American Winery of the Year – Don Sebastiani & Sons

American Winery of the Year - Don Sebastiani & Sons

Don Sebastiani & Sons
International Wine Negociant

American Winery of the Year Award

When Don Sebastiani started Don Sebastiani & Sons International Wine Negociant in 2001, there was little to indicate that the new company would become a powerhouse in the American wine industry.

He’d just left the family business, Sebastiani Vineyards & Winery, after 15 years as CEO—of his own free will, he says, but with no clear place to land. He owned no vineyards, and had virtually no staff except his young sons Don Jr. (Donny) and August. What he did have was his brain, his industry connections, and an idea that there was a niche for a buyer-blender of California wine—what the French call a négociant-eleveur—who could produce wines that were modernly stylish and appealingly priced for a younger generation.

He also had cash. The family had just sold off their Vendange, Talus, Turner Road and other brands to Constellation Brands for $295 million.

And Sebastiani was also the lucky beneficiary of something beyond his control: the grape glut of the early 2000s, which he calls the hen that laid the eggs. There was a huge quantity of sound, inexpensive grapes and bulk wine out there, the product of vast new vineyard plantings in California during the 1990s. All that juice was just waiting for the right person to elevate and bottle it.

And Don Sebastiani knew his way around bulk wine. When he was a kid, the family winery produced only bulk wines, which it sold off to other wineries. Then, during the 1980s, when he was a Republican member of the California State Assembly, he and his brother-in-law, Roy Cechetti, started a negociant brand, Cechetti Sebastiani Cellars. (Don’s sons eventually bought out Cechetti’s share of the company.)

That Sebastiani’s vision has paid off is beyond question. In 2003, Wine Business Monthly, a trade periodical, tagged Don Sebastiani & Sons as the nation’s 22nd largest winery. By 2004, it had had risen to 16th biggest, as the company hit the million-case mark. And in 2005, the Sonoma-based company expected to sell 1.5 million cases, making it one of the fastest-growing wineries in California history. Even Sebastiani is surprised by the company’s leapfrogging success. “Four years ago, I couldn’t have guessed what we’re doing today,” he says.

Best Values
But for Don Sebastiani & Sons, Wine Enthusiast’s 2005 American Winery of the Year, it’s not just a question of quantity; it’s quality. The various brands in the company’s portfolio are some of the best values around, across all varieties. In the last four years, they have received 27 “Best Buy” citations from this magazine for their Smoking Loon, Pepperwood Grove, Aquinas Napa Valley, Fusée and Screw Kappa Napa bottlings. (Sebastiani himself credits his chief winemaker, Richard Bruno, as the genius behind the wines: “He’s the key thing in everything.”)

The truth is that a lot of people (and not just Americans; Sebastiani is actively exporting) who like good wine, but can’t afford to spend a lot, have come to depend on Don Sebastiani & Sons for the goods, even though they may not know the name Don Sebastiani & Sons. It’s remarkable how quickly the portfolio’s quirky, memorable names and eye-catching labels have become super-branded in consumers’ minds. With extremely low overhead, and safeguarded by long-term grape contracts that insulate it against price increases, Don Sebastiani & Sons was profitable as early as 2003, just two years after ramp-up, which is unusual in the wine industry, where 10 years is often viewed as the timeline for red ink to stop flowing.

But like any successful company, Don & Sons is not resting on its laurels, hoping the same-old, same-old, will suffice. The company is not only growing in volume, but Sebastiani and his sons are pushing it into new, riskier and, some would say, more controversial directions.

The Other Guys
In late September 2005, they introduced yet another brand that’s part of a new company division, The Other Guys, or TOG. Called “le bon vin de Napa Valley,” or LBV for short, the brand will produce Cabernet Sauvignon and Chardonnay priced below $10, putting it in competition with Smoking Loon and Pepperwood Grove. But LBV’s most distinctive feature is that it will be sold directly to accounts by TOG, bypassing the usual distribution chain and thus boosting profits. And Sebastiani’s goal is for TOG to be a national entity.

And, too, vineyard purchase or development seems likely, thereby breaking a cardinal rule of negociant-eleveurs: Don’t own dirt. Sebastiani could easily purchase or lease a vineyard anywhere, but you can bet that it would be a coastal appellation, and probably in Napa or Sonoma, says company spokesman Jim Knapp. Sebastiani himself is holding his cards close. “There is a possibility in the foreseeable future we could be buyers of dirt,” is all he’ll say.

Even more surprisingly, the company that made value its raison d’etre has announced ambitious plans to launch yet another Napa brand, Used Automobile Parts, in January 2006. The wines will be priced in the $40 to $50 range. (Why “Used Automobile Parts”? “We wanted to develop an upscale brand but without the snobbishness, and at the same time, have some fun,” says Sebastiani.)

All Non-Cork Closures
Then there’s the matter of that little word, “international,” as in Don Sebastiani & Sons International Wine Negociant. What does that mean, coming from a guy whose playing field has never extended beyond the North Coast and Central Valley? The family isn’t talking, except to hint that they have an Australian Pinot Noir deal in the works. As if all that weren’t enough, the company recently announced plans to graduate to noncork closures on all bottles, across all brands, making it, in the words of a company press release, the largest wine company in the world to abandon the traditional cork closure completely.

These all represent dramatic departures from business as usual. They also pose potentially huge risks. “I just think if you want to be successful, it means taking on a certain amount of risk,” Sebastiani observes, adding, “but it’s managed risk.” As a recovering politician who ran for, and lost, statewide office, Sebastiani can joke about his defeats: “I’ve failed at more things than I can recall!” he laughs.

So how big could Don & Sons (and TOG) grow? “I don’t know,” Sebastiani says, “but I assume we’ll grow dramatically. With all the consolidation going on, it’s certainly feasible we’ll climb the ladder.”

See the other Wine Enthusiast Wine Star Award Winners.

Published on December 5, 2005