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Posted: May 27, 2009

The cult of cabernet

Silver Oak Cellars soars with single-minded niche

Alta and Brad Smith

California cult wineries are by definition small and their wines exclusive, expensive and predominantly Cabernet Sauvignon. About a dozen wineries have reached cult status. One of the first, if not the first, cult wineries in the United States was Silver Oak Cellars, a winery with Colorado roots that started in a dairy barn with an exclusive focus on one grape.

Followers of Silver Oak — and their numbers have grown considerably over the years — may know the winery’s background. But they may not know that Silver Oak Cellars and its wines might not have been created and grown into the business it is today without the acumen of a Colorado family.

Silver Oak Cellars was created out of a partnership, sealed with a handshake, between Colorado oilman and entrepreneur Raymond Duncan and a California winemaker who originally wanted to become a monk, Justin Meyer. It got its name because it was located between Oakville and the Silverado Trail in Napa County.

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The Duncan family continues to run the privately held venture, with Ray Duncan, now in his late 70s, actively involved. Two of his four sons are officers — David is president and Tim is executive vice president. The other sons, Mike and Kevin, live in Denver.

Mike manages the family-owned Diamond Tail Ranch, which raises buffalo and cattle on the Laramie River in the northern part of the state. Kevin is vice president of Duncan Oil. Ray’s wife, Sally, has been involved in marketing the wines as well as the tasting rooms at the winery’s locations in the Napa and Alexander valleys. Tim’s fiancé, Roo McKenna, is a childhood friend from the fourth grade at Cherry Hills Elementary.

Silver Oak’s story occupies an important niche in California’s wine industry, partly because it so single-mindedly bet on Cabernet Sauvignon while other wineries were bottling several varieties of both red and white wines. It also proved that close attention to business, especially to its main customers and its marketing, could pay off for a winery that was going against the grain.

Silver Oak’s success encouraged many other California wineries to make Cabernet Sauvignon one of the state’s leading varietals. And Meyer, who died in 2002, helped shape the California wine industry with his advocacy of wine education and service in many wine organizations.

Not bad for a cult winery, although most people would not consider Silver Oak a cult winery anymore because of its size. Cult wineries have small productions, perhaps a few hundred to 2,000 cases annually, with limited distribution and high prices. Silver Oak’s first vintage, 1972, put it into that class with a production of 1,600 cases. In 2007 (when this article originally appeared in Colorado Vine) that reached about 100,000 cases.

Wine & Spirits magazine nameed Silver Oak its “# 1 Most Popular Cabernet” in its 20th annual restaurant poll, released March 23.

Its new Oakville winery opened in Fall 2008. The winery celebrated the grand opening and the long-awaited release of the 2004 Napa Valley Cabernet Sauvignon with festivities at both its Oakville and Geyserville wineries in early February. Re-built from the ground up after the original facility suffered a fire in 2006, the winery is designed to produce one wine only, the Silver Oak Cellars Napa Valley Cabernet Sauvignon.

The new tasting room includes features evocative of the original tasting room build in 1981, a history gallery with original memorabilia from the original Silver Oak Cellars and an exterior built from limestone reclaimed from an 1800’s flour mill in Coffeeville, Kan.

A business that began with a handshake

Asked if things turned out the way he envisioned when he and Meyer started Silver Oak, Ray Duncan answers with a quick “no” and then adds: “The mindset in those days was a lot different from what it is today. We had in mind to make and sell a good, high-quality, consistent-quality wine. From that standpoint it turned out very well. And we’ve kept that up since Justin passed away. But on the scale that we have now, we didn’t have any definite goal. The business plan was a handshake.”

David Duncan adds that Silver Oak has “executed  a fairly steady plan over our 35-year history. Looking back over that period of time, we’ve been sold out of wine 28 years in a row now — basically since we started, since we didn’t sell any for the first five years. We have grown steadily over that time.”

Silver Oak’s prices may be high compared with many mass producers, but not for the cult wineries. Its Alexander Valley Cabernet runs $65 a bottle, while the Napa Valley vintage is $100. Compare that with a cult Cabernet from Screaming Eagle Winery, which runs more than $1,000 if you can find it in a retail outlet. (Screaming Eagle is partly owned by Stanley Kroenke, owner of the Denver Nuggets, Colorado Avalanche and Pepsi Center.)

Most importantly for Silver Oak’s business plan is that it sells out its entire stock every year. Plus, it has been the top-selling Cabernet Sauvignon in high-end restaurants in the United States for most of the past decade, according to Wine and Spirits Magazine.

Ray Duncan admits he didn’t envision Silver Oak becoming the scale it is today, but he and David say it has stuck with its original plan of making a high-quality, consistent wine year after year.

The Duncans have a history in Colorado dating back to 1958, when Ray moved to Durango to build his father’s oil and gas exploration concern. His own company, Duncan Oil Inc., moved to Denver in the 1960s. Duncan helped found the Purgatory Ski Resort in 1966, became involved in the ski industry organization Colorado Ski Country USA, and was inducted into the Colorado Ski and Snowboard Hall of Fame in 2006.

Ray also was inducted into the Rocky Mountain Oil & Gas Hall of Fame in 2004 and was named Wildcatter of the Year by the Independent Petroleum Association of Mountain States in 1998. His philanthropy has included support for Kent Denver and his alma mater, the University of Notre Dame, which named a men’s dorm after him. He also has backed the Crow Canyon archeological center near Cortez, the Denver Art Museum, and is a founder of the Castle Pines Golf Club.

How an oil and gas entrepreneur and a former monk got together to start Silver Oak is the stuff of Napa Valley wine legend. The two men came from completely different backgrounds but became lifelong friends and business partners.

Duncan had purchased about 750 acres of Northern California agricultural land in the early 1970s. Some of it was planted in wine grapes, and Duncan, still living in Denver, started looking for someone to take care of the property. The land acquisition was an investment, and Duncan had no plans then to build a winery, just grow and sell the grapes.

Duncan’s quest for help led him to several people in the Napa Valley, among them Justin Meyer. Meyer had joined the Christian Brothers religious order earlier, and the order had transferred him to their winery in St. Helena, where he wound up overseeing much of their wine production. After 15 years in the order, Meyer left to get married.

Duncan talked Meyer into taking over his vineyards, while Meyer talked Duncan into creating a winery. Duncan provided the financial backing, and Meyer contributed his skills and his inside knowledge of the burgeoning California wine industry.

First vintages

Silver Oak opened in 1972 and bottled its first vintage that year, mostly from its own Alexander Valley grapes. The first three vintages were made at the Christian Brothers winery, and then at the Franciscan Winery, which Duncan and Meyer purchased in 1975. The wine was aged in the old Keig Dairy barn that was part of Duncan’s original land purchase. The partners sold Franciscan in 1978 and turned their attention to building the Silver Oak winery, which opened in 1981. They also were buying more acreage to expand production.

Why focus on Cabernet Sauvignon? Duncan says that was part of Meyer’s original plan because he thought the varietal was best suited to California’s North Coast region. But Meyer also didn’t want a big, tannic Cab that needed to sit in someone’s cellar for 15 years before it was drinkable, Duncan recalls.

Meyer said in an oral history for the California wine industry that he picked one varietal because “it was kind of a reaction to my days at Christian Brothers, where we made so many wines it was hard to do them all right, and it was kind of in keeping with what I thought — that Cabernets were what Napa and Sonoma did best, so why not devote our attention to that. This is a pretty common concept in France.”

The decision led to a couple of important moves. First was to use American oak barrels, which impart less tannin to wine than French oak. Second was to age the wine for a total of five years before releasing it, which also softens the inherent grape tannins.

“That worked out very well,” Duncan says. “One of the attractions of our wines is that they are drinkable on release.”

Of course, the decision also meant Silver Oak had nothing to sell for its first five years. But the relatively long bottle aging and limited quantity also created an aura around the wine when aficionados discovered its quality.

Duncan says it took about 10 years before Silver Oak was seriously recognized. By that time, Silver Oak had become a national phenomenon in the industry. It would announce the release day for its wines, and the winery would be flooded on that day with people waiting to buy. That demand still occurs, with the winery selling out of its wines before the next vintage release date, even though it limits purchases to 12 bottles per person or fewer.

David Duncan says Silver Oak still gets several thousand people at its facilities on release day. Silver Oak didn’t start out promoting release day, which drew 50 people the first year, but did after several years when hundreds of people starting showing up.

David is a Durango native who got his MBA at the University of Denver and moved to the Napa Valley full time in 2002 to run the day-to-day operations of Silver Oak. The move uprooted his family as well — his physician wife, Kary, gave up a high-level position at the University of Colorado Hospital and now has a dermatology practice in St. Helena.

David helped on the acquisitions for another Duncan-owned winery, Twomey Cellars, which focuses on making single-vineyard Merlot wines as well as smaller quantities of Pinot Noir and Sauvignon Blanc. Twomey Cellars opened in 2002. (Twomey is Ray Duncan’s mother’s maiden name and his middle name.)

It was under David’s leadership that Silver Oak acquired the former Roshambo Winery near Healdsburg, plus 17 acres of vineyards in the Russian River Valley. That facility was used to make the 2007 Silver Oak Napa Valley Cabernet Sauvignon, as well as to produce the Twomey Pinot Noir and become a second tasting room for Twomey Cellars.

Much like they did with Meyer, the Duncans teamed up with a first-rate winemaker, Daniel Baron, at Twomey and Silver Oak. Baron’s background includes wine-making studies in Bordeaux as well as general manager at the respected Dominus Estate in Napa. He was picked by Meyer in 1994 to succeed him as winemaker at Silver Oak and became director of winemaking this year for both Twomey and Silver Oak.

Construction of the new Silver Oak winery was one of those clouds with a silver lining. The fire destroyed a historic building, but it also gave Silver Oak the opportunity to build a modern winery from the ground up, David Duncan says.

David is as much a hands-on winery president as he can be. He describes his job as “to get it into the bottle, and then (brother) Tim has to get it out the door.”

Tim went to work at Silver Oak in 1986, right after getting his business degree from Regis University in Denver. He worked first as the northern California sales rep and then gradually worked himself up to national sales manager in 1996. He’s now not only executive vice president in charge of all sales but also managing partner for Twomey Cellars.

The original Twomey Cellars vineyard, called Soda Canyon Ranch, was purchased in 1999, Tim says, for the Cabernet Sauvignon grapes it grew. But Baron became enchanted with the Merlot grapes there as well and convinced the Duncans to make a Merlot under a separate brand in a style similar to a French Pomerol and St. Emilion. The Twomey Merlot, which uses French oak barrels, began with about 500 cases in 1999 and will reach 10,000 cases this year.

Silver Oak still follows its original business plan to always pay attention to its customers, Tim says. That includes pouring at charity auctions like the Sun Valley Wine Auction he attended this summer, and “talking to consumers, retailers and restaurants or they will forget you. You need to be part of the community. Your following can disappear quickly.” 

This article was originally published in Colorado Vine in September 2007. Patricia Kaowthumrong contributed to this story.

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