rogue Valley. For those traveling via Interstate 5, Del Rio is a beautiful must-see and a must-taste vineyard with ease of access to their vineyard for wine tastings and events. At the entrance to Del Rio Vineyards, is the historic Rock Point Stage Hotel built-in 1864, renovated to serve as Del Rio's wine tasting room (Travel Oregon, 2020). In addition to the tasting room, those who visit Del Rio can enjoy a picnic area where they can relax and cherish the fantastic views of the vineyards.
Jackson County is the 6th most populated county in the state of Oregon, with 214,267 residents. The major racial and ethnic groups in Jackson County are White (81.2%), Hispanic (12.5%), and two or more races (3.0%). The median household income is $50,851 (Oregon Demographics, 2018). In Jackson County, it is estimated that about 51.2% of the population is female, and 48.8% are male. Although the average age is 42 years, 22.0% are aged 65 years and older, 20.6% of the people are 18 years and younger (Census Bureau, 2019), this concludes that 48.2% make up the remaining age group between 19-64. Based on people ages 25 years and more, high school graduates or higher make up 89.6% of the population, and those with a bachelor's degree or higher make up 27.4% of the community. There are over 20,226 firms in the Jackson County area, including 9,589 that are men-owned, 7,335 that are women-owned firms, and 2,185 minority-owned firms (Census Bureau, 2019).
From the east coast to the west, Del Rio Winery has distributors across the United States, and they also have distributors internationally, including Canada, Japan, and China. Del Rio wholesales its wine across the state of Oregon and Washington, offering the purchase of their wine in restaurants, markets, retail grocery stores, liquor stores, festivals (including the Oregon Shakespearian Fest), and many more locations (Trade and Media, 2020).
A recent study conducted in 2020 showed that while millennials are still consuming lower-priced wines, this generation has not progressed into premium wine consumers in the past five years and accounts for only 17% of the premium wine market (McMillan, 2020). Although the wine consumer target market is primarily an educated middle-aged woman, millennials may be drinking more affordable wines. However, 75% of millennials wish they could spend more on wine (Arthur, 2018). Arthur also mentions that "millennials are a key consumer group: leading the emergence of a 'golden age' for wine thanks to their adventurous attitudes and the desire to spend money on experiences rather than material items" (Arthur, 2018). The given reasons why a consumer will typically purchase wine falls into a handful of categories, including taste and smell, adequate health benefits, and the stimulating effects that alcohol brings to the body. According to one study, "wine has the uncanny ability to affect more of your senses. Wine can easily bring some pleasure not only to your taste buds but also to your sense of sight, as well as your sense of smell" (Edison, 2020).
Although millennials may be consuming more wine annually, regarding expenditures, the Gen-X and baby boomers are spending more on wine. For example, Gen-X spends approximately $5,717 on wine annually, baby-boomers spend $4,900, and millennials spend $4,163 (Arthur, 2018). Reason's for these statistics suggest that since Americans of higher socioeconomic status provide more of a higher annual income, they can afford and indulge more in activities and spending habits. Whether it is dining out with friends and family, celebrating with colleagues, or touring a winery, those who have higher socioeconomic status can typically afford to purchase wine whenever they want.
The wine market potential is quite extensive. According to one study, "the global wine market is estimated to grow at a compound annual growth rate (CAGR) of 3.7% during the forecast period. The wine industry valued at $157.6 billion in 2018, is estimated to reach $201.2 billion in 2025" (Wood, 2020). Although drinking habits and trends change over the years, we have determined that millennials ages 24 – 41 account for 36% of wine consumers, and baby boomers between the ages of 54-72 account for 34% of wine consumers. Similarly, studies also found that women account for a little over half of the U.S. wine consumption at 56% (WMC, 2018). We have also seen that the generation-x spends approximately $5,717 on wine annually, baby-boomers spend $4,900, and millennials spend $4,163 (Arthur, 2018)
The consumption of wine has been on the rise across the United States. For example, the Wine Institute of the U.S. saw an increase in wine consumption of 919 million gallons in 2015 to 966 million gallons in 2018. Furthermore, wine holds 28% (of volume) in the overall alcoholic beverage consumption across the world (Wood, 2020). Overall, this information is good news for Del Rio Vineyards, since the mean age for the Jackson County area is at 42 years and that 51.2% of the population are females. Based on the provided information, it is evident that the purchase of wine and its consumption will continue to grow primarily through the help of women, millennials, as well as baby boomers, who will continue to help sustain the wine business in the years to come.
Consumer Purchase Process
The process of purchasing Del Rio wines can require as high or low involvement as each customer desires. Consumers who are looking for a local winery can easily find Del Rio through several channels whether it is finding information on wine country, through an online search of "top things to do in southern Oregon," finding Del Rio Vineyards through an article in the Wine Enthusiast Magazine or finding one of Del Rio's wines in a local retail store across Oregon and Washington.
On top of finding Del Rio's wine in distributor centers across the United States, Del Rio offers a link on their website that will guide their customers to a page with a list of all of their wholesale customers in Oregon and Washington. The customer can choose to purchase any available wine on the website, which will be shipped directly to their address. Del Rio also provides "Rio Club" membership where friends and loyal customers are offered the best wines at the best price. The Rio Club provides an ongoing relationship where, every quarter, members receive three bottles of Del Rio wine and an enlightening newsletter with suggestions for pairing the wines with food (Del Rio Vineyards, 2019).
To make the purchase more of an experience rather than just the purchase of a product, for a local wine enthusiast, Del Rio Vineyards offers tours to join them at their historic landscape. Customers can also settle in for a family picnic with a lovely view of the vineyard or join in for tastings of their delightful wines at their rustic facility that was once the Rock Point hotel. After these activities, customers can place their orders on the bottles that they liked the most, and their decisions are usually "educated" impulse purchases based on their tasting experience.
For those who are unable to attend Del Rio's location for a wine tasting, or for those who cannot purchase at any of their distributors, Del Rio Vineyards has a user-friendly website that will educate their customers on the variety of wines. On the website, Del Rio offers "factsheets" that will provide plenty of information that may help fulfill the wine tasting experience. For example, according to the factsheets about Del Rio's 2019 Grenache Rose, "This rosé's elegantly strawberry pink color was achieved by limiting the skin contact to only 4 hours at 40°F before being gently pressed and allowed to ferment in stainless steel tanks. This approach elevates the very floral style" (Del Rio Vineyards, 2019). These descriptions may help the consumer ultimately decide on what wine to purchase.
Part of Del Rio's establishment embodies the focus and value on family and the community. In 2016, near the base of the 300-acre vineyard, Jolee Wallace started a Zinnia flower farm where guests are welcome to pick flowers from dusk to dawn for themselves or others. However, there is a "flower it forward" policy, where according to Del Rio Vineyards, "for every bouquet you pick for yourself, you pick one for someone else. Share with someone in a care facility, a friend in need, or a stranger who might benefit from a smile" (Zagar, 2018). This activity is ideal for Del Rio's target market, who may be interested in wine, with the possibility of bringing home some fresh flowers.
Although the impact of the current epidemic of COVID-19 has put social restraints on gatherings, Del Rio Vineyards continues to offer a smooth purchase process for their local customers. Del Rio Vineyards mentions that their tasting room will remain open during the time frame of 11 am-5 pm for wine pick-ups only and for the wine to be delivered to the customer's car. Furthermore, Del Rio makes the purchase of wine relatively straightforward: the customer can either call ahead to place an order over the phone, send an email, or visit their website for an online request to be shipped anywhere within the U.S. (Del Rio Vineyard, 2020).
Choosing a wine can become a complicated experience for some consumers, especially if they do not know what they want or are faced with a wide variety of wine options. In the combat to increase performances, companies have spent much money to try and recognize their consumer's needs through assessment of surveys and intelligent analytics (Lowengart, 2006). However, further research and studies have shown that tasting wine is still one of the best tools for wine selection. For example, one study found that "along with price promotions, wines are often offered for tasting, because consumers report they like to know how a wine tastes before buying it. Lockshin measured the effect of free wine tastings on sales before, during, and after the tasting period. Free tasting improved sales on the day by over 400% compared to before and after the tasting" (Lockshin & Corsi, 2012). In conclusion, the best approach to fully grab consumers and to increase wine sales is to offer wine tastings and to educate the customer.
Del Rio is not only a vineyard (Business to Business) but also a winery (Business to Consumer), that was established in 1997 in a highly competitive area where more than 150 wineries are offering more than 70 different varieties of wine (Southern Oregon Wines, 2020). In 2001, Del Rio Vineyard became a winemaker while growing thirteen varietals including, Cabernet Franc, Cabernet Sauvignon, Chardonnay, Merlot, Pinot Gris, Pinot Noir, Red Blend, Rosé, Sweet / Dessert-style, and others. Del Rio Vineyard also supplies premium wine grapes to more than twenty vintners in Oregon and California. More than 300,000 vines produce a diverse selection of grape varieties.
As a grape distributor, Del Rio produces a specialty product. The most popular grape is Pinot Noir, which is primarily grown on the property purchased by the Del Rio in 2016. As a grape distributor, Del Rio must target specific markets and utilize resources, including online portals and marketplaces, to quantify marketing and sales leads. Those who are familiar and loyal to Del Rio’s brand will purchase bottles from the estate or a store. With the reputation as a premium grape grower cemented, the Del Rio vineyard was able to add 300 acres to its Gold Hill estate in 2015 to accommodate the growing need for its grapes (Stiles, 2016).
Del Rio Vineyard produces a shopping product with its wine, as more selective people will purchase a bottle while comparing with other labels on shelves. Del Rio’s wines are more expensive than a lot of wines in grocery stores (averaging between $22-$40), so branding and vintage are essential. Rob Wallace stated:
“‘Think about rice or beans on a store shelf. There will be two brands with one priced 5 cents higher than the other. You take wine and there will be dozens of bottles.’ The price range will vary greatly, and marketing will help determine buying habits, he said, noting the popularity of Trader Joe's legendary Two Buck Chuck. ‘If people didn't think it was good wine, it wouldn't sell," he said. “Quality is going to dictate demand.’” (Stiles, 2016)
According to business executive, Jean-Michel Valette, wine has many brands and labels, it’s produced from many regions and varieties, and unlike other products, it is sold based on vintage. Del Rio Vineyards’ winemaker, Jean-Michel Jussiaume, works according to these principles. “I barrel age red and white wines according to the vintage and its potential. In any case, I do not try to overpower the fruit of wines. To achieve the aging that suit the wine, I select oak from France, Hungary and America. I also used lees aging, Malolactic fermentation, and different techniques of maceration and yeast strains to create several nuances into the wines (Del Rio Vineyards, 2020).”
Wine commonly employs stories for marketing, and it is sold at a much more extensive range of price points than other products. Valette cited two key things that are not different about wine: It is bought and consumed by the same consumers who buy other products, and the fundamental laws of economics are the same for wine as for other consumer products. (Rieger, 2017). Winemakers may use a heavier glass or thicker paper for their labels or paid a professional to design their brand or use a more expensive cork as a way to entice consumers and justify quality and price point.
Del Rio tries to sell the experience as much as it does its wine. Not only does it market the vineyard, but also the estate, which was built in 1864. Del Rio differentiates itself from the competitors with its rich history as much as its grapes and wines. When a consumer walks into the old stagecoach hotel, not only do they get to taste Del Rio’s wine, they also learn a small tidbit of Southern Oregon history, which Del Rio uses as its brand and in promotional purposes.
Setting a price in the wine industry is perhaps the biggest challenge for vintners. Each grape harvest has its own fixed cost, which cannot be decreased. If a small or limited quantity of wine is produced, fixed costs can impact the price of a single bottle. Winemaking techniques also play a role in the price.
Jussiaume, like winemakers around the world, uses a complex biochemical process, or fermentation, to transform the grapes into wine. Each winemaker performs this technique a little differently, which can affect the cost. This is proprietary information because each winery performs this process a little differently. The region’s climate is also unique, and unlike any area in the state because of the mesoclimate, which leads to a better quality of grape. In this case, the pricing is often based on the quality-inferences of the grape and the vintage of the wine. This is why Del Rio Vineyards’ wine, along with a lot of brands in Southern Oregon, are priced higher than bottles in other regions.
According to findings on surveys of what consumers recall buying, or disappearance data from the United States Department of Agriculture (USDA), a Oregon State University-Purdue study, entitled “Demand Elasticities for fresh fruit at the retail level,” Grapes were the most elastic of the fruits analyzed at between -1.62 and -1.67, while it will probably come as no surprise to produce executives that bananas were the most inelastic at -0.9-0.98 (Ogg, 2019).
In a 2019 preliminary report put out by the University of Oregon, overall average price per ton of grapes in Oregon decreased $23 (‐1%) and median price per ton increased $38 (+2%) when comparing the state figures to 2017. The highest three highest median prices were for Cabernet Franc ($2,558), Cabernet Sauvignon ($2,500), and Pinot noir ($2,436). The lowest three median prices were for Müller Thurgau ($1,000), Gewürztraminer ($1,250), and Riesling ($1,427) (Oregon Wine, 2019).
One final factor is Del Rio must purchase goods and services from outside vendors, and these costs affect the price of a bottle as well. To stay competitive from a price-point vantage in grocery store shelves, Del Rio added a new brand label called Rock Point, where these bottles sell between $7 to $10 less than the Del Rio labels.
The winery estate location along Interstate 5 provides greater visibility as competitors tend to be tucked away in different areas of Southern Oregon. The Vineyard is in an area that is highly saturated with large and small wineries and vineyards. The first winery in Oregon, Valley View, was established just outside of Applegate by pioneer Peter Britt in 1850 (Valley View, 2020). The Valley View winery is still operating today. Having direct competition so close creates more challenges for Del Rio to control space in the marketplace.
The Oregon Wine Board estimates that somewhere between 24 and 44 new wineries open every year, and large, outside investors continue to buy large chunks of established properties because of the soil and climate of the Rogue Valley (Milshtein, 2020). Del Rio Vineyards has been an established supplier of premium grapes to winemakers across the globe since 1997. In 2001, when they became winemakers, Del Rio transformed the large barn on the property, which served as a packing plant for the former orchard, into a large winery.
The estate has rows of quality grapes that stretch up in the mountainside, with a large percentage of the grapes being sold in bulk to other vintners.
How is the product being promoted? What types of media are being used? What is the core message being sent? Keep in mind there are four types of promotion: advertising, sales promotions, personal selling, and publicity. Address each. Word of mouth (WOM) is not promotion! You do not pay for it nor do you have any control over it. It can work against you faster than it can work for you. WOM works wonderfully if it's positive, but do not rely on it. Be more proactive. Consider what you can do to encourage the spread of positive WOM. Tell me about that instead. Include a budget for the next six months.
Del Rio Vineyards is active on popular social media platforms often promoting events on the estate or providing educational videos and endorsing new products. The vineyard’s location off Interstate 5 allows it to utilize large billboards for northbound and southbound travelers. In addition to leveraging their self-pick flower farm for promoting the winery, Del Rio typically plays host to several events during the year, including a summer concert series, where musicians from around the region come and perform, where concertgoers listen to good music while sipping on Del Rio wine (Del Rio, 2020). The vineyard also leases out its property for weddings, parties, and other outside events. However, because of COVID-19, Del Rio, like businesses across the globe, has had to adapt to the times. They have had to postpone recent events. That has not stopped them from inviting folks to purchase wine and have it delivered to their car, or shipped to their home (Del Rio, 2020).
Del Rio annually puts its wine in the Oregon Wine Competition. In 2019, the 2017 Pinot Gris won a Double Gold (Oregon Wine Experience, 2019). Del Rio uses the award in promotions.
As distributors, the sales and marketing team can point to the fact that the owner, Rob Wallace, is a fourth-generation farmer, and the vineyard has more than 300,000 vines, 13 varietals, and 17 clones in an area that has a stellar reputation for farming, growing and harvesting, which it details on its web site and other promotions. Like business world-wide, Del Rio has had to adjust the way it markets and promotes because of the recent pandemic. For the next six months, it will continue to market itself as a grape distributor and focus less on the event and tasting room promotion. Like many businesses, one can assume, it will affect its net profit.
In the summer of 2018, as the Southern Oregon region was devastated by wildfire and heavy smoke, Copper Cane, a winery based in the Napa Valley, canceled contracts to buy 2,000 tons (1,814 metric tons) of grapes just as the annual harvest was getting underway in Oregon. The value of the grapes totaled $4 million. If they went unsold, harvesting crews would be out of work, and earnings and profits would not be pumped into the local economy (Selsky, 2018). The Southern Oregon wineries were bailed out by King Estate Winery, from Lorane, Oregon, in Lane Çounty, and Willamette Valley Vineyard, in Turner, Oregon, at full contracted rates (White, 2016). Will local vineyards be bailed out again if the area is inundated with smoke? The summer of 2020 could be another smoky summer, and a burden for grape growers in the Rogue Valley, thanks to a dry winter (Weather.gov, 2020). Like most farmers in this region, Rob and Jolee Wallace know the risks and rewards of growing agriculture in this region. Farmers and vintners rely heavily on the climate for a successful crop. It takes skill, like understanding grape growth, management, pruning and pest management, and in some cases, luck, like avoiding smoke from wildfires. Smoke taint is considered relatively rare and will not automatically affect wineries and vineyards near a fire. However, unharvested grapes that have been through the color change or ripening process – known as veraison – are most at risk, and it can be hard to spot problems before fermentation (Mercer, 2019). Smoky skies in Southern Oregon have been commonplace in recent summers, while smoke taint has not been an issue with local vintages in the past, the 2018 harvest was nearly a financial nightmare. In the likelihood that its grapes are damaged, or other target markets are concerned about smoke taint in the future, Del Rio Vineyard has insurance to mitigate crop losses (Stiles, 2018) as a short-term solution.
In 2018, researchers at the University of British Columbia were working on problems related to quickly and accurately determining smoke-taint potential before harvest and protecting the grapes from smoke damage in the first place. They tested the protective sprays two years in a row, demonstrating that they could effectively block compounds from entering grapes. Since the spray is already approved for use on other agricultural products, including cherries and blueberries, they foresee few regulatory roadblocks, even if this is an off-label use (Alley, 2020). Del Rio Vineyards would benefit significantly from this spray once it hits the mainstream market as a long-term solution for an ongoing problem during harvest in the late summer.
As a grape distributor, Del Rio Vineyards grows 13 varieties, most notably, Pinot Noir. Two of Del Rio’s main competitors in Southern Oregon are Valley View Winery in Applegate and Roxy Ann Winery in Medford. Valley View Winery concentrates on just six grape varieties, Cabernet Sauvignon, Merlot, Viognier, Syrah and Tempranillo (Valley View, 2020). Roxy Ann has 12 varieties on its estate, Cabernet Sauvignon, Cabernet Franc, Merlot, Malbec, Syrah, Petite Sirah, Tempranillo, Pinot Noir, Pinot Gris, Sauvignon Blanc, Chardonnay and Viognier (Roxy Ann, 2020). The climate in the Rogue Valley, which averages just 18 inches of rain a year (Weather.gov, 2020), makes the area more production oriented. Wineries closer to the coastal area and even in the Willamette Valley, which are the wettest and coldest parts of the state, have difficulty growing and harvesting grapes because the rainfall makes it difficult for them to ripen. This is what differentiates Del Rio from a lot of its outside competitors and why wineries rely on vineyards in the Rogue Valley for certain varieties of grapes and can continue to be a long-term objective for the estate. Though grapes can be grown throughout Oregon, they are considered temperate zone plants, requiring a cold winter to meet chilling requirements and a warm growing season (150 to 180 frost-free days) to develop and mature a crop (Strik, 2019).
Del Rio could also review the varieties grown and adjust annually to ensure an optimized variety mix to decrease smoke damage/losses risk. Weather in any given year will always affect the quality of the crops, and to some extent, much will remain out of the control of the growers, so there will remain a need for insurance. Good insurance companies will work with the industry and customers to find and implement ways to decrease risks and often provide discounts on insurance for those who take such measures and demonstrate better track records.
With COVID-19 affecting businesses across the globe, as a winemaker, Del Rio Vineyards continues to operate its tasting room in creative ways. For its target market, consumers loyal to the Del Rio brand, they can drive to the vineyard’s tasting room and have wine delivered to their car. One short-term solution for a winery, like Del Rio Vineyards, during these modern times, would be to include take-and-bake options, where food that can be paired with wine is available for purchase. Del Rio Vineyards also has an online store where it sells all labels. With tasting rooms closed due to COVID-19, several local wineries have reported that internet sales have increased since the pandemic restrictions went into place (Boom, 2020).
Another marketing effort as we deal with these challenging times, Del Rio could donate proceeds of wine sales to organizations, like ACCESS. The pay it forward option also helps community outreach. Marketing efforts in the past have included playing host to a concert series in the summer, special events, like dinner under the stars, where, for $85, patrons can sip on Del Rio’s wine and enjoy a catered dinner on the vineyard's grounds. With COVID-19 rules and regulations in place a short-term solution would require Del Rio to adjust with the times during these events.
Typically, before COVID-19, Del Rio set up a booth in many local events, grocery stores, and Saturday markets, where potential customers sip on the wine and purchase a bottle. In 2017, as a long-term solution to compete with less expensive wine on grocery shelves, Del Rio Vineyards established another label, Rock Point. Its most popular wine remains Rose Jolee, a co-fermented confection of Muscat, Riesling, and Cabernet Franc, which can be purchased for $15.
In 2016, Del Rio Vineyards purchased the historic 165-acre Birdseye Ranch for $2 million, where it planted Pinot Noir, which, according to its web site, the grapes will be exclusively sold to other wineries. Long term, Del Rio Vineyards should expand its winery or purchase more surrounding land to grow more varietals and continue to supply grapes to other wineries throughout the region. The location of its vineyard in the Rogue Valley will help sustain Del Rio as a supplier of grapes, especially the Pinot Noir, which was initially planted by Jacksonville pioneer Peter Britt in the Applegate area in the 19th century. Today, Pinot Noir amounts to 44 percent of the total vineyard’s acreage. Most of these grapes are sold in bulk to wine producers. Pinot noir, when cropped adequately on the right sites, can have a distinctive aroma and flavor profile (Micallef, 2019).
One final long-term objective could include decreasing and ongoing operational costs by two percent each year through continued innovation and technologies, like solar power for warehouses and offices. Also, setting up wholesale bidding sites/processes to optimize profits for distribution to wineries, or improvements in shipping resources, pooling resources with wineries purchasing grapes to advertise to broader markets with co-promotional activities.
EVALUATION OF MARKETING STRATEGY
As one of the most extensive vineyards in the Southern Oregon region, Del Rio Vineyards will continue to have a significant advantage as a grape supplier. Many regions in the state struggle to grow specific varietals because of the climate. Southern Oregon is a world-class viticultural region, presenting complex geology and terrain and mesoclimates, which lends itself to the production of a broad array of quality grapes from both cold and warm climates (Micallef, 2019). As a supplier, especially the Pinot Noir, and that Rob Wallace is a fourth-generation farmer who has a keen understanding of growing and harvesting, this is Del Rio Vineyards’ value proposition and competitive advantage against grape growers in regions outside of southern Oregon. When harvest time comes, wineries will use new strategies to maintain distancing protocols if required. That might include the use of more tractors. A single worker usually harvests a row, which can be hundreds of feet long (Boom, 2020).
Because Del Rio is a successful grape supplier, it has allowed the company to become a winemaker in 2001 and compete in a heavily saturated market. If Del Rio Vineyards were exclusively winemaking, the price point alone would leave it at a significant economic disadvantage because many wines in grocery store shelves run between $10 to $15 less than Del Rio’s brand. Del Rio wine is also almost exclusively sold in Southern Oregon. Del Rio Vineyards' label is at a disadvantage outside of the southern Oregon region because people are unfamiliar with the wine. Consumers are only loyal to brands they know and can taste. For example, Del Rio wine struggles to compete against Willamette Valley Vineyards in the northern part of Oregon because wine enthusiasts know and are familiar with Willamette Valley Vineyards’ brand. Setting up distribution outside of the southern part of the state might generate more interest, but it would also be costly. Perhaps Del Rio has investigated this and decided it is not worth it to compete with wineries in the north.
Del Rio Vineyards will need to adapt to a brave new world, one with the SARS-CV2 virus. They will need to make marketing adjustments, at least for the immediate future, and possibly longer than anyone would like. The problem is how to continue to grow its business in a world where physical distancing requirements may hamper promotion via live events and tasting rooms. Solution: help maintain social connections while physically distancing! With the “Phase 1” reopening of Jackson County approved recently, Del Rio Vineyards posted on its social media accounts offering tastings of its wine outside (weather permitting) with social distancing measures and protection in place, but still offering a curbside pickup from the property. The Baby Boomer generation and Millennials, as well as women, are large growing markets for wine consumption (McMillan, 2020). Millennials are also avid internet users, and Baby Boomers are among the fastest-growing segments for internet use as well as buyers and influencers (Census, 2017). In 2005, Del Rio added a Rio Club membership to extend its reach. For a fee, people nationwide can become a Rio Club member and have wine shipped to them quarterly. Del Rio’s website and direct sales should target this market with information of how wine benefits the consumer. For example, a glass of Merlot, in moderation, from Del Rio can provide health benefits, thanks to powerful antioxidants in red wine called polyphenols.
Like many businesses, Del Rio Vineyards will have to market itself during the pandemic. The messaging remains the same, but the interaction has changed, which means marketing in the past with concerts and catered dinners, to extend its brand, need to be adjusted. Offering take-and-bake options pair with Del Rio wine is one option that many wineries have been doing (Boom, 2020).
Del Rio Vineyards has become a significant player in the Southern Oregon wine scene since it was established in 1997. Thanks to the climate of this region and its ability to grow and harvest 13 varietals, Del Rio has a firm foothold as a major supplier and winery. As a winemaker, it continues to win awards in the Oregon Wine Competition and has a robust, loyal following. The price-point of Del Rio’s wine does leave it at a disadvantage in grocery stores, however, against smaller producers. A bottle of Oregon wine costs between $20 and $40, far greater than the $10 the average consumer pays.
These small producers — which make up 70% of Oregon wineries, according to the Oregon Wine Board — contend with labor shortages, shrinking distribution channels and regulations that complicate out-of-state sales (Milshtein, 2020). A report found that Oregon wineries shipped almost 100,000 more cases directly to U.S. consumers than neighbors to the north, despite the industry being less than two-thirds its size. The report also found that more Oregonian wine is being shipped to more Oregonians than ever, citing a 24% increase since 2018 (Milshtein, 2020).
Forecasting for the next five years, Del Rio Vineyards should position itself even more as a significant supplier by expanding its vineyard. As a wine producer and distributor to grocery outlets and restaurants, Del Rio Vineyards’ brand will continue to grow. This will allow it to experiment with new labels and differentiate itself further with an even more substantial marketing budget that many smaller wineries do not have. For that reason, Del Rio will continue to be a leader in the industry.
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