Interview with Jordan Winery's CEO


Dear Client:

Jordan Winery of Alexander Valley, Sonoma recently had the best sales months in its history in November and December of 2011, which ceo John Jordan said was all part of good planning and thinking outside the box. Although the winery was founded by his parents, John does not consider himself a wine guy per se. He started his own private practice a few years after graduating from law school in 2004, and also has an MBA from the University of San Francisco. In 2005 he stepped away from his law practice to oversee day-to-day operations of the family winery, and moved back to the property in 2006. He is also currently a Partner in the law firm of Smith & Dollar and works as a part-time professor at the Empire College School of Law. So clearly he has a lot on his plate. Here's a peak at how John applies his outside knowledge to Jordan Winery:

WINE & SPIRITS DAILY: So you guys had a great November and December?

JOHN JORDAN: Yeah, really good months. We've done really well over the last few years. We've actually had revenue growth during the recession.

WSD: How did you do it?

JOHN: It's a couple of things. First of all-something I think was a big advantage for me-I'm not a wine guy. I didn't grow up in the wine business. Yeah, my parents were in it, but professionally I am a Naval officer, my degree is in Economics and I have a law degree and an MBA. So I didn't grow up in the wine business doing things the same old way that everyone else has always done them. My law firm that I'm a partner in specializes in mortgage fraud and housing issues, so I saw the housing crash coming in 2005-2006. I was able to prepare the company for it by doing some different things. First of all, even though in the boom Jordan, like everyone else, was selling every bottle we made, I expanded the number of accounts. I grew our sales force and grew the number of restaurants that carry Jordan. At the time, certain people thought I was nuts because here I was adding these costs and it wasn't bringing in any revenue. The idea was that when the recession hits and each account is down -20% to -30%, the increased number of accounts will more than make up for that. Because of that we were actually able to take price increases during the recession. We've had revenue growth in 2008, 2009 and 2010.

WSD: About how much of a price increase did you take?

JOHN: They were small, 4% to 5%. We also had production growth and a couple of really good years in there quantitatively. We've also grown our direct-to-consumer channels and sold more wine that way. The margins on that are much thicker.

So I didn't grow up in the wine business. I'm a business guy, and lastly Jordan has embraced the digital era with things like video blogs. In fact, I even have another company that does iPad wine lists that enables wineries to deploy multimedia content to a wine list at a restaurant.

WSD: How else is Jordan involved in social media?

JOHN: We have our own communications department. We make and edit one to two videos a week for our video blog in-house. We don't outsource any of that. I used to have a PR company, but I got rid of that and built our own internal department that does both traditional PR as well as new media.

I saw that the world was changing. The recession was coming, there were too many brands, the wine industry was going to come under serious pricing pressure, and the way that consumers develop product preferences was changing. The internet was changing people's perceptions on products, and manufacturers and suppliers need to be able to function in that environment.

WSD: How do you think consumers' product preference is changing with wine?

JOHN: There are a couple of things at work. First of all, the Millennial generation is the first generation that really isn't interested in what critics say and there are studies that support this. They're interested in peer review. The Millennial generation, which is numerically almost as large as the Baby Boomer generation, isn't interested in that hierarchical, 'this is good, this is bad' by an expert. They want to hear and see what people like them think on Yelp. They want to hear the story. They want it to be a rich, vivid experience. The idea is not to look at where the state of the industry is now, but where it might be five or ten years from now and reconfigure your organization to meet the challenges.

WSD: What was your strategy with growing accounts before the recession hit?

JOHN: We wanted more restaurants and more wine lists with Jordan on it. The chains have always been pretty good to us, so it was a lot more of the independents.

WSD: How are your off-premise sales?

JOHN: Not so much, we're primarily an on-premise brand. We sell 20% to 30% off-premise.

WSD: What is your ideal placement on restaurant wine lists?

JOHN: We like to not be the most expensive. We like to be in the upper quartile to upper third.

WSD: What is your best selling wine by the glass?

JOHN: We only make a Cabernet and Chardonnay, so our by the glass is Chardonnay because its less expensive. But we make and sell more Cabernet.

WSD: How much wine do you sell through your direct-to-consumer platform?

JOHN: Well, we sell 6% to 7% of our volume through direct-to-consumer. It's more than we used to and it's a profitable channel. We don't have a wine club.

WSD: How do you build that base?

JORDAN: We have a lot of unique features: a full time culinary staff, overnight accommodations, and events throughout the year. We don't force wine down their throats, which is basically what a wine club is. But if you purchase something you accumulate points. Those points you can redeem for anything from free tickets to our Christmas or spring events, to having a dinner in our dining room made to your specifications, to bringing two or three couples to stay in our guest suite. It's leveraging existing infrastructure.

WSD: How do you think the on-premise environment is right now?

JOHN: The year is young, but the last three months have been just incredible. I mean, we are back on allocation. We have to manage our inventory to make sure we have wine to sell at the end of the year.

The great recession was serious. It was the most disruptive economic occurrence of my lifetime even though I'm only 39, so we made sure we never really had a problem on-premise by growing that account base.

WSD: Who are your distributors?

JOHN: Generally, we're with Southern, Republic, Glazer's. We are with some independents like Young's market. I can call the CEOs of any of those companies and get right through. Our wholesalers have been absolutely terrific too. We have terrific relationships with them and they're unbelievable responsive.

WSD: What is the grape supply situation like in California?

JOHN: I know that some that say there is going to be a real shortage of grapes. That may be, but the evidence supporting that is speculative. Nobody knows that for sure.

WSD: What is the general state of the California wine industry?

JOHN: There are too many wineries, and they're not all going to make it. There's an oversupply of brands. There's a glut of them. The wine industry is an industry that hasn't changed in any meaningful way since the repeal of Prohibition. There's been no innovation, no imagination in terms of how wine is brought to market and how stories are told at all compared to other industries. I come at the wine business with a background of doing other things and I've never seen an industry slower to adapt, which has changed so little.

WSD: What about Moscato? Some people consider that innovation.

JOHN: Yeah, maybe, but it's still the same old thing. It is still fermented grape juice. There are little trends here and there that come and go, like hula hoops. One week one wine is hot the next week it's another one. Fundamentally the small wineries have not been successful in carving out or owning their own niche. What happened was all these wineries got by because wine consumption in the US grew at a rate that was greater than wine production. Simple Macroeconomic Theory says that pushes prices up. Everyone in the wine industry was congratulating themselves on being marketing geniuses when in fact they were just riding a natural wave that had nothing to do with them. Then along comes the great recession, wholesalers are ceasing to represent a lot of smaller brands. Now the music has stopped and there are too few chairs.

WSD: Will you always stay with Chardonnay and Cabernet?

JOHN: Yes, that's what we do. Wineries, or companies in general, get into trouble when they cease to be successful because they try to be too many things and do none of them particularly well. Wineries, which are all small business in the big scheme of things compared to General Motors or INTEL. In the wine business you have to own something. What I mean is, you have to be better, faster, cheaper or own a particular niche. What Jordan does is own our niche, our niche is our style of Chardonnay that low malolactic, crisper, flinty style of Chardonnay. That is a space that we own. The Cabernet, the low alcohol, the emphasis on balance, the higher acidity, the anti-Parker Cabernet is a space that we own. Is there room for other kinds of wine? You bet. But the trick is as a smaller producer you have to own a space and tell that story in a very disciplined manner.

WSD: Do you think wineries are going to have trouble after the recession when they want to raise prices back up?

JOHN: It depends on who it is and how they managed themselves during the recession. That's a great question and the answer is that it is different case by case. Some people did it responsibly, some people will never get back up there, but they survived as a company and some companies won't survive at all. What determines a company's success isn't how they reacted to the recession, its what they did before. If you're in the position where you're just reacting, then you're already three steps behind where you need to be.

WSD: What does the future for Jordan hold?

JOHN: At Jordan we'll continue to improve our product. We can't expand production, that's not who we are and that's not what we're going to do.

WSD: Will you expand into other accounts?

JOHN: If I had 30% more wine I could sell it. If anything I over did it.

WSD: How many cases do you produce annually?

JOHN: 50,000 cases of cabernet and 30,000 of chardonnay.

WSD: Thank you for your time.

Until tomorrow, Megan

"Life is what happens to you while you're busy making other plans."
John Lennon

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