Sebastiani Vineyards, Inc.

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Sebastiani Vineyards, Inc.

389 Fourth Street East
Sonoma, California 95476
U.S.A.
(707) 938-5532
(800) 888-5532
Fax: (707) 935-1218
Web site: http://www.sebastiani.com

Private Company
Incorporated : 1904
Employees : 340
Sales : $200.9 million (1997)
NAIC :31213 Wineries

One of the largest wineries in the United States, Sebastiani Vineyards, Inc. produces moderately priced table wines under a variety of labels, such as “Vendange,” “Talus,” “Sonoma Cask,” “Heritage,” “La Terre,” and “Estates.” A family-owned and -operated business, Sebastiani Vineyards developed into a major wine producer under the control of the founder’s son, August Sebastiani, who focused on marketing inexpensive, jug wines. August Sebastiani’s son Sam assumed the reins of control in 1980, but was fired six years later after attempting to transform the winery into a more upscale wine producer. Sam Sebastiani’s younger brother Don, a former California legislator, took command in 1986 and during the course of the next decade tripled the winery’s production volume. By the end of the 1990s, Sebastiani Vineyards was producing more than seven million cases of wine each year.

1895: Samuele Sebastiani Arrives in America

Sebastiani Vineyards began producing wine in 1904, when the patriarch of the family, Samuele Sebastiani, started a modest wine-producing business in Sonoma, California. A native of the Tuscany region in northern Italy, Sebastiani immigrated to the United States in 1895, arriving with the clothes on his back, a thorough understanding of how to produce wine, and little else. Young and poor, Sebastiani did what he could to provide food and shelter for himself in his new surroundings. He worked in gardens and performed other odd jobs until he saved enough money to buy a horse and a wagon. With the horse and wagon, Sebastiani hauled cobblestones from a quarry in Sonoma, cobblestones that were used to pave the streets of San Francisco, 40 miles to the south, and to lay the tracks for the city’s famed cable cars. After nearly a decade of such work, Sebastiani had saved enough money to start a business truer to his heart. In 1904 he purchased a Sonoma vineyard and began producing his own wine, practicing a craft whose intricacies had been handed down through generations of Tuscans.

The land Sebastiani purchased had been operating as a vineyard for nearly 80 years before he purchased it in 1904. The vineyard’s first owners were disciples of a sect whose origins were not far from Sebastiani’s birthplace. In 1825 Franciscan monks residing at San Francisco Solano, a mission near Sonoma, enlisted the help of local Native Americans to clear the land for the vineyard. When Sebastiani began working the old Franciscan vineyard, he concentrated on producing Zinfandel, which he sold to familiar clientele. Sebastiani, using his horse-drawn wagon, delivered his Zinfandel to workers toiling at the Sonoma quarry, selling it by the cup and by the jug. Sebastiani worked at the vineyard until his death, establishing a legacy as one of the pioneers of northern California’s wine country, destined to be the epicenter of wine production in the United States.

Second Generation Takes Over in 1952

Sebastiani’s son, August, purchased the winery from his father’s estate in 1952, and with his wife, Sylvia, developed the family business into one of the largest wineries in the United States. As a vintner, August Sebastiani displayed a talent for marketing his wines to a broad customer base, selling Sebastiani wines, as his father had, by the jug. He increased the winery’s production volume a hundredfold during his nearly 30-year reign by tapping into the demand for table wines, relying almost exclusively on inexpensive wines marketed to the masses. August Sebastiani was the first vintner to market premium varietal wines in a magnum size. He introduced “Nouveau” Gamay Beaujolais to U.S. consumers and he created a blush wine known as Pinot Noir Blanc; two examples of Sebastiani labels that fueled the winery’s rise during the latter half of the 20th century. By the end of his tenure in 1980, Sebastiani Vineyards ranked as the sixth largest table wine producer in the United States, controlling 3.9 percent of the market. His death in 1980 devolved stewardship of the winery to the third generation of Sebastianis and marked the beginning of a tumultuous, divisive decade for the Sonoma-based company.

August Sebastiani’s eldest son, Sam J. Sebastiani, took control of the winery in 1980, assuming leadership at the age of 39. Under Sam Sebastiani’s control, radical, sweeping changes were implemented that reflected a wholesale change in the winery’s strategy. Sebastiani immediately led the winery away from its dependence on inexpensively priced jug wines and toward a new existence as a trendy upscale winery, capable of producing award-winning, high-quality wines. His objective for Sebastiani Vineyards, as he once wrote in an industry newsletter, was “to fall out of the top 10 from quantity, to the top 10 in quality,” a dramatic shift in stance engendered by his vision that premium wines would be the choice of consumers in the years ahead. Sebastiani’s prognosticative skills were laudable, prompting the publisher of the Grape Intelligence Report to remark, “[Sebastiani] saw that the days of jug wines were numbered in a worldwide shift toward premium wines,” but Sebastiani’s execution and timing led to difficult years for the winery.

Mid-1980s Troubles Lead to New Management

A number of factors conspired against Sebastiani’s ambitious plan to upgrade the winery’s image, particularly a worldwide grape glut that delivered a pernicious blow to the California wine industry. Also hampering Sebastiani’s progress were increased competition from foreign wines, the growing popularity of California wine coolers, and a decrease in worldwide wine consumption. Further, Sebastiani Vineyards’ mainstay business—the production of inexpensive table wines—was plagued by escalating production costs during the early 1980s, causing the winery’s financial troubles to mount. Undaunted by declining sales, Sebastiani pushed ahead with his plans, systematically changing everything from labels to promotional techniques in effort to recast Sebastiani Vineyards as a premium wine producer. At one point, he offered to recall more than $2 million worth of lower-priced wine to blend it with private reserves. “If it’s a choice of dumping the advertising and dumping the wine, you dump the wine,” Sebastiani remarked, revealing his priorities for Sebastiani Vineyards’ future. He continued to direct capital toward an aggressive and expensive marketing campaign, despite declining sales, persisting with a program that struggled to identify the proper direction to pursue. Several marketing directors endeavored to find the appropriate image for the winery and failed, prompting Sebastiani and his wife, Vickie, to lead the marketing of Sebastiani Vineyards themselves. The couple traveled across the country, staging flamboyant wine tastings that proved highly successful. The peripatetic Sebastianis gained worldwide recognition for their winery, but back in Sonoma concerns were heightening as sales sagged. By 1985 Sebastiani Vineyards had slipped from being the sixth largest producer in the country to the eighth largest producer, while its market share had fallen from the nearly four percent earned by August Sebastiani to 2.3 percent. The stage was set for a family feud, a public rift between Sebastiani family members that centered on the prudence of Sam Sebastiani’s vision.

On January 2, 1986, Sam Sebastiani received a letter from his mother, Sylvia, long a powerful figure at Sebastiani Vineyards and holder of 92 percent of the company’s stock. While her husband developed the winery into one of the largest in the country, Sylvia Sebastiani exerted her own considerable influence over the company, regularly appearing at the winery to greet visitors and entertain guests. After August Sebastiani’s death, Sylvia Sebastiani presided as the winery’s board chairwoman, from which position she watched her son’s dealings with the family business and grew increasingly displeased. In her letter, Sylvia Sebastiani noted that “the winery was being run very, very poorly” amid concerns about “incredibly high expenditures of money.” The letter informed Sam Sebastiani that he and his wife, who served as the winery’s director of food and wine, had been fired, a decision Sylvia Sebastiani said she reached in agreement with her daughter and fellow board member, Mary Ann Cuneo, and her other son, Don Sebastiani, a Sebastiani Vineyard board member and a representative of the Eighth District in California’s state assembly. Concurrent with the ouster of her son and daughter-in-law, Sylvia Sebastiani announced she was stepping down as chairwoman to be replaced by her son Don. Mary Ann Cuneo’s husband, Richard A. Cuneo, the winery’s senior vice-president and secretary-treasurer, was named to replace Sam Sebastiani as president and chief executive officer on an interim basis.

Company Perspectives

The Sebastiani family has been making wine at its Sonoma Cask Cellars location since 1904. Our Sonoma Cask wines are the culmination of years of research and practical experience. The guiding philosophy behind the Cask winemaking program has always been to produce the best possible wines from grapes grown in Sonoma County. Flavor, balance and fidelity to the unique character of our viticultural area is our goal. We maximize quality, often at the expense of quantity.

Before the end of 1986, Don Sebastiani assumed full control over the winery, serving as both chairman and chief executive officer, with Cuneo serving under him as president. Under Don Sebastiani’s control, the winery arrested its financial slide, bolstered by the strength of its biggest brand, “August Sebastiani Country Wines.” The brand paid homage to the individual responsible for developing the winery into a major producer, a tribute Don Sebastiani sought to extend through his managerial approach by emulating his father’s hallmark achievement: dramatically increasing production volume. During his first decade in command, Don Sebastiani increased the winery’s production volume threefold, expanding at a pace that vaulted Sebastiani Vineyards past its competitors to reign as the quantitative champion of Bay Area wine producers. The company’s growth was driven by the success of a full range of brands that positioned the winery in the most lucrative retail price categories. Sebastiani Vineyards’ notable success was its “Vendange” brand, introduced in 1987. Marketed at the lower end of the price scale, the “Vendange” brand developed into the fastest-growing brand in the country by the early 1990s, helping Sebastiani Vineyards eclipse Sutter Home Winery Inc. in 1994 to rank as the largest winery in the Bay Area. The company, by this point, was registering an annual growth rate of approximately 15 percent, thanks to the growing demand for its “Vendange” brand and its super premium “Sonoma Series” brand. “August Sebastiani Country Wines,” holding sway as the company mainstay brand, was experiencing slower growth as the winery entered the mid-1990s, but a national promotional campaign—the largest in Sebastiani Vineyards’ history—was launched in late 1994 to spur sales of the mid-priced, popular premium brand.

By the late 1990s, there were seven brands composing Sebastiani Vineyards’ product line, each catering to mainstream consumer tastes and competing in different price categories. Annual sales in 1997 surpassed the $200 million mark for the first time, increasing more than 13 percent from the previous year’s total. The $200.9 million in sales generated in 1997, drawn from the production of more than seven million cases of wine, was more than three times the total registered when Don Sebastiani first assumed leadership of the winery in 1986. Under his direction, Sebastiani Vineyards strengthened the market recognition of its name, providing a decided advantage toward realizing future growth and market penetration. Although advancement at a pace commensurate with the past was not guaranteed, the roster of Sebastiani Vineyards brands appeared strongly positioned as the winery neared its centennial.