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Reluctance to Retail

When Matt Francke was working for Orfila Winery, trying to get San Diegans to buy San Diegan wine, he felt hampered by the fact that "the winery didn't want to be in any retail." It's a common enough tactic for a winery seeking to build a reputation — retail sales outside of the winery generally mean wholesale sales to a distributor, who then sells it to the retail establishment. And once you put your wine out there at a certain price wholesale, you give up a measure of control over the retail price. If the retailer can buy whole bunches of product from the wholesaler and so get a deep discount, the retailer may choose to pass the savings along to the customer in the form of lower retail prices than you had planned. (Or the wholesaler might sell the wine to retailers with less cachet than the producer would prefer.)

It's different with restaurants. In a restaurant, you can almost always count on a certain degree of markup. But out there in the marketplace, not so much. Given the persistent connection in the consumer mindset between quality and price, it might not be worth it to see your $20 premiere bottling — available on restaurant wine lists for $44 — on the shelf for $15.99. This may be especially so if you're a small producer, one who counts on each bottle to bring in a certain number of dollars.

"I don't agree with that at all," says Francke. "Especially if you want to get your name out there. I think retail is a very important part of that when you're just getting going." It's not a debate that's likely to end soon, although it is interesting to note that Francke recently became the owner of San Diego Wine Company, a store known for its aggressive pricing — their motto is "The best wines, the lowest prices." The shop operates on volume — if you move a ton of product, you can afford lower margins, and that means lower prices. It's a concept that appealed to Francke from the day he discovered it back in 1993, when he was still selling for Orfila Winery. Five years later, he started working for Tom Kowalski, San Diego Wine Company's original owner. As of this past November, Francke owns the place and has no plans to fix what ain't broke — though he may not be above a bit of tinkering.

Thanks to connections made through his uncle, a California wine-biz veteran, "I've talked about some new boutique wineries coming on board," he says. "But this is not going to become a bottle shop. We're still very happy to sell a $4.99 bottle of wine. It takes us literally 100 wines to find a really good $4.99 bottle. And I'm still going to expect the guys on the floor to be fully knowledgeable about the wines. With the exception of the wines we get only a few allocated cases of, we taste every wine that comes into the store. Today, we'll line up 40 wines. I'll go through them in about ten minutes — the old sniff, swirl, and spit, just to get an initial take. Then all the guys come up and taste them, and we get together and see if we agree on them. If the opinion is split, it's a question of 'How passionate are you about this wine? Are you going to sell it on the floor? Because I'm not crazy about it, and so you're responsible for moving this wine. '"

"The guys" include longtime staffer Mark Fratta and regular part-timer Alex Daniels. And of late, Rich Potenza, who came up from the Wine Bank downtown. "It really is a small business when it comes down to it," says Francke. "So many people know so many other people. People jump from broker to broker, distributor to distributor." Or shop to shop. Longtime San Diego wine salesman David Derby left his Orange County outpost to fill the vacancy created by Potenza's departure. Paris Driggers, formerly Kowalski's right-hand man, left earlier this year to buy into Bacchus Wine Market in the Gaslamp.

About Driggers, Francke says, "I think there was a thought that he would try to buy it from Tom, or that we would buy it together. At the beginning of this year, I told my wife, 'Something is going to happen this year. We're either going to make the jump and do our own thing or...'" As it happened, Driggers made the jump, and that gave Francke the right of first refusal when Kowalski decided to sell. "It was tough. Do you go somewhere else and try to reinvent the wheel or do you stay somewhere where everyone knows you and you know how the business is run? It was tough because of the dollar amount — it wasn't an easy acquisition. But we ran the pro formas and it made sense."

He took over in late November, just as the store was heading into the holiday crush, but that wasn't what had him worried. "We're on track to have our best holiday season ever. The most intimidating thing to me, more than the buying or anything else about the shop, was the signage — the bold, hand-lettered signs that introduced the consumer to each wine in the store. My wife used to laugh at me. 'Why would you be intimidated by that? It's silly.' But Tom was so good at it; he'd been doing it for 20 years. He was so detail-oriented; he could just whip out a sign and not make one mistake. And the newsletter — he would sit down and write it by hand for hours on a Sunday morning. That part of my brain just does not exist."

It sounds like a small thing, but San Diego Wine Company's signage was a big part of its sales effort — name, price, origin, and a brief commentary, often including the name of the staff member who went nuts over the wine. If you had gotten to know an employee's palate, it was that much easier to gauge your own likely response. "Fortunately," says Francke, "my wife has taken over the signage, and we're going to find a way to do the newsletter on the computer." The shop's website is also getting an upgrade; Francke hopes to build an online following via e-mail newsletters. "We're going to start communicating with the customer, probably on a weekly basis. 'This wine just came in, only 40 cases, 94 points from Parker, $7.99,' that sort of thing."

And while he intends to continue Kowalski's practice of advertising on cable television, he's shifted strategy, with excellent results. "I've learned a valuable lesson — saturate the market over a shorter time period. My biggest response seems to be CNBC between six and nine in the morning — the stock report. And the Food Network. We're getting great feedback. People are already telling me that they're getting sick of seeing my face on TV, so that's a good sign."

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When Matt Francke was working for Orfila Winery, trying to get San Diegans to buy San Diegan wine, he felt hampered by the fact that "the winery didn't want to be in any retail." It's a common enough tactic for a winery seeking to build a reputation — retail sales outside of the winery generally mean wholesale sales to a distributor, who then sells it to the retail establishment. And once you put your wine out there at a certain price wholesale, you give up a measure of control over the retail price. If the retailer can buy whole bunches of product from the wholesaler and so get a deep discount, the retailer may choose to pass the savings along to the customer in the form of lower retail prices than you had planned. (Or the wholesaler might sell the wine to retailers with less cachet than the producer would prefer.)

It's different with restaurants. In a restaurant, you can almost always count on a certain degree of markup. But out there in the marketplace, not so much. Given the persistent connection in the consumer mindset between quality and price, it might not be worth it to see your $20 premiere bottling — available on restaurant wine lists for $44 — on the shelf for $15.99. This may be especially so if you're a small producer, one who counts on each bottle to bring in a certain number of dollars.

"I don't agree with that at all," says Francke. "Especially if you want to get your name out there. I think retail is a very important part of that when you're just getting going." It's not a debate that's likely to end soon, although it is interesting to note that Francke recently became the owner of San Diego Wine Company, a store known for its aggressive pricing — their motto is "The best wines, the lowest prices." The shop operates on volume — if you move a ton of product, you can afford lower margins, and that means lower prices. It's a concept that appealed to Francke from the day he discovered it back in 1993, when he was still selling for Orfila Winery. Five years later, he started working for Tom Kowalski, San Diego Wine Company's original owner. As of this past November, Francke owns the place and has no plans to fix what ain't broke — though he may not be above a bit of tinkering.

Thanks to connections made through his uncle, a California wine-biz veteran, "I've talked about some new boutique wineries coming on board," he says. "But this is not going to become a bottle shop. We're still very happy to sell a $4.99 bottle of wine. It takes us literally 100 wines to find a really good $4.99 bottle. And I'm still going to expect the guys on the floor to be fully knowledgeable about the wines. With the exception of the wines we get only a few allocated cases of, we taste every wine that comes into the store. Today, we'll line up 40 wines. I'll go through them in about ten minutes — the old sniff, swirl, and spit, just to get an initial take. Then all the guys come up and taste them, and we get together and see if we agree on them. If the opinion is split, it's a question of 'How passionate are you about this wine? Are you going to sell it on the floor? Because I'm not crazy about it, and so you're responsible for moving this wine. '"

"The guys" include longtime staffer Mark Fratta and regular part-timer Alex Daniels. And of late, Rich Potenza, who came up from the Wine Bank downtown. "It really is a small business when it comes down to it," says Francke. "So many people know so many other people. People jump from broker to broker, distributor to distributor." Or shop to shop. Longtime San Diego wine salesman David Derby left his Orange County outpost to fill the vacancy created by Potenza's departure. Paris Driggers, formerly Kowalski's right-hand man, left earlier this year to buy into Bacchus Wine Market in the Gaslamp.

About Driggers, Francke says, "I think there was a thought that he would try to buy it from Tom, or that we would buy it together. At the beginning of this year, I told my wife, 'Something is going to happen this year. We're either going to make the jump and do our own thing or...'" As it happened, Driggers made the jump, and that gave Francke the right of first refusal when Kowalski decided to sell. "It was tough. Do you go somewhere else and try to reinvent the wheel or do you stay somewhere where everyone knows you and you know how the business is run? It was tough because of the dollar amount — it wasn't an easy acquisition. But we ran the pro formas and it made sense."

He took over in late November, just as the store was heading into the holiday crush, but that wasn't what had him worried. "We're on track to have our best holiday season ever. The most intimidating thing to me, more than the buying or anything else about the shop, was the signage — the bold, hand-lettered signs that introduced the consumer to each wine in the store. My wife used to laugh at me. 'Why would you be intimidated by that? It's silly.' But Tom was so good at it; he'd been doing it for 20 years. He was so detail-oriented; he could just whip out a sign and not make one mistake. And the newsletter — he would sit down and write it by hand for hours on a Sunday morning. That part of my brain just does not exist."

It sounds like a small thing, but San Diego Wine Company's signage was a big part of its sales effort — name, price, origin, and a brief commentary, often including the name of the staff member who went nuts over the wine. If you had gotten to know an employee's palate, it was that much easier to gauge your own likely response. "Fortunately," says Francke, "my wife has taken over the signage, and we're going to find a way to do the newsletter on the computer." The shop's website is also getting an upgrade; Francke hopes to build an online following via e-mail newsletters. "We're going to start communicating with the customer, probably on a weekly basis. 'This wine just came in, only 40 cases, 94 points from Parker, $7.99,' that sort of thing."

And while he intends to continue Kowalski's practice of advertising on cable television, he's shifted strategy, with excellent results. "I've learned a valuable lesson — saturate the market over a shorter time period. My biggest response seems to be CNBC between six and nine in the morning — the stock report. And the Food Network. We're getting great feedback. People are already telling me that they're getting sick of seeing my face on TV, so that's a good sign."

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