(Wines&Vines) - Michael David Winery has implemented a successful, multi-parameter grape bonus payment system for its contract growers that has played a key role in helping the winery increase grape and wine quality, grow its brands and increase bottle prices. In addition, the winery has fully embraced sustainable winegrowing by earning certification for all its estate vineyards and by paying bonuses to contract growers for grapes produced from certified-sustainable vineyards. Mike Stroh, Michael David’s director of marketing, described the grower bonus system at Lodi Grape Day on Feb. 3, and told the audience of Lodi appellation growers and wineries, “In Lodi as a region, everyone should be striving for higher bottle prices ($12 per bottle and higher), as the image of the region continues to grow.”

Moving to higher price points is sound advice, based on current market trends presented at the recent Unified Wine & Grape Symposium, which showed 2014 sales growth of 6% for wines priced at $7 per bottle and above, and sales declines of 2.7% for wines priced under $7 per bottle. The highest sales growth in 2014 was in the $10-$14 per bottle range, up 12%. The end result, as Stroh summarized, “From grower to retailer, everyone wins with higher price points.”

Newer brands and higher prices grow sales

Michael David Winery was started in 1984, first called Phillips Vineyards, and later named for brothers and co-owners Michael Phillips and David Phillips—fifth-generation Lodi grapegrowers. The winery produced 500,000 cases in 2014, sold 470,000 cases and produces 27 different wines, with more labels in development. The wines are sold in 50 states and exported to 22 countries.

A Lodi native, Stroh worked in Michael David’s tasting room while attending college. He returned in 2002 to take a position in the marketing department, eventually becoming director of marketing. Stroh noted that the winery has 20 sales representatives and 70 distributors, and wines are sold through 33,950 accounts nationally, with 27% on premise. Exports made up 13% of total sales in 2014 with Canada as the largest export market. New markets include Poland, Jamaica, the Bahamas, South Korea, Indonesia and Taiwan.

For the past decade, the winery has focused on developing and growing brands at price points of $14 to $26 per bottle. These brands employ creative and colorful names and packaging, with large, eye-catching labels. Four key brands account for 75% of total wine production, and each has enjoyed double-digit—and, in one case, triple-digit—growth during the past year.

The flagship brand, “7 Deadly Zins,” grew from 700 cases in 2001 to 290,000 cases in 2014, making it the No. 1 varietal Zinfandel brand in the United States by total dollar sales, with an average retail price of $14 per bottle.