Sebastiani diversifies into tequila, bottled water and nuts

Sonoma Valley vintner Don Sebastiani & Sons announced Tuesday that it will diversify into products beyond the wine business, entering the markets for premium tequila, bottled water and nuts.

Donny Sebastiani, president and CEO of the 90-employee company, said he believes the new products - due to be unveiled in early 2016 - will pair well with its wine inventory and help grow its various brands, which now encompass more than 70 different products. The winery is on pace to produce 1.25 million cases this year.

“A lot of thought goes into this decision,” said Sebastiani, whose father, Don, founded the wine company in 2001 after selling a portion of Sebastiani Vineyards and Winery. “The hard thing to do is to say no. ... We have been looking for reasons not to do this.”

The move by Don Sebastiani & Sons follows other wineries that have ventured into the highly profitable spirits market, from E&J Gallo to Ménage à Trois in Oakville and Purple Wine and Spirits in Graton.

The premium tequila category, which is made from 100 percent blue agave, has experienced a significant increase in sales. The four brands that dominate the market - Patrón, Don Julio, Avión and Herradura - saw overall growth of 6.5 percent last year, according to Impact Databank. It also faces competition from upstarts such as Casamigos, backed by partner George Clooney, in a market where customers sip the drink like a bourbon, instead of taking shots or mixing it into margaritas.

The Sonoma company’s tequila will be made in Mexico, Sebastiani said. “In the craft spirits market, the challenge for us is to find a way to do it ... and be able to put the Sebastiani flag on it,” he said. “We want to do it in a way to make it special.”

Don Sebastiani has kicked around the possibility of producing bottled water since the 1980s, and the new product will be infused with the essence of varietal wine juice. The product will be sourced from glacier springs, but will not come from California given the impact of the drought, Sebastiani said.

The company also intends to put out a dry-roasted almond brand, irreverently named “U Gottabee Nutz,” in flavors such as rosemary and Meyer lemon as well as caramel and sea salt, which it believes it can cross-promote with its wines, he said.

The expansion comes in the midst of a flurry of deals by local family wineries selling out to larger wine companies in the competitive North Coast wine market. Don Sebastiani & Sons - the 10th largest winery on the North Coast, according to the North Bay Business Journal - is not on the market, Sebastiani said.

Instead, it has been aggressively expanding its wine options. Late last year, it announced a new venture, New House Vintners, to focus on small-lot wines noted for their appellation.

It also has been active in importing Chilean wines to use in its labels such as its flagship Smoking Loon and Pepperwood Grove; its international case export business has increased 98 percent over the past three years, according to a report from industry consultancy BW 166.

The people down there (in Chile) are great to work with and are smart,” he said. “And they are worthy competitors to (North Coast vintners).”

You can reach Staff Writer Bill Swindell at 521-5223 or bill.swindell@pressdemocrat.com. On Twitter @BillSwindell.