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Daou Brothers’ Latest Startup Is a Fine Vintage

The Daou brothers are at it again, launching a new venture and talking like it’ll be the next Microsoft or Google. But this time it has nothing to do with high-tech.

After running a successful technology business, Daniel and Georges Daou are realizing a long held dream: Launching a winery that produces wines to rival the best in the world.

Launched in 1988, Daou Systems grew to more than $120 million in sales and 1,000 employees. The brothers cashed out in 1997 and retired early.

The world of technology was good to the Daous, especially when the company went public and shares tripled in price. Yet the satisfaction they got from that success pales in comparison with what they’re doing now, they say.

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“We got into our 40s, and we decided there may be more to life than chasing the next deal,” said Georges, 48.

Born in Lebanon and raised in Paris, the Daous grew up in a family where wine was part of the daily routine. The boys learned to appreciate good wine, and what was not so good.

So Daniel took to collecting it, and then experimenting with various blends.

In 2005, they purchased 100 acres in Paso Robles in California’s Central Coast region, and began growing grapes.

Last year, Daou Vineyards released its first 4,700 cases, which included cabernet, merlot, syrah, zinfandel and two blended wines.


Affordably Priced

Gary Bullers, regional manager for six Morton’s steakhouses in Southern California, says the wines are both well-balanced and high quality, but even more important, affordably priced.

“Most wines at that price point don’t offer the quality and balance that these do,” said Bullers.

Michael Gallegos, chief executive for American Property Management Corp., a local hotel management firm, says the wines have received rave reviews from both chefs and customers.

“They’re doing so well that I’m doubling my order,” Gallegos said.

Bertrand Hug, who runs Bertrand’s at Mr. A’s and Mille Fleurs, serves the Daous’ wines at both upscale French eateries.

The Daous labeled their wines La Capilla, or the Chapel, in honor of their favorite winery in France, La Chapelle in the Rhone region. They recently found a Spanish-style bell made in 1740 that serves as their logo.

One factor contributing to the high quality of the wine is the use of fewer grapes. While an average winery may make about 150 to 170 gallons for each ton of grapes, the Daous make between 80 and 120 gallons, Daniel Daou says.

“We’re sacrificing quantity to produce quality,” he said.

The wine also has a higher skin to juice ratio, which results in more intense color and taste, Daniel says.

The Daous use handmade French oak barrels for aging instead of domestic, machine-made barrels. The former averages about $1,100 per barrel compared with $300 for the latter.

The emphasis on quality drives up costs, with their wines retailing between $28 and $46 a bottle.

Recently, the Daous got an order for 56 cases from Costco for bottles that should sell for about $22 each, Daniel says.

Local vendors carrying the Daous’ wines include The Wine Connection in Del Mar, North County Wine Co. in San Marcos, and the San Diego Wine Co.

“Our goal is not to produce 2 million cases and compete with Gallo or Kendall Jackson,” Georges Daou said. “Our goal is to create and foster a very good, high-end clientele. And when they taste it, they’ll go, wow, I can’t believe this a wine for $40 to $50.”


Drawn To Paso Robles

While the Daous initially looked at setting up their winery in nearby Ramona and Temecula, they were drawn to Paso Robles, primarily because of the climate and limestone soil.

Just north of San Luis Obispo, the area enjoys hot days and cool nights, a beautiful combination for producing flavorful grapes, Daniel Daou says.

“The limestone-based soil provides for great drainage, and you’re able to naturally stretch the vines to constantly produce very concentrated, very elegant and very intense berries that you can make wine from,” he said.

To help in the making of the wines, the Daous enlisted the expertise of several professional winemakers, but the Daous take a very hands-on approach in buying grapes from other vineyards and in the entire winemaking process, they say.

They plan to produce a limited amount of wine during the next several years, until they can use the grapes they’ve planted on the 100 acres they recently purchased on the west side of Paso Robles.

“We basically want to keep our production between 4,000 to 7,000 cases a year until we produce our estate-bottled wine, and then we’ll produce about 12,000 to 15,000 cases a year,” Georges Daou said.

In the near future, the Daous plan to construct a winery. In the meantime, they lease winemaking facilities to make their wines.

Gladys Horiuchi, spokeswoman for the California Wine Institute, says the Paso Robles region is home to about 170 wineries, while the number in San Luis Obispo County has tripled in the past decade to about 200.

California’s wine industry, including retail sales and agricultural and tourism factors, had a nearly $52 billion economic impact on the state’s economy in 2006, Horiuchi says. The industry employs about 309,000 people.

Since they began their wine business and through the next five years, the brothers estimate their total investment will be $10 million.

It’s all worth it because it’s a business that is involving the entire family and something every one of their children can be part of, the brothers say.

“This is not about creating a profit, but about creating a passion and a lifestyle not only for us, but for our children,” Daniel said.

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