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The Commodification of To Kalon
Local Tastes

The Commodification of To Kalon

From the Columnist Tim Carl: Local Tastes series
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Thomas Brown makes wine for many clients, often producing some of the highest-scoring and most sought-after wines in California. One of these brands is Schrader, a small producer based out of Calistoga that makes a few thousand cases of cabernet sauvignon-based wines that primarily source grapes from top vineyards such as Andy Beckstoffer’s section of the To Kalon vineyard in Oakville.

Schrader did not have their own winery (they made their wines at another winery through a custom-crush-type arrangement), and they didn’t own their own vineyard. What they had was a wine brand that collectors clamored over, mostly because of Brown’s skill as a winemaker, but partly because of Schrader’s skill as a marketer.

Of course, Beckstoffer would argue that much of their success was due to the quality of the grapes.

Whatever the case, the Schrader brand sold for millions of dollars (the word on the street is somewhere less than $50 million, but I have no confirmation of this from anyone involved).

The question is, why would Constellation Brands, the third-largest wine and beer company in the United States with some 50 million cases of wine sold a year and first-quarter revenue at $1.9 billion, purchase such a brand?

There are a few possible strategic rationales for buying such a brand, with access and control of the To Kalon vineyard probably near the top.

Constellation purchased the majority of the To Kalon vineyard back in 2004, when it purchased the Robert Mondavi Corp. in a $1.03-billion cash deal that was the biggest wine purchase in the history of the Napa Valley. The deal was brokered by Ted Hall, the chairman of the Mondavi board and an ex-McKinsey and Co. consultant.

Hall now owns and operates what is fast becoming another massively valuable wine enterprise, his Long Meadow Ranch winery that includes an organic farming operation, the Farmstead Restaurant in St. Helena and a recently submitted plan for a hotel.

Beyond purchasing Mondavi’s winery and massive world-wide distribution network, Constellation found themselves with most of the To Kalon vineyard. Beckstoffer owns about 80 acres or so of the remaining portion.

To Kalon was originally planted in 1868 and seems to have always produced wonderfully distinct wines. Ancient Greek for “the highest beauty,” the To Kalon name, largely through Beckstoffer’s marketing genius, became synonymous with some of the best wines from the Napa Valley: Mondavi Reserve, Schrader, Tor, Paul Hobbs, Harlan, Opus One and many others.

For many years, Beckstoffer seemed to own the entire To Kalon brand position, requiring those who purchased the grapes to pay astronomical prices and even to add his name to their wine labels.

And producers were willing to play because making wines from this vineyard was a near guarantee that the wines would score highly with reviewers such as the Wine Spectator and Robert Parker Jr.

Years passed and everything seemed to be working fine: Beckstoffer became even more linked to To Kalon, producers that used To Kalon fruit sold their high-scoring wines for ever-increasing amounts and, strangely, Constellation just kept out of the way, not leveraging the To Kalon branding strength in their marketing.

But then a couple years ago, there must have been this moment in the Constellation boardroom. I can almost hear the conversation:

“Hey, Bob, don’t we own about 80 percent of the To Kalon vineyard?”

“Yes, Sally, I think we do.”

“Well, Bob, aren’t those To Kalon wines selling for crazy amounts and everyone seems to know that name is linked to high quality?”

“Again, Sally, I think you are correct. That is true.”

“OK, Bob, then why the heck are we not using the To Kalon name on everything we can get our hands on?”

“Good point, Sally. Let’s start tomorrow.”

And they did. Now the To Kalon name is prominently displayed on the Mondavi highway signage, and you can’t go very far into the Mondavi complex before hearing about the To Kalon legacy.

But Constellation, a company that is legendary for wanting to acquire and control their world, does not control all of To Kalon yet because Beckstoffer is not going to sell (his portion is in a land trust anyway), and he has long-term contracts for much of the sale of much of the fruit and his section is in a land trust.

And that’s where these two businesses are colliding and why every producer of Beckstoffer To Kalon with a long-term contract should be expecting a call from Constellation — they want what you have, but maybe not for long.

And for now Beckstoffer is laughing all the way to the bank — for now he holds all the cards.

However, what happens when Constellation owns all the brands that make wine from Beckstoffer’s To Kalon and then sells it at both modest prices and modest quality? It doesn’t take a marketing genius to figure out that strategy, but it will certainly be interesting to watch. So, who’s next? Tor, is your phone ringing yet? Or, is it Beckstoffer’s that won’t stop ringing? Who blinks first? We will see.

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