Monday, August 27, 2012

O'Neill Beverage Company Part 2

I got interested in writing about O'Neill because of a conversation I had recently with a food vendor.  He had asked if I knew that Boars Head doesn't own any manufacturing facilities of their own.  They are just a marketing company.  The wine industry is now similar.  There are "virtual" wineries galore with ownership far from California and no physical plant of their own.  And then there is that category of enabler to facilitate this kind of  industry development with O'Neill being in that number.

Many of O'Neill's competitors are similarly not household names but basically every wine label on the grocery store shelves comes from a player of that scale because supply must be contractually guaranteed.  Depending on how one defines industry terms, Continental Brands or Gallo would be the number one wine company in the world.  O'Neill, by the way, is number eight.  But Gallo is listed as a client of O'Neill so its sales numbers are dependent on supply from O'Neill.  Many other grocery store wines also depend on O'Neill or Bronco or Delicato to maintain supply.  Many other popular grocery store wines are wholly creations of the mega-bulk wine houses.

Along with its aggressive vineyard acquisition expansion into northern California in the eighties and nineties, Golden State Vintners (later O'Neill) replanted many of those vineyards with varietal rootstocks known to work in their respective locales.  Trellising was also done by working with the right viticulturalists.  In other words, they did it right, as you might expect from a company dating to the 1930s with three generations of one family running the business, each with ongoing relationships with other producers through time.

What makes O'Neill's story of "vertical integration" in the wine business noteworthy though concerns how they chose to react in the nineties to the new competition from South America and Australia.  They realized that so much of the cost of competing was in the marketing of the product so they marketed their production of wines to include storage, shipping, and a complete service department dedicated to providing support for their clients and it has been a model of success.

In 1998 Golden State went public.  In 2004  they became the O'Neill Beverage Company and created their giant physical plant in the central valley in Parlier, California.  By renovating and enlarging the brandy distillery they had purchased in the eighties and rode to number two in sales in the nation, that circa 1900 building now lies as part of one of the most modern energy efficient complexes in the wine industry.

Today 80% of California wine sales are considered to be premium wine sales as opposed to jug wine sales.  Seven wine companies account for 75% of that number.  Thirty years ago those numbers could have been reversed with 80%  being jug sales and that number being controlled by seven companies.  But the great cultural change did happen and the rest is history, a history accomplished by companies like O'Neill who were able to pull it off.

On Friday September 7th from 5 to 7pm, Henry Leung of Hemispheres Fine Wines will join us here with an exposition of  blended reds and whites from California, France, and Italy.  Henry, for the uninitiated, is a popular wine educator with a noteworthy following in Gainesville.  Please join us.

This Friday we are tasting California reds with one of those being an O'Neill product.  Again, please join us.  

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