Just Right: Chateau Grand Traverse Finds Pricing Sweet Spot

The northern edge of the Lower Peninsula of Michigan can be a competitive area when it comes to wine. With 40 some wineries scattered around the Traverse City area, marketing your product can be as important as what is poured into the glass. Yet, Chateau Grand Traverse found consistency in its growth for decades as President and owner Eddie O’Keefe, Jr. has helped lead that charge since 1985 as he came on in a marketing role with his father, Eddie, Sr., who began the winery in the mid-70s. The reason that Chateau Grand Traverse had seen growth for more than 40 years is because O’Keefe said that the brand is comfortable to consumers and trusted across all of its labels.

“You know what you’re going to get, you know what you’re going to pay. And you know you’re not going to be disappointed,” O’Keefe said. Although he may not want the pseudo stigma that comes with being called a “comfort brand,” he accepts it.

“The first time I had ever experienced that phenomenon was in 1998 when the tech boom crashed, and we were like, ‘Oh, no, what’s going to happen?’ and sales went up. Then we had 9/11, where nobody knew what was going to happen. We were all prepared to be a roller coaster going downhill, and it went downhill for a couple, 2-3 days. All of a sudden the phone started ringing and sales exceeded whatever was going on. Then we had the downturn in 2008.” Each time, Chateau Grand Traverse saw sales either maintain or increase when the economy is at its worst.

“The only thing that we can determine is the establishment of our brand, and the comfort level,” O’Keefe said. “The super-high priced premium brands and all that kind of fall by the wayside during tough times. People fall back on what they know.

“I don’t know if I want to be known as a comfort brand, but we have a very strong following and I think a reputation for quality at a great price point.”

Several Michigan wineries bigger than CGT focus on a lower price point while some wineries focus on the $20-50 price point.

“A majority of our premium products — I’d say 90% of them — fall between the $10-15 price point, which is the spot to be in as far as where the growth is,” O’Keefe said. The brand is multi-faceted with it being found not just on chain shelves, but also in independent bottle shops and having a strong on-premise showing.

“Our main product line is Chateau Grand Traverse, which is our tried and true brand of the grapes that we grow here,” O’Keefe said. “We have Traverse Bay Winery which is a cherry wine product line that we do. Then we have Grand Traverse Select, which is a brand that we source and use our own juice to create a non-vintage wine that we get into the chains at about $9 a bottle retail.

“Most wineries have multiple brands. It’s kind of the consumer mindset that if you’re trying to say I make some of the highest quality Rieslings in the country and also have a cherry wine under the same label, it just doesn’t ring well. I don’t know why cherry wine gets such a bum rap because it’s just as difficult to make.” O’Keefe laughed and noted that one of the managers for one of the winery’s distributors says that the Chateau Grand Traverse brand, especially a couple key items, like its semi-dry Riesling, is a ‘bulletproof brand.’

“I asked, ‘What do you mean by that?’ And it’s because you could sell in Costco, Sam’s Club, and Meijer; be on the best wine list in the city, and also be sold at independent stores,” O’Keefe said with a smile. “It covers all the bases, and it’s accepted. A lot of times, if you’re a grocery store driven brand, the restaurants don’t want you. And if you’re a grocery store-driven brand, the independent retail stores don’t want you because they know they can’t compete on price.

“And we believe it’s very important to be in the restaurants because not only do people get to try it with food, which is how we like to have it, but then they’re going to seek it out at their local store and potentially have a more intimate experience with it at a dinner table, and they might visit our winery as well. So we just find the on-premise to be a very important part of our business whereas more of the chain-driven brands it’s easier to sell pallets of wine and not have to deal with the personal sales of it. So I just say that’s what makes us unique. We’re bigger, but we still have a presence at all levels.”

Eddie, Sr. who started the winery in 1974 is what his son calls, ‘a true 

entrepreneur.’

“Entrepreneurs are lousy managers,” O’Keefe said with a laugh. “And so they have these visions and interests. It’s kind of like a squirrel. When we went into this, he really wanted to do fine wine production. He didn’t want to be just really good for Michigan wines. He said, ‘I want to make Rieslings and the wines that I want to make. I want to compete with the best in the world. I want to be on the same level as they are.’

“It was such a different mindset. It was maybe a little bit ego-driven more so than business-driven but he really wanted to establish it as fine wine and Michigan just wasn’t there in the mid-70s.”

So O’Keefe, Sr. put a lot of effort into trying to go out and market CGT in some of the exceptional restaurants of the San Francisco Bay area, New York City, and Chicago while looking to garner awards.

“It would make people go, ‘Hmm, gosh, maybe I should try it if it’s good enough for them.’” O’Keefe explained. “It was a little bit of a reverse strategy in trying to market the wines: if we’re good enough for people in California, maybe it’s good enough for Michigan. So it worked. I don’t know if you can do the same thing today.”

The winery is now seeing consumers going back to buying more wine, with purchases being back up to the case instead of by the bottle, many coming from online orders.

“The online sales are interesting, but it’s expensive to ship a case of wine,” O’Keefe said. Although some wineries have eliminated shipping during the pandemic, Chateau Grand Traverse is sticking to its guns and charging for shipping, for a reason.

“Customers shop around and say other wineries are offering free shipping and all that. And we go, ‘Yes, but if you really look at our discount structure and the prices of our wine you’ll find that we’re probably the best-priced wine,’” O’Keefe said. “They will do their shopping, and they’ll come back and call on the phone say, ‘My gosh, I did the checking. And you’re right.’

Photos Courtesy Chateau Grand Traverse

“Our core is to be what we are, and don’t be a gimmick.”

O’Keefe said he’s seen it many times where a winery will start and they want to be the best out there, so they’re going to charge the highest price knowing or not knowing what their costs are, or if they can charge that amount.

“Eventually, maybe that wine does not sell or maybe they just have too much inventory,” O’Keefe explained. “So they go, ‘Well, that wine was $18 a bottle, let’s put it out there for $10 a bottle to move some product.

“You’ve just basically reset the price in the consumer’s mind. And you’re never gonna go back to the $18 a bottle again. So you just ruin whatever you’re gonna do after that.”

O’Keefe sees it the same way with offering free shipping, that’s what the consumer will now expect.

“You can’t go back to charging shipping again, or your sales are going to go down,” he said. “So you really have to have thought-out programs and stick to them. I mean be adaptable, but if you’re going to do unrealistic gimmicks, that’s what customers will then expect.”

A few bad winters led to low harvests, and the winery located on the Old Mission Peninsula near Traverse City, Michigan saw a slight downturn in production output since 2015, going from around 110,000 cases per year down to just less than 100,000 recently.

Being located in a tourist area of Michigan, known for its cherry harvest even more than being a fine wine-producing region, Chateau Grand Traverse has a lot of competition. It doesn’t just come from other wineries, but also a smattering of breweries that have been opening.

In the last 15 years, O’Keefe said it has gone from offering free wine tastings to charging.

“You come to the winery, you taste wine, it was free and you walk away … hopefully buying some wine,” he said. “Back then, it used to be a little bit more wine tourism where people might buy 6-12 bottles of wine. Then it started to trend towards ‘edutainment’ [entertainment with an educational aspect] where people were like, ‘I don’t know where I am. And I don’t really care. I just want to have a good time.’

“So it kind of got a little bit toward wineries being more entertainment for customers and they would come in and taste wine and take a tour. Eventually, the laws changed and we started to charge for tasting, and customers went from getting the free tasting and buying a case of wine to paying for the tasting and maybe buying one or two bottles of wine. So you’re doing a lot more volume of people for the same amount of sales.”

O’Keefe sort of laments that many have just become attraction points for people to go out and have a good time.

“Are you a winery? Or are you more of an entertainment facility,” he pondered. “Now I see a little bit — especially recently with COVID — is we are seeing people coming back to not only their tasting wine seriously, but they’re also wanting to just sit on the back patio and have a glass of wine.”

So the conscious effort to go to a winery and the fact that there’s probably 45 wineries in our region, you really have to stick out in something of what you do to get people to come here,” O’Keefe said. “I think that the product that we offer, the price that we offer, and the exceptional service and quality of service that we provide, kind of makes us a must-see if you’re going to visit.”

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