Chris Indelicato, the growth driver

The president and CEO of Delicato Family wines has presided over the rapid growth and expansion of the company. Felicity Carter speaks to Chris Indelicato.

Chris Indelicato, CEO, Delicato Family Wines
Chris Indelicato, CEO, Delicato Family Wines

Chris Indelicato is president and CEO of Delicato Family Wines. A member of the family’s third generation, Indelicato presides over one of California’s fastest growing wineries, a family-owned business that’s made wine in California for nearly a century. Born and raised in Manteca, California, where his grandfather Gaspare Indelicato planted the family’s first vineyard in 1924, Indelicato was immersed in the work of wine from early on. After he graduated from the University of Southern California in Los Angeles, Indelicato went on to become a licensed certified public accountant before assuming the roles of president and CEO of Delicato Family Wines in 2004. The company is now one of the top ten US wine companies by volume, selling more than 11m cases a year, with more than 30 brands in its portfolio. 

MEININGER’S: You have one of the largest vineyards in the world, San Bernabe. Do you use all the grapes yourself, or do you also sell grapes?
INDELICATO: At one time, San Bernabe was the largest vineyard that we knew of and although it’s still very large, we’ve sold off about two-thirds of the acreage to help us diversify our vineyard holdings. For example, we recently purchased 250 acres [101ha] in the Santa Lucia Highlands. It’s a really nice area in Monterey for growing Pinot Noir and Chardonnay. We’ve just replanted the Pinot. As we premiumised our portfolio, we have a great brand called Diora, a combination of the San Bernabe and Santa Lucia Highland vineyards, that’s doing extremely well over the $20 price point.

MEININGER’S: When did you introduce falcons into the vineyard and do you still use them?
INDELICATO: We began flying the falcons around the ranch years ago to scare off some of the birds, because there was so much crop damage from the birds down there and you know, we’ve been really happy with that. There is a gentleman who owns a number of falcons and he brings them in and he goes out during the day with a different falcon and they are well trained and fly around the vineyard.

MEININGER’S: There is a major move towards certified organic and other types of certified sustainable farming going on, with more scrutiny of the use of pesticides, fungicides and herbicides. Do you think it’s possible to farm at scale without using chemical inputs?
INDELICATO: All of our vineyards are certified sustainable, as are all of our facilities. We use the California Sustainable Winegrowing Alliance for our certification. You know, as a family-owned company, one of the things my grandfather, dad and two uncles focused on was always retaining the quality of the land and keeping any kind of pesticide use to a bare minimum. I think without some chemical usage it’s hard for a vineyard to be economically viable. 

MEININGER’S: Likewise, there is more scrutiny coming about how wine itself is made – the EU will have labelling laws in place within the next five years. How do you think consumers will react to learning there are things used in winemaking besides grapes? 
INDELICATO: We’re really careful about what we use in making wines. As technology continues to improve, I believe we’ll get rid of the additives. Being able to manage solids correctly is a big key to that. Also having proper equipment throughout the winery and property, like the capacity to pick grapes at the right time, so you don’t have to worry about disease pressure. We’ll be prepared for ingredient labelling and I know that the Wine Institute has been working on this topic. Today, all compounds that are used in winemaking are both legal and food grade, so we don’t see this as a challenge.

MEININGER’S: Internationally we’re seeing a shortage in agricultural labour that looks like it’s only going to get worse, not better. Are you seeing this, and how are you dealing with it?
INDELICATO: We’ve noticed a similar trend and as a result we’ve made significant investments in technology and we’ve increased wages to remain competitive. I think we also pride ourselves on our long-term relationships, especially with the agricultural business and the workers, and we’ve worked hard to maintain those relationships and that reputation.

MEININGER’S: The natural wine movement, although tiny, is getting noisy. Do you have any plans to make a natural/reduced sulphur wine?
INDELICATO: We’re obviously watching it as a trend but wines produced naturally without sulphur arguably don’t always produce the flavour profiles that customers are looking for and it can have an impact on the longevity of the wine, so we’re not focused today on making natural wines at this point. There needs to be some work done around defining what natural wines means.

MEININGER’S: Your boxed wines are doing well. Do you think this segment is going to grow? 
INDELICATO: The box category has been the number one growth driver of dollars in the US market. Obviously it’s been around for a long time in the export market and we do well in other markets like Sweden; our Bota Box has grown an average of 35% year-on-year since 2008. Wine quality is the driver. It’s also all of the benefits that a bag-in-box package has: its ease of use, longevity after opening. Our package is environmentally sensitive and is made with recycled cardboard and food grade food colouring print on the package. We seal with cornstarch glue. I think as each day goes by, consumers are becoming more environmentally sensitive. So that’s why all of our facilities are certified sustainable, we use solar, things like that. We’re moving in the same direction as the consumer.

MEININGER’S: What about canned wines?
INDELICATO: Through our partnership with the Dobbes family out of Oregon, we distribute a 375ml can called Joe to Go, and it’s doing well. The consumer is looking for new ways to enjoy beverages and so having wine in cans or single serving size is a convenience that the consumer is looking for, just like we’ve seen explosive growth in our Bota Box Minis [500ml]. 

MEININGER’S: Everyone’s talking premiumisation. What do you need to do in order to premiumise, or convince the market to pay more?
INDELICATO: I would first say that premiumisation is about the quality of the wine, not the package; to drive consumer loyalty, they have to feel that the wine quality matches the price. I think it’s very rare to increase the price of an existing brand, so for us it really entails launching new brands using the wine quality that we’ve been investing in heavily over the years. It starts with planning the vineyards, the right locations, the right rootstocks and investing in the facility and technology. 
You need a distinguished varietal characteristic and, where applicable, oak barrels and greater balance and intensity in the wine. You tend to grow smaller crops so you get more intensity. All of these things add to the cost of the wine, but the consumer expects that when premiumising. When the wines are notably better, people are willing to pay a few dollars more.  

MEININGER’S: Do you think there is a danger that everybody is racing to premiumise and ignoring the lower tier? If the world is hit with another recession, that lower rung will become important again.
INDELICATO: I think the lower price category has a great future, as all the wineries have been making better wines at that price. Not everybody can afford to premiumise and during economic downturns people do trade down. The wineries with the best quality at the lower price will do well. We did extraordinarily well between 2008 and 2012, during the last economic downturn.

MEININGER’S: In 2017 you invested in the V2 Wine Group, which has a portfolio of well-known international wines. Can you explain why and what your plans are for the fine wine area?
INDELICATO: We made a significant equity investment and brought them into Delicato. V2 was very helpful because it gave us an entrée into fine wines, such as Torbreck. It allowed us to get access to agency brands and it allowed us to begin importing wines, to be a more full service provider to our distributors.

MEININGER’S: How important is it to have international wines in your portfolio?
INDELICATO: Approximately a third of the shelf are imports. If we’re going to have scale and provide products for distributors and retailers, we need to be in the import business. I think most imports are doing well today, if they are unique to their country and growing region. If it’s terroir driven and unique, that’s what gets consumers excited.

MEININGER’S: You have also co-created a celebrity wine with singer Z. Alexander Brown. How does this work in practice? Do you do the making, distribution etc and pay a royalty for the name, or…?
INDELICATO: Zac is a huge celebrity and what we’ve tapped into with Zac is his creativity. He comes and blends and works closely with John Killebrew, the lead winemaker on Z. Alexander Brown. Zac is heavily involved in choosing the wine styles and final blends, and we obviously make the wines and do the sales and marketing. We don’t share details of the agreements – they’re basically non-disclosure agreements – but while Zac is a big celebrity, his real focus on this brand is the winemaking; the style, the wine quality. So we don’t position it as a celebrity brand.

MEININGER’S: US commentator Jon Fredrikson said that Delicato is an old family winery that’s been transformed into “an incredible marketing machine”, making it a fast-growing company at a time when other similar wine companies have seen flat sales. What are the most significant business decisions you have taken?
INDELICATO: Hiring the best people ahead of the growth. Today we have 170 salespeople and I think they’re some of the best in the industry. All of our salespeople come from the wine industry and have tremendous relationships before they come. We work closely with everyone in the company on the culture that we have, so they can be successful and spend their day selling wine. We do look for people with [existing] relationships, as selling wine today is as much of a relationship business today as it’s ever been.  

A close second would be investing heavily in wine quality; as our business grew we actually increased the quality of our wine. We talk about authenticity, so that means owing the vineyards, owning the wineries, being family owned and having a long heritage and history. A lot of wine today is purchased based on quality. Three: we have, given the size of our marketing team, the ability to service the distributor and the retailers. We can deliver digital assets – we can deliver specific information about a label to someone’s cell phone in a matter of seconds.  We have a digital team. I’m not sure we do much on the influencer side, because we want to focus on the basics. We want to focus on authenticity and we can do that through the team we have. Being family owned gives us the advantage that we can invest over years. It allows us to invest years in advance of any changes in the market.

MEININGER’S: When can you see that a brand is at the end of its life?
INDELICATO: When the interest in the brand, both in the channel and at the consumer level, is no longer there. I think you know it when you see it, both in the performance of the brand and the volume and what you’re hearing out in the market.

MEININGER’S: What are you seeing in terms of economic trends?
INDELICATO: Obviously the Baby Boomers are beginning to drink less wine and they’ve been carrying the industry since the French paradox story. Millennials drink less today, but we all drank less wine when we were that age as well, so I chuckle at people being amazed at that. Over time their palates will mature and they’ll begin to drink more wine in the future. The wine industry will figure out what the preference is of the consumer and deliver that. California is extraordinarily versatile in delivering wine styles and quality all over the spectrum, given our geographic locations.

MEININGER’S: You’re the board chairman of the Wine Institute for the rest of this year. What do you think are the most urgent questions facing California?
INDELICATO: Obviously regulation and labour are the two big ones. Overbearing environmental regulation. It’s very difficult to make wine in California.
The industry has obviously slowed down a bit as it competes with other drinks like craft beer, cider, flavoured vodka, brown whiskey. Hard seltzers [alcohol diluted by carbonated water] are a very hot category. What I would say is that over time people will want the positive experience of wine with a meal. The new consumers that are replacing the Baby Boomer consumer will look to have a more sophisticated experience.

MEININGER’S: And what are the big issues in export markets?
INDELICATO: [Sales to] China are down with the tariffs [imposed by the Trump administration]. We are hoping the government can work something out. We’re doing well in Canada and Sweden, and obviously a little slower in the UK. I think some of these export markets will settle down once Brexit and China are settled.

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