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Grape Expectations

Inc. 500 CEOs Roy Cecchetti and Don Sebastiani started their now successful wine business, Cecchetti Sebastiani Cellar Inc., despite fierce competition and a lack of financing connections.
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Origins

Cecchetti Sebastiani Cellar's founders were intoxicated by the idea of making wine.

There's nothing new about hatching a business idea over an extended meal. And there's certainly nothing unique about entrepreneurial inspiration percolating up through conversation as the last of soiled plates are cleared, leaving behind half-full goblets and grape-stained napkins.

Nothing new, either, about two friends making giddy plans for the future, wineglasses in hand, unless those friends are Roy Cecchetti and Don Sebastiani. And unless, as in this case, dinner takes place amid the oak-spotted hills and translucent green vineyards of Sonoma, Calif. And those glasses of California cabernet sauvignon prove to be not only inspiration but end product as well.

Cecchetti, now CEO of Cecchetti Sebastiani Cellar Inc. (CSC), #252, met Don Sebastiani of the Sebastiani wine family when he was only 16 and Sebastiani was 20. The two shared a passion for wine.

After dropping out of law school, Sebastiani served as a California state assemblyman for three terms. Cecchetti clambered up the corporate ladder, working first for Bechtel, then the Bertolli olive-oil import company, and then for Charles Schwab, the discount brokerage.

After six years of commuting two hours from his home in Sonoma to San Francisco, Cecchetti was getting tired of the rigidity of corporate life. Sebastiani had also tired of politics but was avoiding the family business, the massive Sebastiani Vineyards, where he'd worked as a kid.

Cut back to dinner in 1985, over glasses of cabernet in Cecchetti's Sonoma home. Even though the market was weak, the competition was fierce, and neither man had access to financing, Cecchetti and Sebastiani decided right there and then to get into the wine business.

"Our only question was, How in the hell are we going to do it?" Cecchetti recalls. The next morning, he began hammering out a business plan on his computer. Three months later, he quit Charles Schwab.

Rather than hunt for funding, the two men funneled their savings accounts into a new wine company. Cecchetti Sebastiani Cellar leased facilities from established wineries, bought grapes from established vineyards, and housed barrels in surplus warehouse space. The anemic wine market favored their plan: sales were low, and area wineries were cutting back on production to save money. From 1985 to 1992, the partners worked out of the Valley of the Moon winery, which was grateful for the extra income.

"Our immediate costs were grapes, bottling, and sales," says Cecchetti. "There were no hard capital costs." Corporate headquarters were in Cecchetti's home.

The business sputtered along for a few years, unable to shake the sluggish market. But in 1991, after introducing a new low-cost label, Pepperwood Grove, the partners watched with delight as customers started guzzling the stuff. An increasing global interest in California wines helped, as well as news about wine's potential health benefits. And the "popular premium" price range Cecchetti bet on--$4 to $6 a bottle--expanded rapidly.

Suddenly the crush was on. CSC outgrew its leased facility, and Cecchetti sought a larger facility to rent. Today, with part-time production facilities at Napa Valley's St. Supéry Winery, CSC produces more than 100,000 cases of its popular Pepperwood Grove wines. It also offers the tonier Cecchetti Sebastiani label, which sells for up to $30 a bottle. With 1996 revenues at $2.7 million, Cecchetti predicts shipping half a million cases in three to five years. And he is finally considering buying or constructing his own facilities. This, despite the fact that Cecchetti's payroll currently consists of just three names: Cecchetti, a national sales manager, and a wine maker.

"The wine market is flat right now," he notes. "I'm assuming our growth means somebody else's loss." The company spends only 5% of revenues on sales and marketing. "We make sure our wholesalers profit handsomely. Other wineries squeeze the margin at the wholesaler to get a lower shelf price, but that lowers the incentive of the wholesaler to sell the wine," Cecchetti explains. "So that's where our dollars go."

Don Sebastiani has since returned to work at his family's wine business while Cecchetti heads up CSC. The two friends continue to enjoy family dinners together in the golden hills of Sonoma, only now they toast each other with their very own, very successful cabernet.

Last updated: Oct 15, 1997




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