Many businesses appear to glide from their founding to their current place of prominence as gracefully as swans. No surprises, no angst. At first glance, Kevin Pike’s Schatzi Wines would seem to fall into that category.
In 2014, Pike, an experienced sales director with an enviable network of wine industry contacts, founded Schatzi with the help of a trusted colleague. Four years on, he now has a profitable book bristling with 25 “geeky” growers and a presence in 37 states and Washington, D.C., as well as Puerto Rico, Nassau, and Grand Cayman. Voilà? Not so much.
Dig beneath the smooth surface, and the story of Schatzi is really the story of the journey of Kevin Pike—paddling against the current and struggling against obstacles he couldn’t possibly have anticipated.
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Pike launched his company after working for 14 years with industry legends Michael Skurnik and Terry Theise at Skurnik Wines. He’d been in the same position—as the director of national sales and marketing with Champagne as his main focus—for a long time and was ready for a change.
There were a number of reasons he wanted to make a transition. He missed working with wines beyond Champagne. He also says that he felt he was traveling and drinking too much, and that he wanted to “produce something” instead of “just selling something that somebody else made.” Initially, he attempted to reinvent his role at Skurnik, but he wasn’t able to carve out a position that he could truly embrace.
“Concurrently, I moved to the Hudson Valley and rented a house while looking for a farm to purchase,” he says. “I spent many of my childhood summers at my grandparents’ farm in Iowa, and I wanted a similar experience for my children.”
He bought land in Milan, New York, and decided to produce farm-to-bottle spirits and cider. His farm, which he’s planning to call Branchwater Farms, is still being built, but Pike says he expects to roll out the first spirits in 2018, with ciders debuting in 2019.
Around the same time, he began sharing his plans to leave Skurnik with producers. Johannes Leitz, one of the producers Pike worked with at Skurnik, saw an opportunity for both of them. “My wines have been sold in the U.S. since 1991, and by Michael Skurnik, one of the nicest human beings on Earth, since 2000,” Leitz says. “But the whole system is a bit sick. There are too many hands in between the vineyard and the shelf, which drives prices up.”
The Leitz family has been making wine in Germany’s Rheingau region since the mid-1700s. Leitz took over in 1985 at age 21, growing the footprint of the estate from 7 acres to 99. Once he learned of Pike’s plans, he decided to entrust his expanding portfolio to Pike exclusively, citing their mutual, pared-down vision of vineyard-to-shelf distribution.
“[Leitz] reminded me of our long discussions about improving the import system in the U.S.,” Pike recalls. “And he told me that if I was leaving [Skurnik], he would either go it alone in the U.S. or he would partner with me to start something new.”
“In truth,” Pike says of that time, “I wasn’t looking to start my own wine import company, and what Schatzi is now is not what I first envisioned.”
Pike’s initial concept was simple: “A single-member-managed LLC with one supplier—Leitz.”
Pike planned to strip away layers of cost (such as those incurred by brokers and shippers), which would enable him to lower prices for Leitz by 20 to 22 percent in the local market and between 11 to 14 percent in the national market.
Pike and Leitz spent months building the model, and Pike was initially able to secure a distributor in his largest market, which freed him to look for distributors in the rest of country. But the potential for disaster was realized right away, as Leitz’s first container shipped in June 2014—and the distributor informed Pike that it would not be able to distribute Leitz.
In the Red
That unexpected development plunged Schatzi “deep in the red,” Pike says, explaining that the shift forced him to change the company’s business model overnight. If he’d hit pause to look for another New York distributor, he would have had to hold inventory for at least a month, a costly proposition.
While there were few short-term alternatives that would put the company back in the black, Pike felt that recruiting a few more producers and hiring salespeople to sell direct in New York and New Jersey was the way to ensure long-term financial success.
So Pike flew to Germany, and by November 2014 he’d secured inventory from Dr. Heger in Baden, Dreissigacker in Rheinhessen, and R. Pouillon & fils in Champagne. He brought Dan Weber on board in August 2014 to sell wines in New York, and in October that year he brought on Hayley Johnson to handle California.
The unexpected turn of events enabled Pike to push his vision to its logical conclusion and offer producers and buyers an alternative to what he saw as an inherently flawed import model. Schatzi offers a small, focused portfolio of wines that doesn’t have internal competition and that has stateside inventory (with warehouses in New York and California) and competitive pricing (the company works like brokers for state distribution and works direct in its home market of New York, New Jersey, and California).
In a bid for transparency and trust, the company also maintains an open-book policy on prices for suppliers and buyers. “Why hide behind margins?” Pike says. “How is it fair to ask for a discount for a wine if you are not willing to show your own gross profit to the winemaker?”
Aldo Sohm, wine director at New York’s Le Bernardin and partner at Sohm & Kracher wines, appreciates Pike’s method, noting his “direct approach” and “transparency,” which allow Sohm to offer his wines at lower prices with Schatzi than elsewhere. “The Schatzis also have access to key buyers of prestige accounts who respect them,” which, Sohm notes, is essential for small brands.
Back on Track
Schatzi offers four producers from Austria, ten from Germany, eight from France, two from Switzerland, and one from New York, about one-eighth the number of SKUs Pike worked with at Skurnik. With this relatively small portfolio, Pike and his team know every brand and label intimately, which allows them to make the best placements for buyers. With larger portfolios, he explains, it’s impossible to grasp the nuances and unique strengths of each winery.
“The reality is, no buyer needs Schatzi, because far bigger companies can fill the categories we represent,” he says. But they want us because “we set ourselves apart by being aggressively priced, service oriented, and quality driven.”
And definitively offbeat. For example, Schatzi represents Jean-René Germanier’s 2016 Fendant de Vétroz Les Terrasses, a Chasselas grown in glacial moraine and slate soils. “Until we started with Christopher Bates’s Element Wine in New York this fall,” says Pike, “we didn’t have any wine in the portfolio that could be considered ‘normal,’ like a domestic Chardonnay.”
Josh Ahlers, a wine buyer for Whole Foods Market, says Schatzi’s approach has opened a new universe for customers. “[Pike] has brought us producers who were not being imported at all,” he says, adding that Schatzi’s entire portfolio has “given us a deeper understanding” of the regions the producers hail from, especially Germany.
In 2014, Schatzi had four producers but no stock for three of them (Dreissigacker, Heger, and Pouillon) until November. In 2015 the company added eight producers and put several more prospects in motion. In 2016 another six producers materialized and Schatzi officially turned a profit. At that point, Pike turned to a bank for a line of credit so he could hire two more salespeople and expand the portfolio.
“We first built up the book, then the people,” says Pike, pointing out that Schatzi grew a little over 24 percent in cases and about 38 percent in value from 2015 to 2016, “the year we scaled-up our portfolio.” The difference in growth between cases and value, he explains, was the result of adding more expensive wines from Champagne and Burgundy to the book. Schatzi’s growth from 2016 to 2017 was statistically flat, he says, “so we’re scaling-up now with staff to address this issue.”
Pike zeroes in on specific goals for Schatzi’s growth in a number of categories. While he would not disclose specific percentage projections, he says he comes up with goals for growth on a quarterly and annual basis and reviews them with his team. His primary goal each year is to focus on increasing sales within existing states rather than adding new producers. He says his central concern—and challenge—is to maintain a small and focused portfolio so that a distributor in any state could work with a few wines from nearly every producer in the portfolio, while maintaining a collection of producers big enough to appeal to buyers in New York and California. He also creates individual goals for producers who he thinks “need more attention to get them solidified in the market.”
Winemakers credit Schatzi’s personal approach for their growth. For Fabrice Pouillon, of R. Pouillan & fils, it has made all the difference. “Their approach opened markets for me,” he says. “My Champagnes are now in the best places in New York, and the U.S. market went from negligible for us to representing 12 percent of my production.”
But getting people who can give producers that attention is one of Pike’s biggest challenges. He motivates his four-member sales staff to be as passionate as he is by offering a competitive salary, great benefits, and unlimited time off. (While the company is headquartered in an office in Milan, everyone works remotely.) Pike is hoping to bring on one more salesperson in January.
What’s next? Pike takes a bird’s-eye view of Schatzi’s place in the market, and while he says he doesn’t have an idea of how many producers he wants to add next year or the year after, he does have in mind a few regions he wants to bulk up—perhaps one more producer in New York “to make that category more interesting,” another from Switzerland, and a few from Northern Italy.
No rush. Chemistry is key.
“I have a commitment to only work with Schatzis,” Pike says. He named the company for the German word, a diminutive of Schatz, a term of endearment that means “little treasure.” “Life is too short to work with difficult individuals.”
Chaylee Priete, the wine director at the Slanted Door Group and a Schatzi client, praises Pike and his team’s commitment to “offer high-end and high-quality wines from small, hand-selected producers with a very limited markup. Also, they’re very gracious.”
In other words, they’re Schatzis.
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Kathleen Willcox is a journalist who writes about food, wine, beer, and popular culture; her work has appeared in VinePair, Edible Capital District, Bust magazine, and Gastronomica, and on United Stations Radio Networks, among other venues. She recently coauthored, with Tessa Edick, “Hudson Valley Wine: A History of Taste & Terroir.” She lives in Saratoga Springs, New York.