4 days ago
- Business
- San Francisco Chronicle
How the new CEO behind Two Buck Chuck plans to ‘win' the wine crisis
Dom Engels has got to have one of the toughest jobs in California wine right now. In November, he became CEO of Bronco Wine Co., which produces an estimated 3.5 million cases annually of some of the country's most famous bargain-priced brands like Crane Lake, Salmon Creek and Charles Shaw, a.k.a. Two Buck Chuck.
Engels has arrived at a moment when the wine industry is in a tailspin. The sub-$10 category, Bronco's bread and butter, is experiencing some of the sharpest sales declines. Since the beginning of the year, Bronco, which is owned by the Franzia family, has laid off 227 employees from its Central Valley headquarters.
But Engels claims to relish the challenge. 'I love the complexity of trying to win in a difficult environment,' he said. 'Because there are always winners.'
The vision he has for Bronco runs counter to much of the industry's conventional wisdom. Engels believes that 'premiumization,' the march toward ever-higher prices, did a 'disservice' to consumers. That the fast-growing ready-to-drink category, which encompasses canned cocktails like High Noon, is overrated. That organic wine will always remain a 'niche.'
His perspective is largely one of an outsider. Although Engels worked at the Wonderful Co. when it acquired Paso Robles' Justin Vineyards and Sonoma's Landmark Vineyards, he has mostly worked in other fields. Before joining Bronco he served as the CEO of the school-lunch producer Revolution Foods, and before that as CEO of Stone Brewing, a behemoth of craft beer.
Looking at the wine industry, 'honestly, I draw a lot of analogs from the craft beer dynamics over the last eight or nine years,' Engels said. When he joined Stone in 2016, craft beer was consistently seeing double-digit annual growth. That changed somewhat abruptly, a couple of years before the wine industry's own wake-up call.
The luxury tier is way outperforming the value tier right now: Sales of wines over $50 increased 1% last year, according to the Wine & Spirits Wholesalers of America, while wines priced $8-$10.99 dropped 12.7%. Many of Bronco's best-selling products are under $5. But Engels is undeterred. 'We firmly believe that the value segment is very important for creating lifelong loyalists,' he said. The premiumization trend completely ignores 'the funnel of new 21-year-old consumers.'
That said, Bronco is also inching up, a little bit. 'We are probably overindexed in value,' Engels admitted. Without abandoning Two Buck Chuck, he hopes to also play more in the $15-$20 range. In February Bronco acquired Wine Hooligans, a Santa Rosa winery whose bottles sell for $12 and up.
Recognizing that Bronco's value-priced wines have been treated 'more like labels than as true brands,' Engels is building out his brand marketing teams. Crane Lake Chardonnay, $4.49 at a local Total Wine, may not have seemed like a strong branding opportunity in the past, but Engels believes wines like these could benefit from a bigger social media footprint.
He also plans to open more tasting rooms — a priority informed by his time working with beer taprooms. Of the more than 100 brands Bronco owns, the only public space in California is Rosenblum Cellars in Oakland. He imagines opening something at Wine Hooligans, in a Santa Rosa industrial park, and at the home winery in Ceres (Stainslaus County). 'I think we should have a couple of billboards on the 99, really invite people to see what we're doing here,' Engels said.
Does that mean we can expect a Two Buck Chuck tasting room? Engels laughed. 'Not sure about Charles Shaw,' he said. More likely is a 'multi-brand specialty store,' spanning the Bronco portfolio.
At the same time, like many of its peers, Bronco is contracting. The company has removed some of its vineyards, a response to California's grape surplus, and 'moth balled' others — pruning them short and letting them lay dormant until the company has the need for the acreage again. Bronco is a major California landholder, with the capacity to farm 'a significant five-digit number of acres,' Engels said, but is currently farming 'in the middle four digits.'
All of the grapes Bronco farms are 'sustainable,' Engels said, a term that adheres to certain environmental standards but still permits the use of synthetic herbicides like RoundUp. A small amount of Bronco's vineyards are organic, and Engels doesn't have plans to expand that. Organic farming requires such high costs that it necessitates higher-priced wines, in his view, 'and I don't think the market necessarily always rewards that premium price,' he said.
The company is also contracting its workforce, new brand marketers notwithstanding. The 227 workers laid off in Ceres included mechanics, lift truck operators and viticulturists. 'It's hard, but I don't think the winery's ever really adjusted its workforce in the 50 years before I joined, and I think there are a lot of wineries like that,' he said. 'You go on a diet first before you reach the lifestyle change phase.'
In Bronco's case, that lifestyle change will not involve ready-to-drink, the ultra-fast-growing category of beverages that encompasses canned cocktails and hard seltzers. The space is too crowded. 'They're churning very fast and it's very difficult to build something there,' he said. 'We're not seduced.' He is intrigued, however, by half-bottles and boxed wines. (Despite being owned by the Franzia family, Bronco does not own the boxed-wine brand Franzia.)
Tough as his job may sound, don't feel bad for Engels. He's having fun, he swears. 'When the tide is ebbing, that's what really separates great operators from folks that participated as a passenger in the category growth,' he said. 'I love that.'
