As one of the major players in value wine, owning Charles Shaw (aka “Two Buck Chuck”), Bronco Wine Co.’s new CEO, Dom Engels, believes that the wine industry needs more innovation and focus on creating new entry points for younger consumers. From packaging to labels, Dom discusses how he’s navigating Bronco through the turbulence of a shrinking market for value wine from both the cost and innovation side.
Detailed Show Notes:
Bronco - Top 15 winery, owner of Charles Shaw (aka “Two Buck Chuck”)
- Has its own CA distribution
- House of >200 brands
- Large winery in Modesto, bottling in Napa, a boutique winery in Santa Rosa
- Owns ~40k acres, ~30k acres vineyards, but farming <10k today
- Owns Bivio, a logistics company
Charles Shaw
- No created by Bronco, acquired by Fred Franzia (co-founder of Bronco)
- Was a successful, premium, luxury Napa brand, 1st vintage 1978
- Went bankrupt in the 90s, Bronco bought the trademark in 1999
- 1st product in 2022 - $1.99 for good quality wine
- Low pricing enabled by low margins and Fred Franzia’s “genius” in bulk wine trading
- Partnership w/ Trader Joe’s through shared belief in creating accessibility and substantial cultural overlap
Believes the industry needs more good entry-level wines to get younger generations a start in wine
- The ethnic makeup of younger people is not the same as that of older generations
- “Not your father’s Cadillac” - young tend to rebel against what their parents did
- 11,400 wineries in the US create a diffuse set of interests, a lack of clear messaging (e.g., craftsmanship, agriculture) to separate wine from alcohol
- Accessibility could be driven by the right packages (including formats) and labels; good labels drive trial, good liquid drives repeat sales
- Significant marketing spend is difficult due to low margins
- Industry covers the right price points (e.g., Charles Shaw $3.49 in CA), but needs other elements, not a lot of great innovation or marketing at low price points (some pockets of innovation, e.g., XXL focus on high ABV)
- Need more transparency - ingredients, nutrition, ownership, provenance - Bronco is adding more back stories to brands
Enhancing social interactions is important; e.g., Jack Daniels’ ad that getting together with other people is healthy too
- New Bronco company motto, “better times at every table,” similar to Pernod Ricard’s “conviviality”
Believes dislocation of restaurant price vs retail is a core driver of wine industry decline, $14 IPA and $25 cocktails make people drink less
Navigating lower volumes requires being more efficient, sees opportunity in winemaking (most capacity utilization at wineries now <50%), distribution (reduce inventory), and retail
Likely too many brands in the US and too much shelf space in retail
Mothballing a lot of vineyards due to oversupply
- Can’t bring back in 1 year, but can in 2-3
- Cut buds down so vines don’t produce fruit
- Still requires some maintenance costs
- Vineyards in less optimal areas are to be pulled first, and he does not believe there will be an overcorrection
Competing in value vs international
- Can’t compete on labor
- Need to compete on quality, provenance, and taste
- Even tariffs won’t solve the cost gap
- EU subsidies help democratize wine
Tariff impacts
- Some input cost increases (e.g., China for glass)
- A good thing overall for the US industry, which will lead to more US wine being consumed
- Likely no structural change
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