Vol.1 No.24 …why bigger isn’t better…in beer OR wine…

In the last episode, TB unloaded on the AB ImBev-SAB/Miller buyout. Do you really think that is good for the industry? Consider this: TB went to lunch yesterday and on the list of craft beers was Stella Artois…at $8 the most expensive beer on tap. Hmmm, is it that good? It IS good, but with literally hundreds of craft beers springing up all over the country, their might be more competition than the behemoths think. There is a good profit in a craft beer and attempting to raise the price on Bud, Miller, or even Stella likely won’t fly as the closer they get in price to those fine craft beers being made virtually everywhere in the country, people might just revolt from the swill that passes as beer (oops, I exaggerate but you get the point).

Now let’s look at the BIG wineries…to satisfy their audience who most likely aren’t oenophiles, they strive for consistency from year to year. The also have to buy grapes from many growers and their profit margins aren’t that wide – the profit comes from volume. That is why a winery that produces 10,000-25,000 cases cannot charge less than $20 and frequently has to charge $25 to $35. But as TB has frequently noted: globally, good wine is forcing out bad…bad wine cannot be sold at any price. Last year, three million gallons of French wine were turned into ethanol. Think those winemakers got the point?

Some people who rant about wine prices blame it on fancy labeling, heavy bottles, and many more issues. The fact is that 80% of the cost of producing wine is labor. Now add in the investment in real estate, the cost of maintaining vineyards, stainless steel, oak barrels, and much more…and guess what? After all that, even if you do everything right, you can have a bad year. That is why the late winemaker Joe Heitz told me that people think wine is romantic…it’s agriculture…farming.

So, don’t you think those people deserve to make a profit? They are not faceless corn or wheat farmers, who people never consider when there is a drought, infestation, or a huge glut that drives prices down…and don’t forget farmers…and grape growers have big cash flow issues and have to borrow to match their revenues and expenditures. Did you stop to think of that?

Previously, TB said, drink your Two-Buck Chuck or whatever you like during the week then get adventurous on weekends. Spend some money on good wines you have never tried or like. One way to satisfy both conditions of value and quality is to go to restaurants associated with a wine shop. There, you buy the wine and bring it to the restaurant (usually next door), and they waive the corkage fee. Now you can buy a $30 wine and not pay $50 for it. I will list two that I know, one in Walnut Creek, California, PRIMA, a northern Italian restaurant, and one in Minnetonka, MN, called Spazzo, also Italian. But there are others and you can find them, if you look and ask around.

While we are on this topic, it appalls TB to see wine lists that take advantage of the customer. First, the markup in sparkling wines is outrageous…sometimes a common Prosecco can cost as much by the glass as an entire bottle. Then there are the wine list themselves. No self-respecting restaurateur – or a sommelier that works for one – should have the commonplace wines on their carte de vins that has a plethora of the most common names at double or even triple the price. Along with this goes the wine lists that you swear you have seen before. Most likely you have with a few changes. Distributors offer to print the wine lists for free and then pack them with their own wines and provide the pricing. That is one stupid move by a fledgling owner and says volumes about her care for the restaurant. If she does this with the wine, does she look for the best meats and vegetables or just the cheapest? On my last trip in a great restaurant in Genessee Depot, WI, that I bet none of you ever heard of, The Union House, built in 1864 (?), I had a wonderful wine dinner. It will be discussed in a blog most likely early next week. Folio Wines provided the pairings and the chef did wonders with them. The distributor who set up the dinner said he was originally a consultant to restaurants on their wines before becoming a distributor. The wine list here showed his expertise…who would have thought? By the way, as obscure as the restaurant sounds it is only about ten minutes off I-94 near Delafield, and coming from Minnesota about half an hour before you get to The Dells. A must!!!

On etiquette, other than the examples above, never go to the store and buy a current release wine and take it to a restaurant. It is bad form here and you will still have to pay the corkage fee, which nowadays can be as high as $20 a bottle (oh, and that is a 750ml bottle so don’t try sneaking in a magnum at the same price). You can bring in a treasured bottle but always ask when making the reservation…and here is a tip: sometimes offering the somme a taste of a memorable wine will result in the corkage fee being waived.  But note it is either bad form or not allowed to bring wine into a restaurant in Europe…think about that.

In Adventures on the Wine Route, Kermit Lynch describes going to the cellar of a vigneron in Burgundy and tasting some exquisite wines. The man then said lets go get something to eat and they went to a local truck stop (not a joke), where a carafe of the house wine was ordered. Kermit noted that it tasted like “shit”, and the man said it is worse than that, it is “shit de merde”. So why would a man with a great cellar at his disposal do this? He said to bring his own wine would insult the owner. More food for thought.

Now if TB hasn’t succeeded in hammering into your brain what wine is all about, you may as well stop reading because you don’t get it and never will. That is your prerogative. But if you want to see hard-working people make a living, and want to continue to drink their wines…show them some respect and support…please!

To those of you who want to hear about the trip and the names of some of the wineries, TB promises he will do it next week. It is a lot to organize…thank you for your patience.

TB

©Copyright 2015 TBOW, all rights reserved.

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traderbill

How did Trader Bill originate? It was conceived by me as a way of providing information summaries of global financial markets so that friends and associates could bring themselves up to speed on events and changing market conditions upon their arrival at work. In addition, it provides information on speakers and economic releases that day with consensus estimates and level of last release so that the reader is prepared to react, or knows how the market might react upon the release of information. Who is Trader Bill? Initially any reference to me was as ‘i’. This is to remove the aura of ego and to suggest that i am but a humble reporter, albeit with 35 years of investment experience. Investments are demanding of ego, however, or one would not feel that he was qualified to manage someone else’s money in the first instance. Therefore i needed an ‘alter-ego’. Like Winchell and Mahoney, Edgar Bergen and Charlie McCarthy and especially Trader Vic and Mai Tai’s! Why Trader Vic? Because he was a likeable man who delivered pleasure to his customers and knew exactly what their desires were. The reason for the alter ego became obvious once I introduced Trader Bill into my commentaries: people started asking what Trader Bill thought. They had never asked me what I thought before, but suddenly they wanted to know what TB thought! Now mind you they KNEW that I was Trader Bill but for some reason he became bigger than life. Maybe it was the small ‘I’? What does Trader Bill try to do?His goal is to educate from his years of experience. Consider that most of the traders and people managing investments weren’t even around in 1987 for the crash! Consider that Graham and Dodd, and even Warren Buffet are not relevant to them, too old hat. Their historical perceptions of markets and fundamentals (earnings, price/earnings ratios, bonds, debt service coverage) are irrelevant in this fast moving world. This is the NEW ECONOMY, or is it? How did your style originate?Years ago i found that i had a knack and talent for writing. In addition, i developed an ability to analyze market news about 15 years ago. It took the Crash of ‘87. Prior to that i was just listening to what others said about the economy. But bond yields had been soaring in ‘87 yet the stock market just kept hitting new highs. That was when i began to learn about markets. i have both a dry and witty sense of humor (some call it inane!). Therefore i attempt to make even the worst news somewhat amusing: whether it is the absurdity of an economic release, or the comments of a CEO. This is trading desk humor (or gallows humor). It isn’t politically correct but it does ease tension. Ironically, it is seeing the light at the end of the tunnel (in the Navy they say: it’s always darkest before it’s pitch black!), that allows you to be more objective in your analysis, as bad as a situation is there will still be a tomorrow! You will see that i practice three-dot journalism, a style made famous by San Francisco reporter Herb Caen, whom i idolized. At least to me it is effective. What is so special about your analysis?Frankly, i don’t know that it is special, but at least it beats “the market closed down today on profit taking.” What i do know is that most of what you read is spat out without considering whether or not it is rational, like the above statement. Is it right? Sometimes yes and sometimes no, and that is the key to what is different about my analysis: it is meant to make you think. Is Dan Rather right or is Trader Bill right? If it causes you to stop and think about it, regardless of whether you agree, i win! Because THAT is my goal…not to have you think i am a guru, got that? Bet you never heard that ANYWHERE before in my business! Instead they want you to think just how smart they are but remember in this business if you are right 60% of the time you ARE a genius! Another thing that is different is when i am wrong on an analysis i will tell you, not hope you forget what i said. So now you have the tools to do what the speculators and hedge funds do: challenge authority, and if you make money it is because YOU did it not me. i was just a tool, your flunky to do the grunt work and let you decide…course you could be wrong too but at least you looked at the big picture. But the goal is also to have fun! This shouldn’t be a business of hushed tones and grim faces. It is a living, breathing thing and nowhere else in the world do you have the odds as much in your favor as here. Just beware of the guy who wants to put his arm around you and tell you he is your friend. So there you have it. I hope you select me as one of your sources for market information. If you do I promise to work my best for your financial success. Trader Bill

2 thoughts on “Vol.1 No.24 …why bigger isn’t better…in beer OR wine…”

  1. American beers are awful. In France Stella Artois (Belgium) is a good but fairly cheap label; the Stella draught is excellent. Heineken (Dutch) is very popular because of price. I like the French brand Pelforth, “1664” (Kronenbourg) is a big seller here too. The Belgians make the best beer in my opinion. Sipping a 50 cl mug of Affligem draught (pression) on a summer’s afternoon sitting at an outdoor café along the banks of the River Nive ,and watching the “gonzesses” stroll along the sidewalk showing off their suntans is a quite a pleasant way to spend one’s retirement years!

    Like

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