Home Wine Business Editorial Bubbles for Everyone: Behind the Rack & Riddle Expansion

Bubbles for Everyone: Behind the Rack & Riddle Expansion

1858
0
Advertisement

The company’s plan is to transform the supermarket private label bubbly business.

By Jeff Siegel

Rack & Riddle, the California custom sparkling wine house, garnered lots of attention last month when it scooped up one of the state’s biggest private label charmat producers. But the deal, says a Rack & Riddle executive, was about more than expanding just for the sake of expanding. The company’s plan is to transform the supermarket private label bubbly business — and, some  industry observers say, the company just might be able to do so.

Room for growth

R&R Founders Rebecca Faust and Bruce Lundquist [Photo: Rack & Riddle]
R&R Founders Rebecca Faust and Bruce Lundquist [Photo: Rack & Riddle]

The company plans to use its newly acquired charmat capacity, which approaches half a million cases per year, to focus on $10-$12 charmat sparkling. In this, Rack & Riddle wants to offer grocers a wine that fits between lower-priced brands such as Andre, Cook’s and Wycliff, and $15 proseccos and U.S. labels such as Gruet.

That way, says Rack & Riddle co-CEO and co-founder Bruce Lundquist, retailers can make more margin — 50 or 60 points instead of 30, by one estimate — while selling a quality wine that costs less than the brand names.

“We still think there’s growth in the sparkling market,” says Lundquist, who points out that sparkling is one of the few wine categories that hasn’t slowed in the past couple of years. In addition, he says, the company thinks it’s possible to trade up younger consumers who drink hard seltzers to less expensive charmat labels.

“The prosecco market has been remarkably strong,” says Lundquist. “So what’s to stop us from making a quality American Prosecco-style wine for $11 and capturing part of the growth of that market?”

Strategic acquisitions

The key Rack & Riddle acquisition came this summer, when it bought Lodi’s Weibel Family Winery. Weibel, founded in 1935, produced sparkling for other brands has a 1 million-case charmat capacity. It can also bottle 187s and flavored sparkling wines.

Rack & Riddle also added another 1 million cases in charmat capacity this spring when it signed a multi-year lease agreement with Delicato Family Wines for its sparkling facility in Geyserville, Calif., which can also produce carbonated beverages and canned products. R&R already made methode champenoise sparkling and still wine at its main facility in Healdsburg, Calif., and had a separate crush and cooperage facility in the state’s Alexander Valley.

“The charmat is a logical extension of what we’re doing now,” says Lundquist. “So our business development team will try to have these types of conversations with the national chains, and we’ll talk about how they can earn higher margins and a price between the lower end and those that cost around $15 with the wine we’re going to make.”

Private label surge

Rack & Riddle Methode Champenoise Bottling Line [Photo: Definition Films]
Rack & Riddle Methode Champenoise Bottling Line [Photo: Definition Films]

Why private label and why now? Because sparkling has seen significant growth in an otherwise flat wine market. Sales in the United States increased 9.1%,  to $52.2 million, during the 52 weeks ending June 18, according to data from Circana. Meanwhile, store brand dollar sales in the nation increased throughout 2022, according to a new report by the Private Label Manufacturers Association. PLMA also reported that store brand sales advanced 11.3%, nearly twice the growth of national brands in the study, for the 52 weeks ending Jan. 1, 2023.

The private label grocery wine surge has included brands at a variety of prices, such as Albertson’s Vinafore, which debuted last November and targets the current pricing sweet spot, $14.99 to $21.99. Convenience chain Circle K added both the $8 Sunshine Bliss wines and the premium Fine Wines ($10 to $25) in 3,000 of its U.S. stores.

“Private label is totally hot right now,” says wine marketer Tim McDonald, who notes that retailers — supermarket and otherwise — see it as a way to build brand loyalty among the younger consumers who are notoriously non-brand loyal. Grocers not only appreciate the extra margin, they say shoppers who buy wine tend to spend more money during their visits, whether it’s a planned trip or a one-off to buy the makings for dinner.

Aim for the middle

“The other thing to keep in mind here,” says McDonald, “is that most wine consumers don’t know the difference between charmat and methode champenoise – or that there even is a difference. Champagne is champagne. So when they see a price that’s suitable for their pocketbook, and that the wine is on the sweeter side, they’re going to think about buying it.”

Rack & Riddle Healdsburg Facility [Photo: Definition Films]
Rack & Riddle Healdsburg Facility [Photo: Definition Films]

Hence, says Lundquist, the $10-$12 target price. The lower-priced brands, he says, haven’t been able to break out of the sub-$10 market, despite incredible success for many of them. And most methode champenois brands, California or imported, can’t afford to sell for less than $20. So why not a store brand that costs less than $15?

“That’s why this makes total sense to me,” says McDonald. “It’s not a big leap of faith to believe consumers will want to buy something between a brand like Korbel and the store’s $25 captive label.”

Rack & Riddle, thanks to its expansion, has the capacity to make the wine to fill that gap. 

________________________________________________________________

Jeff Siegel

Jeff Siegel is an award-winning wine writer, as well as the co-founder and former president of Drink Local Wine, the first locavore wine movement. He has taught wine, beer, spirits, and beverage management at El Centro College and the Cordon Bleu in Dallas. He has written seven books, including “The Wine Curmudgeon’s Guide to Cheap Wine.”

Advertisement

LEAVE A REPLY

Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.