A couple weeks ago I was visiting friends in the Santa Cruz mountains. It was a sunny Saturday afternoon and we decided to check out the Bonny Doon Vineyard tasting room.

Bonny Doon is a renegade brand. They’ve successfully disrupted the market with their innovative packaging (Stelvin screw top bottles), memorable brand names (Big House Red, Cardinal Zin, Bouteille Call), and eccentric, irreverent artwork.

They’re comic, iconoclastic, culturally informed wine marketers. They reportedly hate wine marketers. Of course they do.

This post provides a brief summary of Bonny Doon’s efforts to create a sense of terroir, to localize their supply chain, and to promote premium markets as opposed to commodity markets.

Bonny Doon’s Growth Management Strategy

One of the more interesting aspects of Bonny Doon’s business is their growth management strategy. They’ve worked hard to build a customer base, and they’re making smart decisions to ensure many many years of loyalty.

Localize the Supply Chain

As an example of intelligent growth management, Bonny Doon has been paying attention to the sustainable food systems conversation. They know their customers are also paying attention. The idea of a secure and sustainable local food system is compelling for many reasons. So how does a business respond?

Bonny Doon has responded by phasing out the use of all imported grapes. In the near future all of Bonny Doons grapes will be sourced in California. That’s a smart local move. It’s good for the brand, good for the community, and good for the Bonny Doon story.

Terroir, Biodynamic Vineyards, and Place Basedness

Bonny Doon is going biodynamic. It’s part of a place based strategy that can best be described by Randall Grahm, Bonny Doon’s charismatic owner. He calls it the phenomenology of terroir in the Santa Cruz mountains. ApellationAmerica is hosting the complete version of Grahm’s terroir paper. In it he writes:

“Terroir is a composite of many physical factors… as well as more intangible cultural factors. Matt Kramer once very poetically defined terroir as “somewhere-ness,” and this I think is the nub of the issue. I believe that “somewhereness” is absolutely linked to beauty, that beauty reposes in the particulars…”

Craig Camp’s Wine Camp Blog has a three post commentary on Grahm’s terroir paper. For other information about biodynamic farming at Bonny Doon and a link or two to biodynamic farming resources, see this post from Dr. Debs.

Premium Markets, Not Commodity Markets

Big House Red was introduced in 1990. It was a commercial hit. Cardinal Zin was another commercial hit. By 2006 these two brands represented an overwhelming share of Bonny Doon’s total sales. In July 2006, Bonny Doon closed a deal to sell these two brands. The rumor is that the Bonny Doon operation will scale back from 450,000 bottles per year to 45,000.

The plan is that this move will free them to focus on more premium products. Reportedly, financial leverage was part of the incentive to sell. The move was also reportedly related to cash flow constraints. The company was leveraged and they couldn’t effectively scale supply to keep pace with market demand. Spinning off those two brands seems like a perfectly logical move.

But the move didn’t come without a price.

“As a result of the changes, the winery has parted or will part with about 50 percent of the total employees recently hired by the company.”

Nevertheless, the business is now on stronger footing and the brand has only gotten stronger. It’s clear that Grahm is willing to put his money behind his ideas for a sustainable food system. Increased credibility in the Santa Cruz area should help Grahm expand into more distinctive, premium products. In his words:

“‘We are shrinking all round,’ Grahm said. ‘I want to make the operation more distinctive, and get to the point where I can make wines with uniqueness and distinction.’”

It sounds to me like Grahm made the right choice at the right time. Rising interest rates may have slightly forced his hand, but I doubt things could have worked out much better. He has successfully built the Bonny Doon brand up from scratch in 1981. He’s a terrific brand manager. He may claim to be financially inept, yet he’s done a great job building a fun, meaningful, and increasingly sustainable business.

[tags]Bonny Doon Vineyard, Randall Grahm, Growth Management[/tags]