As it celebrates its 40th anniversary this year, Deutsch Family Wine & Spirits can pause to look back at a long, remarkable journey. Today’s revenue is at around $1 billion, and annual volume is 13 million cases. The company now employs 350 people, headquartered in a modern glass office building in Stamford, Connecticut. It’s all quite a contrast to the earliest days.
At the dawn of the 1980s, founder Bill Deutsch was on a bright career path in the corporate drinks world. His resumé sparkled with executive experience at companies including Gold Seal, Austin Nichols, and Somerset Importers, where he had started in 1975 and had risen to become senior vice president of sales. Somerset was owned by billionaire industrialist Norton Simon, whose vast holdings also included Hunt Foods, Canada Dry Corp., Avis Car Rental, and more. The workday was filled with corporate politics, layers of authority, and endless meetings. “I came to the realization that I didn’t want to work for a multifaceted corporation for the rest of my life,” Bill says.
Lighting The Spark
Somerset boasted such star spirits brands as Johnnie Walker Scotch whisky and Tanqueray gin. It also operated a wine division, where Bill was in charge. The wine side handled the négoçiant portfolio of Alexis Lichine, the legendary wine entrepreneur who’d sold that business to another company a decade earlier. But Bill had tapped Lichine as a consultant, and the two enjoyed a close working relationship. In the spring of 1978, Bill purchased a selection of Bordeaux futures—a move not considered unusual in the least. But it caused a storm at Norton Simon, where the higher-ups were new to wine and had no understanding of the Bordeaux futures market. “When it came time to pay for those futures the following year, things hit the fan,” Bill recalls. “I was told I had no right to commit to corporate inventory they couldn’t put their hands on. They simply didn’t understand how the futures business worked.”
The order came down to speak with Lichine and unload the futures. At this stage in his career, Bill was already contemplating a new path, so he came up with an unusual offer. “I told Lichine I wanted to start my own business,” Bill says. “If he took the futures, I proposed to resell the inventory and share any profits with him on a 50-50 basis.” A deal was sealed, to the satisfaction of all parties. “I left Somerset in 1980, knowing I had the Bordeaux futures to sell,” he adds. “If I could succeed in doing that, I would make enough to launch my business.”
After selling the futures, Bill founded his company in January 1981, at 44 years of age. He set to work from his home in Chappaqua, a suburb north of New York City, with just a telex and a phone. “What I believed in 1981 was that an experienced family importer-marketer, working with family suppliers and selling to family distributors, could find a niche in the market and give the big players some competition,” he says. “That was the plan.”
Rising at 5 a.m., Bill would read his telex messages and plan his day. At mid-morning he would drive into New York City to visit retail accounts and also venture into Connecticut and New Jersey—the beginnings of broader ambition to cover the East Coast. Meanwhile, he was garnering a portfolio of niche French wine brands, the first being Sauvion et Fils, Château Timberlay, and the Ferreira Port brand. By the end of the first year, he had an office in downtown Chappaqua and his first employee, a secretary who would stay for more than 20 years.
First Giant Step
While the Lichine connection sparked the launch, it also became the catalyst for the first giant step in the company’s development. The Lichine négoçiant business was buying its Beaujolais wines from a little-known producer named Georges Duboeuf, who had met Bill during the Somerset days. Duboeuf’s wines had zero presence in the U.S., and he was looking for an importer. He reached out to Deutsch.
“About a year after I went into business, I received a telex from Georges, saying that he’d like to come to New York to sit down and talk,” recalls Bill. “I didn’t speak French and he didn’t speak English, and yet there was instantaneous communication. We understood each other perfectly, and had long conversations.” With a handshake, they agreed to work together—forming a partnership that would last more than 30 years and propel both of them into the big leagues. By the end of the 1980s, Duboeuf would reach half a million cases, surpassing B&G to become the top French wine brand in America at the time. The Beaujolais Nouveau concept was hugely popular among Americans, and also provided a valuable entry into the marketing side of the business.
In 1985, Deutsch won the rights to Francis Ford Coppola Winery’s Niebaum Coppola Rubicon label for the eastern U.S., representing a major coup. (It would eventually build the brand to 250,000 cases in its territory over the next 15 years.) “The door was now open at our distributors,” says Bill. “But we didn’t go in with a laundry list of items. We had a couple of potential winners. Duboeuf was our big volume player, our profit generator, and our hook with the wholesalers.”
Another major development came that year when Bill’s son Peter joined the business. He had graduated from college the previous year and landed a job in advertising, where he soon became restless. “Working with my dad wasn’t something I had initially contemplated,” Peter recalls. “But the business was taking off a bit, and after securing the East Coast rights to Duboeuf, he could no longer handle it all by himself. He needed help to cover Maine to Florida, and the idea of working with him was very appealing.”
Peter’s first assignment was to visit France and spend time with Duboeuf in Beaujolais and Lichine in Bordeaux, as well as other Bordeaux châteaux owners including Jean-Michel Cazes and Anthony Barton. “I found the Bordeaux futures business fascinating, and I was tasting some of the great wines early on,” he says. When Peter returned home, his father sent him forth to sell. “It was all about getting on the road to work with salespeople and key accounts, trying to motivate the big wholesalers to give our brands a fair shot,” Peter adds.
Building A National Footprint
By decade’s end, Deutsch was selling Duboeuf in 13 East Coast states (Winesellers, Ltd. handled the rest of the country), accounting for an impressive 75% of the brand’s U.S. business. But the company was still only a regional player, and major consolidation trends were afoot during the early 1990s as wholesalers, and even some retailers, were becoming multi-state players. “I was getting nervous about that—I thought an East Coast company could eventually become a dinosaur,” Peter says. “We were expanding the portfolio, but we couldn’t give our suppliers a national footprint. We’d find good partners and then had to offer them up to other companies for the West and Midwest markets. We didn’t have the infrastructure.”
This problem sparked a conversation between Peter and his father in 1993. “I told him the East Coast had taken us to where we were,” he says. “We were probably at $30 million in annual revenue and just over a million cases. With only five employees, life was good. But I didn’t like the consolidation picture.” Bill agreed, but was concerned about carrying additional overhead. “He didn’t want to go in reverse—he didn’t want the company to be making less money as it went forward,” Peter adds. “So I gave him a guarantee. I pledged that we would begin structuring the company around the country, while never making less money than in the previous year. I wasn’t sure how I would to do that, but my guarantee was needed for him to sign off.”
The first step would be to find new suppliers to partner with nationally. “That way, we could instantly open up relationships with distributors around the country,” Peter says. “The idea would be to take a percentage of the new profits and push them to the bottom line, fulfilling my guarantee, and then use the remaining money to develop an infrastructure.”
In 1993, Osborne became Deutsch’s first national partner. The Spanish brandy and Sherry producer was doing about 50,000 cases at the time. Splitting the profits evenly with Osborne, Deutsch used the new revenue to begin hiring regional people—and got to know wholesalers around the country in the process. During the second half of the 1990s, Peter was traveling the country extensively, introducing himself to distributors and building a national organization. “It was about walking into wholesale houses, telling them we were now representing a brand they handled, and that we wanted to help grow it,” Peter says. “Then we’d offer some of our other brands. We couldn’t offer Duboeuf [because of their regional agreement], but we had other pieces—like André Lurton and Vidal, and later Pommery and Pierre Sparr.”
Duboeuf’s growth continued accelerating sharply with the introduction of its varietal line in 1994. But French varietals were starting to face serious competition from Australian wines like Lindeman’s and Rosemount, whose varietals were becoming a more popular consumer proposition. In response, Deutsch resolved to seek entry into the Australian category. “That was the intelligent part of the decision,” notes Bill. “The lucky part came when Casella Family Wines approached the Australian Trade Commission and asked for help in finding a U.S. importer.”
The choice came down to Deutsch and Brown-Forman, and managing director John Casella opted for Deutsch because it was a smaller family company. The partnership was launched in 1998 with Carramar Estate ($9 a 750-ml.), whose debut became a disaster when the first shipment’s corks were discovered to be tainted. “John was heartbroken,” recalls Bill. “He asked us to ship everything back, thanked us, and assumed the partnership was over. I told him, ‘John, this wasn’t your fault. Go and get your money back from the cork supplier, and find something new.’”
Back to the drawing board: Casella met with label designers and returned to the U.S. in January 2001 with a new proposition. “He took out some bottles of Yellow Tail, with the kangaroo on label,” recalls Bill. “The wine was delicious, and the pricing was perfect.” But there was some debate—Bill disliked the kangaroo label, while Peter loved it. The younger Deutsch prevailed, and Yellow Tail came to market during in June 2001. It hit depletions of 23,000 cases that year, but Deutsch had shipped 100,000 cases by December—a sign of things to come. In 2002, the brand rocketed to 1.2 million cases, and nearly tripled to 4.3 million cases in the following year. In 2006, Yellow Tail passed the 8 million-case mark, overtaking Woodbridge by Robert Mondavi to become the U.S. market’s top-selling wine by value.
It was a remarkable climb, but it also posed a new set of challenges. In 2000, the company was at $40 million in revenue. By 2007, its revenue was at nearly $300 million. “This new scale commanded a highly professional level for everything—marketing, supply, finance, legal, and manpower,” notes Bill. The Deutsches began drawing up a new, long-term plan, with the goal of becoming the most professionally run business in the industry. “Prior to Yellow Tail, we were an entrepreneurial company,” says Peter. “We weren’t focused on process—it was about moving cases, building wholesaler relationships, and figuring out whatever marketing you could. We had a national company, but we still weren’t structured at the level needed to maximize this opportunity.”
A key part of this plan was to hire executives from outside the family. “We began to grow internally and professionalize our structure, with a focus on marketing and finance,” says Peter. “We started building a national accounts team, both on- and off-premise. We’d been driving Yellow Tail through the chains of America without one.” In 2009, Tom Steffanci became the company’s president, with Peter relinquishing that part of his title while still CEO, and Bill remaining as chairman. “We’re both actively still involved, but we’re focused on supplier relations and the next big opportunity,” notes Peter.
The Next Big Bang
The next major chapter in Deutsch’s growth came when it began getting word from its New Hampshire distributor about a wine called Josh that was flying off the shelves. It was a one-man show, created by California winemaker and former Mildara Blass USA president Joseph Carr in 2007, and named for his father. In 2011 the Deutsches struck a partnership deal with Carr, taking a 50% stake in the brand and managing sales, marketing. and winemaking, tapping wine consultant Wayne Donaldson to oversee production.
“Yellow Tail overdelivered in the bottle, and with Josh we thought we could use the same approach in the $12-$13 segment,” says Peter. “We did exactly what we did with Yellow Tail—presenting the brand to distributors around the country. In this instance, there was no need for a packaging change. There’s a simple elegance to the brand—it’s a $15 wine that looks like a $30 package. And the name is easy to remember.”
Josh was at about 25,000 cases when Deutsch took it on in 2011, with nearly all its volume in the Northeast. The brand hit 150,000 cases in its first full year with Deutsch, and then began to double each year. Deutsch bought out the remaining 50% ownership in 2014, as growth began to explode. “We went to 250,000 cases, then half a million,” says Peter. “Half a million cases turned into 1 million, and a million cases became 1.5 million, then 2.3 million, and then 3.2 million.” Last year, amid the off-premise boom caused by Covid-19, growth accelerated even further, reaching more than 4 million cases. Josh has been the U.S. wine market’s hottest brand over the past five years.
Josh originally offered just a Cabernet Sauvignon, Chardonnay, and Merlot, but Deutsch has since expanded the lineup to six varietals as well as a red blend, Prosecco, and rosé Prosecco. The Reserve line includes a North Coast Cabernet Sauvignon and Chardonnay, Bourbon Barrel Aged Cabernet Sauvignon, and Paso Robles Cabernet Sauvignon. “We’ve also invested heavily in advertising, telling the story of Joe Carr and his father on TV and in print, with a 360-degree marketing campaign,” Peter notes. The brand is also sufficiently premium to have an on-premise focus. “Some brands, like Mondavi, can exist both on- and off-premise,” he adds. “With Josh, we’ve spent a lot of time building the on-premise side.”
Deutsch’s other California jewel is The Calling, a joint venture brand with sports broadcaster Jim Nantz that also launched in 2011. The line includes 11 wines from the Russian River Valley, Alexander Valley, and Sonoma Coast, segmented into the Gold and Platinum tiers. While it has a healthy on-premise position, the brand has also transitioned to retail, and is adding a Monterey Pinot Noir (around $20 a 750-ml.) that may well become a volume player. The Calling is currently at around 30,000 cases overall, and Deutsch has a plan to grow it to 50,000-75,000 cases.
Amid Deutsch’s on-premise brands that have seen their progress halted by Covid-19 is Barone Fini, a Pinot Grigio from the Valdadige DOC in Alto Adige, Italy. Highly touted as a by-the-glass pour, it’s not the type of brand that can make up volume at retail. Another key on-premise play is Cave de Lugny’s Mâcon-Lugny Les Charmes, which Peter calls “one of the great white linen values in the country.” Having joined the Deutsch fold in 2017, it’s now at about 30,000 cases, and the company thinks it can reach 75,000-100,000 cases.
Since the pandemic’s outbreak, Deutsch has been fighting its corner to deal with the on-premise crisis. “We’ve been doing what we can,” Peter says. “We’ve even redesigned some packaging to make it more appealing to the off-premise. But we’ve spent many years investing to take our company into the on-premise, so we’re hoping it will come back at some point. When it does, our people will know what they have to do.”
Moving To Spirits
Deutsch first entered the spirits side in 2010 with Luksusowa vodka, striking an agency deal with owner Pernod Ricard. Since then it has nearly doubled the volume of this gluten-free brand, taking it from 180,000 cases to 300,000 cases. More recently, the company’s spirits activity has picked up. “When we began to professionalize the organization and invest in quality and manpower, a number of our new hires came from Diageo,” says Peter. “So we had people with spirits expertise, and started to develop our spirits pieces to complement the wine business.”
In 2015, with the American whiskey boom moving into full swing, Deutsch acquired the Redemption whiskey brand from creators Dave Schmier and Michael Kanbar. That deal was followed by the acquisition of Masterson’s rye and Bib & Tucker Bourbon from 3 Badge Beverage Corp. in 2017. Redemption, sourced from MGP in Indiana, is now approaching 100,000 cases, with an entry point of $35 a 750-ml. for its high-rye Bourbon, $30 for Redemption rye, and $50-$65 for the 9-year-old and 10-year-old cask selections. Bib & Tucker ($50 a 750-ml.) is somewhat smaller at 25,000 cases.
Deutsch sees major promise in a more recent spirits acquisition, the premium gin brand Gray Whale, aiming to take share from Hendrick’s. Created by husband-and-wife team Marsh and Jan Mokhtari, the brand name and concept was inspired by the gray whales that migrate along the California coastline. It’s a total California product, distilled in the town of Sebastopol in Sonoma County and made with botanicals from the Pacific Coast. Deutsch signed a joint venture deal for Gray Whale in late 2019, and began rolling it out nationally soon thereafter. The introduction continued in 2020 despite Covid-19, and the brand is now in about 20 states. “We’re starting to hear the same sort of buzz for Gray Whale that we heard for Josh and Yellow Tail,” says Peter. “Our confidence level is high that it will be a multi-hundred-thousand-case product.”
The Road Ahead
From Duboeuf to Yellow Tail to Josh, Deutsch has moved through a series of seismic brand events, each propelling the company to new heights. That history has left people wondering what could be the company’s next million-case brand. The portfolio offers some interesting prospects. One is Layer Cake, whose owner, Vintage Wine Estates, tapped Deutsch to lead sales and marketing in 2017. “Layer Cake is up to about 300,000-400,000 cases, and we see another potential unlocking,” says Peter. “It’s well positioned, but it’s also a passport brand, with varietals from different parts of the world. We don’t believe that’s the right approach. It needs to be more concentrated, but it has a great name and a great taste profile.” Another interesting label is Fleurs de Prairie, the company’s Provence rosé label that’s now at around 80,000-100,000 cases. Deutsch believes that its volume can be scaled up.
In its 40 years in business, Deutsch has shown time and again that it knows how to seize opportunities and leverage them to the hilt. Looking at the longer-term future for this family company, Bill notes that he has seven grandchildren—four of them college graduates, two still in college, and one who will start this year. “All seven have worked at the company at one time,” he says. “Time will tell whether any of them join on a more permanent basis.”
It’s been a remarkable journey—one that’s seen the company expand out of all recognition from its early days. “When we built Duboeuf, people said we got lucky,” says Peter. “Then Yellow Tail came along, and people started wondering what we were doing. Today the image is totally different. I think we’re seen as a company that’s professionally run, is serious about what it does, and looks be a standout organization within this great industry.”