F. Korbel & Bros. Inc.

views updated

F. Korbel & Bros. Inc.

13250 River Road
Guerneville, California 95446-9593
Telephone: (707) 824-7000
Fax: (707) 869-2506
Web site: http://www.korbel.com

Private Company
Employees: 537
Sales: $130 million (2002)
NAIC: 312130 Wineries

Based in Sonoma County, California, F. Korbel & Bros. Inc. has been known for its champagnes since the 1880s, produced through subsidiary Korbel Champagne Cellars. In addition to producing more than a dozen varieties of champagne from its vineyards and winery located along Sonoma's Russian River, Korbel also bottles less expensive sparkling wines, brandies, and sherries. The 2000-acre Korbel estate is open to the public for tours, as is the Korbel Champagne Cellars operation. Tourists can also visit the Korbel Wine Shop and Tasting Room, eat at the Korbel Delicatessen, and enjoy the Antique Rose Gardens featuring more than 250 varieties of antique roses and more than 1,000 varieties of other plants and flowers. In addition, the company runs Korbel Media, located in Beverly Hills, to handle product design, advertising, product placement, and media in house. Korbel is owned by the Heck family, which bought the business from the Korbels in the 1950s.

Origins of Champagne in the 1600s

Legend holds that a blind French Benedictine monk with heightened tasting abilities named Dom Perignon invented champagne, named for France's Champagne region. The key to making a sparkling wine was the methode champenoise, which allowed a second fermentation to take place in the bottle, resulting in champagne's distinctive tiny bubbles. Upon his first taste of champagne, Dom Perignonwho was most likely not blindsupposedly called out to another monk, "Come quickly, I'm drinking stars." It is also likely that the first fermented sparkling wine was produced more than 100 years before Dom Perignon's birth in 1640. Much of his fame, in fact, is due to 20th century marketing than his own winemaking ability. Nevertheless, he was a skilled and influential winemaker, well ahead of his time in terms of cultivating grapes and probably the first to successfully bottle and seal champagne using Spanish corks. However, it would be other French winemakers in the 1700s and 1800s who perfected the methode champenoise. Champagne production in California dates to the late 1800s, when two groupsAlmaden Vineyards the Korbel brothersoffered their first bottles for sale.

The Korbel brothersFrancis, Anton, and Josephwere born in Bohemia in what is today the western region of the Czech Republic. Francis was the driving force behind the champagne business that would emerge in the United States. According to family lore, Francis was in Prague in 1848 and fired the shot that started a revolution against the monarch of the Austrian Empire. The attempt to overthrow the ruling Hapsburgs failed, and the world would have to wait almost 70 years more before another gun shot mortally wounded Arch Duke Ferdinand, the heir to the throne of what had now become the Austro-Hungarian Empire, an act that led to World War I and the downfall of the Hapsburgs. For his part in revolutionary activity, young Korbel landed in Daliborka Prison. He managed to escape, however, reportedly with the help of his grandmother who provided civilian clothes that allowed him to stroll out an unlocked gate to freedom, casually smoking a cigar. He fled to New York City, where cigars would once again play a part in his colorful story. Francis Korbel learned the craft of cigar making, a difficult way to make a living due to the trade's notorious sweatshop conditions. In fact, it was because of these conditions that the labor movement in America emerged, as cigar-maker Samuel Gompers would one day found the American Federation of Laborthe AFL of the later AFL-CIO.

Francis Korbel now left the crowded conditions of New York City for the less populated and less settled locale of San Francisco, making his way there through the Isthmus of Panama. He arrived in 1860. Korbel now turned his attention to cigar boxes, opening up a repair shop. In order to manufacture his own cigar boxes, he asked his brothers back in Bohemia to join him in San Francisco to assist in his enterprise, even though Joseph and Anton Korbel had developed skills that were not necessarily applicable to their brother's business. Joseph was a trained metallurgist, while Anton was a forger. In 1862, they formed a partnership, F. Korbel & Bros., and opened the first cigar box factory in San Francisco. It was an immediate success, and it was not long before they owned their own schooner, aptly named The Bohemia, to import veneers from around the world. They acquired more ships and became involved in the export of hardwood. They also bought timber for shipping and opened sawmills to produce lumber for use in San Francisco's booming building industry.

It was the timber that first attracted the Korbel brothers to the Russian River Valley of Sonoma County in 1872. They took on a partner to buy timber land and build a pair of sawmills. A fourth brother, Winsel, was brought in from Bohemia to run this part of the business, but he died from an illness shortly upon his arrival. The Korbel brothers elected to buy out their partner and run the lumber operation themselves. When the building boom subsided, however, they found themselves holding a lot of timber for which there was little demand. Forever resourceful, they researched what could be done with the cleared acreage and decided the land was ideal for any number of agricultural purposes. They began to grow alfalfa, beets, corn, prunes, and wheat and used some of the crops to feed cows and start a dairy.

Turning Timber into Wine in the 1880s

The Korbel brothers also began to plant vineyards on their Russian River property. They experimented with different varieties of grapes, including Pinot Noir, the favorite of winemakers in France's Champagne region. As the Korbels were supplying their grapes to California winemakers, other growers emerged, the market became too crowded, and the brothers shifted gears once again. They kept their grapes and became winemakers themselves. According to company records, the brothers were producing as much as 30,000 gallons by 1882. The winemaking operation was so promising that over the next two years they devoted all their attention to it, converting their farmland to vineyards and shutting down the diary. Again they turned to their native land for help, bringing in an experienced Prague winemaker named Frank Hasek to become their champagne master in 1884. At the time, it was believed that a suitable champagne could not be produced in California.

Hasek used the methode champenoise approach to making champagne and spent the next decade blending the results of different grape harvests to produce a distinctive house style for Korbel champagne. By 1894, the Korbel brothers began to sell their champagne, and the people who doubted that California could produce excellent champagne were silenced. By the end of the 1800s, Korbel was an award-winning, internationally recognized label.

The Korbel brothers' winery business was interrupted by the advent of Prohibition in 1919, forcing them to turn to other business interests. None of them would be alive to see the repeal of Prohibition in 1933 and the resumption of champagne making at the family estate. Ownership of the winery passed to a second generation, seven cousins in all, who continued the family tradition by planting more vineyards and expanding the winery building. Then, in the early 1950s, the cousins decided among themselves that the time had come to sell the business. They were careful about making sure the winery passed into the hands of someone who respected its family tradition and was committed to the method champenoise. The Korbels found their man in Adolf L. Heck, a young winemaker who had already made his mark.

Heck was a third generation winemaker whose family had roots in the winemaking area of Alsace Loraine straddling France and Germany. Heck's father immigrated to the United States at the turn of the 20th century, and like the Korbel brothers his winemaking career was interrupted by Prohibition. After the repeal of Prohibition, he became manager of the American Wine Company in St. Louis and succeeded in reestablishing the Cook's Imperial Champagne Cellars and the Cook's label. The younger Heck returned to Germany to study at the highly regarded Gelsenheim Institute, receiving a degree in Enology in 1938. He managed to return to the United States before war broke out in Europe in 1939. He first took a job with Sweet Valley Wine Company in Ohio, then ran a number of wineries before moving to California in the early 1950s to take over as the president of the Italian Swiss Colony Winery. Under his leadership, Swiss Colony developed one of the most successful marketing campaigns in the history of spirits, using "the little old winemaker, me" tagline for its advertisements. After four years at the helm, Heck had transformed Swiss Colony into the largest American winery. Despite this success, however, Heck's harbored a dream of owning his own cellar where he could pursue his "California Style" of cuvee, a blend of wines used to produce champagne. He believed that by cutting back on the yeast so favored by European champagnes and accentuating the fruit he could produce a champagne more suited to the American palate.

When Heck heard that the Korbel family was putting its champagne cellar on the block, he mortgaged his home, took on his brothers Ben and Paul as partners, and raised additional funds to put together an offer. Supposedly he made his bid to the Korbel family just after midnight struck preceding the day the business was put up for sale. The Korbels happily accepted the offer and placed in his hands the fate of the business their fathers had founded some 70 years earlier. When the Hecks took over, Korbel was producing just 6,000 cases a year.

Company Perspectives:

Korbel Champagne Cellars has continued its pursuit of excellence for more than 120 years as America's number one selling premiere champagne.

Korbel under Adolph Heck: 1950s through Mid-1980s

Adolph Heck pursued his vision for California-style champagnes. In 1956 he reintroduced Korbel Brut, making it much lighter and drier than other American champagnes. He developed his own champagne yeasts and introduced Korbel Natural, Korbel Blanc de Blancs, and Korbel Blanc de Noirs. He also made innovations on the production end, inventing and patenting the industry's first automatic riddling machine in 1966. The purpose of riddling was to remove dead yeast, remuage, after the second fermentation. Done by hand, it was a time-consuming process that was open to a great deal of human error. The bottles had to be gradually tipped to a vertical position and turned daily over the course of a four-to-five week period to allow sediment to work its way to the cap for removal. Heck's automated process had the bottles placed upside down in racks that vibrated and rocked periodically so that the yeast was guided to the neck. Once riddling was completed, the bottles were dipped in a freezing brine solution, thus creating a frozen plug of yeast that would pop out when the temporary cap was removed. A small amount of sugar and wine was then added in a process called dosage and the bottle capped. All told, between the time the temporary cap was removed and corking took place, the champagne was exposed to the air for only approximately 25 seconds. The champagne would then sit in the winery for a month to allow the cork to soften and the dosage to blend properly.

Champagne Consumption Peaks in 1980s

Adolph Heck ran Korbel and served as its champagne master until his death in 1984. His son, Gary, took over as chairman of the board and Robert Stashak became Korbel's champagne master. Gary Heck grew up in the business. He joined Korbel on a full-time basis in 1965 and worked in almost all capacities at the winery, from working in the vineyards to acting as assistant officer manager. He became executive vice president in 1974 and was named president in 1982. He took over the company just as champagne consumption in the United States was reaching a peak in the mid-1980s after a decade-long run of success. At a time when sales of liquor, beer, and table wines were sluggish, demand for champagne and other sparkling wines was growing at an incredible clip, a 34 percent increase between 1983 and 1984 alone. In 1986, Korbel was shipping one million cases of champagne, an increase of 13 percent over the previous year. Revenues were estimated to be $76 million, a 9 percent increase. However, the good times would come to an end and champagne consumption began to slip. Moreover, the business was problematic because it had become so seasonal, with most of the product purchased during the year-end holidays.

Challenges in the 1990s and Beyond

In 1990, champagne sales in the United States declined by 7 percent. Only because of hard work was Korbel able to beat the industry average, losing just 4 percent of sales. Korbel increased it advertising and went upscale, introducing more expensive products and even limited edition bottles from fashion designer Nicole Miller and singers Frank Sinatra and Tony Bennett. It spent money on promotions in an attempt to spur non-holiday sales. Korbel sponsored a boat in the America's Cup yacht race and in 1996 became an official licensed product of the Atlanta Olympic games. In addition to champagne, Korbel also sold brandies, but it looked to diversify further in the still wine market. After launching a still wine program with a 1991 vintage, Korbel supplemented the operation through acquisition. With no debt, Korbel was able to borrow the money needed in 1997 to acquire three Sonoma County wineries. It also bought Russian River Brewing to add a line of beer and ale.

The champagne industry held out great hopes for increased sales from millennium celebrations. Shipments were strong. In fact, Korbel shipped out the last of 1.6 million cases of champagne in mid-November 1999. Unfortunately for champagne makers, many consumers were too afraid to venture to parties, fearful of Y2K computer meltdowns or terrorist attacks. As a result, hotels and restaurants cancelled parties, and it would take a year or so for the world to work through the oversupply of champagne. By the end of 2001, Korbel was back on track with an inventory of 30 to 40 days. Korbel sold Russian River Brewing to its head brewmaster in 2002 and continued to pursue its still wine program. Nevertheless, the company was still very much known for, and dependent upon, its champagne. Korbel continued to actively promote the product, hoping to grow non-holiday sales. The company, for example, began sponsoring the "Perfect Proposal Contest," in which contestants proposed marriage in unique ways. How well Korbel would succeed in convincing consumers to drink more champagne was debatable, but there was little doubt that the company would remain privately owned and family run. Gary Heck's son Aaron was already heavily involved in the business and was being groomed to one day become the third-generation of the Heck family to lead what the Korbel brothers had begun in the 1800s.

Principal Subsidiaries

Korbel Champagne Cellars; Korbel Media; Master Cellars Inc.; Kenwood Winery; Valley of the Moon; Lake Sonoma.

Principal Competitors

Heaven Hill Distilleries, Inc.; Marne et Champagne SA; Taittinger S.A.

Key Dates:

F. Korbel & Brothers is founded to make cigar boxes.
Frank Hasek is hired as a champagne master.
The Korbel family sells the company to Adolph Heck and his brothers.
Adolph Heck's son, Gary, joins company full time.
Adolph Heck dies and is succeeded by Gary Heck.
Three Sonoma Valley wineries are acquired.
Korbel sells Russian River Brewing.

Further Reading

Ball, Deborah, and Isabella Lisk, "After a Two-Year Dry Spell, Champagne Gets Its Fizz Back," Wall Street Journal, December 24, 2002, p. B1.

Howie, Millie, "Korbell . . . Millenium and More," Wines & Vines, December 1998, p. 54.

Koepp, Stephen, "The Corks are apoppin'For Wine Makers, Everything That Sparkles Is Gold," Time, December 31, 1984, p. 50.

Walker, Larry, "A Sparkling Chat with Gary Heck," Wines & Vines, December 2001, p. 16.

Ed Dinger