Archive for the ‘Wine Sales and Pricing’ Category
Monday, September 6th, 2010
by Jeff Miller of Artisan Family of Wines (Seven Artisans, Sly Dog Cellars, Red Côte)
 Grapes that aren’t under long-term contract look to the spot market to be sold. And this year, the spot market is in pretty bad shape. As harvest approaches and the spot market continues to languish, the outlook goes from bleak to dire.
It doesn’t take an Einstein to see why. If you’re in the business of making wine, the softening of prices in the retail marketplace leaves you in a situation where it’s difficult to make wine and price it at a point where you can make money. So you have to ask yourself why you would go out into the spot market to buy up grapes when you can’t make any money in the process, and create even more inventory that’s difficult to move. The question answers itself.
While the winery can decide to limit its purchases, and look to reducing its inventory, the grape grower doesn’t have that luxury. Every year, the vines do their thing, and produce a crop, even if the grower would happily take the year off. Short of ripping out a vineyard, there’s little the grower can do. And if, at the end of the season, his crop doesn’t find a home, he’s lost his entire investment for the season.
Last year’s spot market was pretty bad, and this year’s seems to be shaping up much the same. There are few buyers, and what few there are know that supply outstrips demand, and are offering prices accordingly.
The choices for the grower are bleak. He can sell for a low price, assuming he can find a buyer at all, choose not to harvest, or crush his grapes himself.
Crushing the grapes himself is the alternative most fraught with risk. It means the grower converts his grapes into wine, in the hope that someplace down the line, he can sell his bulk wine at a price that gets him to a better place than just letting the grapes rot on the vine.
But the bulk market isn’t a whole lot better than the grape market. As with grapes, it’s hard to find buyers for bulk wine, and the prices are depressed. While a few varieties are still doing ok (e.g., Pinot Noir), if you have some Merlot or Syrah on your hands, it’s tough going. For reasons I don’t pretend to understand, Syrah sales have plummeted over the last several years. So Syrah sellers, in particular, are faced with a shrinking demand. Fortunately, it’s still valued as a blender.
It’s hard to imagine that we’re not going to see a major shakeout in the vineyard business. Obviously, the vineyards that can’t find a home for their grapes at any price are going to suffer the most. But many vineyards that can still sell their crop are finding that the prices they can fetch are much lower than in years past. Many of these vineyards are saddled with debt that depended on achieving the higher prices of times gone by. Even though they can sell their crops, they can’t achieve a price that allows them to service their debt.
So the grape grower’s plight plays itself out against a backdrop of rescission where others in the wine business can choose how much they want to produce, while the grape grower cannot. It’s not a pretty sight to behold.
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Monday, July 26th, 2010
Since I’m off this week on a sales trip to Georgia, the whole subject of the wine market is front and center in my thoughts.
One thing that really makes itself understood very quickly when you’re out in the market is that, for all the romance that seems to permeate the wine business, at bottom it’s about money. I don’t mean that in a derogatory way. It’s simply a fact of life.
For a bottle of wine to reach your dinner table, grapes need to get grown, those grapes turned into wine, which needs to find its way into a bottle, which needs to get sold to a distributor, which needs to get sold to a retailer, who needs to sell it to you. At every point in the chain, either a reasonable return on investment is made, or that part of the chain eventually goes out of business. No matter how sincere, dedicated, and competent a grower, winemaker, or distributor or retailer, may be, if the dollars coming in don’t justify the dollars going out, the whole thing comes crashing down.
A corollary to the above is that 99% of the people involved in the business are going to put their efforts into whatever they think is going to return the most dollars to them.
Which brings me back to a memory of a sales trip I was on once. I was with a distributor rep as he made his rounds of his retail stores. We’d taste the various accounts on our wines, and generally did an okay job of selling wine that day. But he was constantly on the phone trying to do deals for upwards of 500 cases. I can’t blame him for that, as those deals certainly earned his company, and him as well, far more than my five case deals ever could.
I can only believe that this effect is reflected throughout then entire wine market, even in areas seemingly remote, such as publicity. My friend, Arthur Z. Przebinda, just wrote an article about Suisun Valley. Suisun Valley, unfortunately, produces a small fraction of what our much larger and well known neighbor, Napa Valley, produces. Napa has the huge advantage in dollars, since it can produce so much more wine than we can. That dollar advantage translates into both market power, allowing Napa wineries to more easily penetrate the marketplace, as well as a publicity advantage. So Napa naturally gets way more attention from the press than we do. An article such as Arthur’s is few and far between for us Suisun Valley winemakers. Again, it’s hard to criticize anyone—after all, I’m sure the wine press’s readership is generally going to be more interested in Napa than Suisun, if for no other reason that there’s a ton more Napa than Suisun wines out there.
When you consider how many wineries there are out there, it becomes obvious than only a small fraction of them can get all that much publicity. The larger winery enjoys not just the benefit that it’s higher production is going to draw more attention from wine raters, but also that they can employ public relations staff and firms to keep up continual contact with the wine press.
Which leads me to contemplate just how difficult it is for the small producer out in the marketplace. While we struggle to sell tens of cases, the big corporate winemakers, with real market power, can ram into the market thousands upon thousands of cases. It’s frustrating as can be, since I truly believe smaller wineries generally make better wines (as I’ve written about before http://artisanfamilyofwines.com/blog/?p=1163 ). Yet the effect of market power overcomes the effect of producing a better product.
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Friday, July 2nd, 2010
Heimoff further opines that the impetus behind vintners pursuing the obscure varieties is to carve out a marketing niche for themselves, something that’s impossible in the common varieties such as Cabernet Sauvignon. I think there’s some truth to this, although I’ll wait and see whether our Montepulciano is successful in this regard. I’m not so sure that you aren’t better off, financially, producing the zillionth Cabernet Sauvignon out there, because, at the least, you know there are people who will buy Cabernet Sauvignon. Are there people who will buy Montepulciano? I’m sure hoping there are.
But when you come out with a wine, you can’t just be thinking about the ultimate consumer. In getting your product to the consumer, you need to first of all get a distributor to buy into your vision for Montepulciano, and then a retailer who has to buy in as well. If you can get that far, you get to the shelf, but you still haven’t made a sale. Hopefully, the local wine store salespeople or restaurant sommelier will hand sell the wine, since I doubt there will be very many people wandering into a store asking for a good Montepulciano. Assuming you can get to the market, Heimoff is right, however, that you’re not going to be going head to head with a crowd of other Montepulcianos. Only time will tell how the marketing side works itself out.
But I think the greater motivation for vintners isn’t the marketing angle, but simply the desire to expand the wine world’s horizons. Producing another Cabernet Sauvignon, no matter how good it is, isn’t really changing things one iota. I would like to think that when it’s all said and done, I brought something new and different to Winedom. I can do that with Montepulciano. I can’t do that with Cab.
I do take exception to Heimoff’s comment that many of these obscure varieties are doomed to fail simply because they aren’t very good. I think many of the varieties that are obscure are obscure only because they hail from the back roads of the wine world. Historically, the wine world’s Main Street is located in England, and England has sourced its wines historically from France. Does that mean that French wines are better than those from Italy, Spain, Portugal, etc.? I personally don’t believe that for a second. But it does mean that the French varieties are the familiar, what we expect when we taste a wine. The obscure varieties aren’t inferior, just different, and don’t come with the comfort of a familiar old shoe the way Cab does.
I also don’t totally agree with the observation that it will take a long time to learn how to grow and vinify these obscure varieties here. While some varieties are pretty finicky (e.g., Pinot Noir) and take lots of learning, many other varieties don’t take a lot of getting used to. Obviously, every vintage you can learn something new, or try something different. But that doesn’t’ mean that many years of trial and error are necessary for every variety. Montepulciano, for one, hasn’t presented any overwhelming difficulties even though I’ve been playing around with it for only a few years.
I think in the end, many of these obscure varieties will succeed. After all, the varieties that we think of as common were all obscure at one time. I think I it will take some time, though, more because of the consumer resistance than because of the inherent problems in making top-flight wines from these varietals.
Posted in Harvest, Viticulture, Wine Sales and Pricing, Wine Tasting | No Comments »
Monday, June 28th, 2010
A recent post by Steve Heimoff caught my attention, “’Obscure’ varieties a hard sell”, which can be found at http://www.steveheimoff.com/index.php/2010/06/24/obscure-varieties-a-hard-sell/
Heimoff has some interesting things to say about obscure varietals (i.e., varietals that have a tiny place in the market place and that many have never heard of). Since I’ve always had a fascination for obscure varieties, I’m going to agree with some of what Heimoff has to say, and disagree, profoundly, with some of the rest.
First, let me say I got interested in some of the obscure varieties by a problem of the inland California vineyard, excessive heat. The main grape varieties on the market (e.g., Cabernet Sauvignon, Chardonnay) come from France and thrive in the climates of Bordeaux and Burgundy. But compared with the California inland valley, those are relatively cool growing areas. In France, those grapes may ripen under optimal conditions, but here they all too often ripen earlier in the growing season, when heat is at its hottest. Some varieties seem to tolerate the heat just fine (I’m thinking of Petite Sirah), but others don’t do as well (I’m thinking of Cabernet Sauvignon).
Ripening under intense heat opens you up to a variety of problems. Sugar levels can spike, requiring either that you add a bunch of water at the winery or else live with high alcohol levels in the finished wine. Acidity often drops, requiring a hefty acid addition at the crush pad, or else living with low acid, flabby, wines.
Sugar and acid levels at least have the redeeming grace that there are corrective actions you can take. But shrivel and raisining produce flavors in the wine that you pretty much have to live with. Those flavors progress from plum, through prune, to raisin. While some people like those flavors, and therefore seek out those wines, I would prefer to avoid at least prune and raisin, even if some plum is okay.
So this is where some of the obscure varieties come in, at least for me. Many of these varieties originate in Southern Europe (e.g., Italy, Spain, Portugal), under climactic conditions more similar to what we experience in the inland valleys. I’ve played around with a number of these grapes with, I would have to say, limited albeit important success. My two stars are Montepulciano and, to a somewhat lesser degree, Aglianico. Montepulciano is a real late ripener, which we pick usually in late October or even early November. It retains high acidity while achieving moderate sugar levels. It emphasizes the brighter part of the fruit spectrum, unlike other varieties that, ripening under greater heat, emphasize the darker part of the spectrum. I hope my first Montepulciano bottling will hit the market within a year.
To be continued on Friday.
Posted in Harvest, Viticulture, Wine Sales and Pricing, Winemaking | No Comments »
Monday, June 14th, 2010
I have to admit to having pretty mixed feelings about Two Buck Chuck, the wine produced by Fred Franzia and sold through Trader Joe’s.
Since I’m assuming everyone knows what Two Buck Chuck (“Charles Shaw”) is, I’m not going to waste any time on that subject. And I will say upfront I’m not a big fan, personally, of the wines. I’ve tasted maybe a dozen of them at this point. One, a Merlot, was actually pretty good. Nothing for the ages, but certainly a pleasing quaffer. The other ones I’ve tried were, at least in my opinion, poor. Nothing commercially flawed, mind you, but the definition of mediocre when it comes to wine. Not bad; just pedestrian and, as I say, poor.
But is the fact I don’t appreciate these wines (as I suspect is also the case with most dedicated wine consumers) a reason to condemn them? I don’t think so. By any standard, getting a bottle of wine to the retail shelf selling for $2 is an incredible accomplishment. Our little wine company spends close to that just for the packaging (bottle, label, cork, etc.). And that’s our cost. By the time you buy one of our wines, probably $3-4 of the price is attributable to the package. And that’s just the package without any wine in it. So I have to tip my hat off to Two Buck Chuck for accomplishing something that, price-wise, I would have thought was impossible.
I also have to acknowledge that, my opinion notwithstanding, there is a place in the market for Two Buck Chuck and its imitators. There are no doubt many people who involuntarily must spend less on a bottle of wine than is consistent with high quality. But better Two buck Chuck than nothing. And there are others who could afford to pay more, but are perfectly satisfied with wines that I would avoid. That’s certainly their right. No one is obligated to buy a wine that’s more expensive than they choose.
Finally, I think Two Buck Chuck bridges the gap between not drinking at all, and drinking better wines. I would bet many begin their wine-drinking life with Two Buck Chuck, and then move on as their tastes and budgets allow.
So overall, I think Two Buck Chuck is a good thing for the wine business in general, even for those whose products cost appreciably more.
One last comment: Fred Franzia has said that no wine should cost more than $10. I’ve often wondered whether he means that seriously, or whether it’s just a marketing ploy. I have to think the latter. Whatever can be said in favor of Two Buck Chuck, at least in my opinion, $10 is more of a floor than a ceiling on what fine wines should cost. I rarely taste a wine for less than $10 that rises above the level of quaffer. We’re trying to come out with a good wine that costs $10 retail, and I have to tell you it’s not an easy thing to do. I’m still not sure we’re going to be able to hit that price point, but we’ll try.
But I do agree with Franzia that good wine shouldn’t have to cost an arm and a leg. I would certainly say that for most (though not all) types of wine, you should be able to get a good product for $20, or even less. Most of our wines retail for about $15, and, at least in my opinion, they’re pretty good.
It seems that some large winery, with the benefits of economy of scale and buying power, should be able to produce a truly good wine for less than $10, but it doesn’t seem to happen. I suspect that’s more from lack of interest than inability.
Posted in Wine Sales and Pricing, Wine Tasting | 1 Comment »
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