Vol. 2 No. 26 – are 90+ ratings worth the price?

There is a popular website, Wine Till Sold Out (wtso.com), mentioned in post 24. I have used it and recommend it but with a caveat: every wine they offer has at least a 90 point rating. They are offered at deep discounts to the ‘retail price’. I am not challenging them on it being accurate, I am saying that when a wine gets a 90+ rating (and if you can’t get at least one from the dozens of raters out there – some with self-serving interests – you shouldn’t be in the business!), the winery ‘creates’ a suggested retail price that ‘they’ cannot sell below which is why you shouldn’t buy wine when visiting a winery unless it is hard to get. If you really like the wine then join their wine club. One reason I do like buying direct is that the haircut is huge due to our three-level marketing system which serves no one well, least of all the producer and the consumer.

A couple of years ago, a friend with a highly respected, but small winery, noted that when the high ratings, especially by Robert Parker, come out, the price of the wine is no longer surging. It may be at the winery which is trying to capitalize on the rating but not like before. Furthermore, just because it is priced at $50-100 doesn’t mean it will be bought there. That is a function of so many wines receiving ratings of 90 or above.

Just in the past year or so the fastest growing segment of the wine market in the U.S. finally moved up from the under $10 range, to the $10-20 range, which is good, although that isn’t hurting Two Buck Chuck much. In post 25, my Ten Commandments of Wine, I suggested moving up a notch and seeing if you can notice an appreciable difference. I also suggested that very few except true enophiles can find differences above the $30-40 range, and fewer still above $50.

This bring me back to WTSO: the savings are incredible – from the winery-set price – but most of the wines I see there I have never heard of before, meaning many are buyers of fruit, make the wine, using time-tested formulas for 90 point ratings (again, let me emphasize my dislike of the 100 point system, and preference for the UC Davis 20 point system). Most of those ratings are achieved by following Robert Parker’s taste buds.

Don’t misunderstand, prior to Parker, there was no quantification (except in tastings at fairs, etc. or the famous Judgment of Paris tasting which brought California wines to the fore. What he did was to set a standard of quality. Originally, many wines received ratings of 86-90, fewer 90-95, and only a handful above that with only a couple of 100 point ratings. Now, a winemaker who can’t expect a 90 rating wouldn’t think of submitting her wines for close scrutiny, because as one store owner quipped, “I can’t sell any wines with an 89 point rating, but I can sell all the wines with a 90 point rating, but I can’t get them.”

So, as TB has been fond of saying: globally, good wine is chasing out bad (TBC excepted). But it has now reached absurdity since most couldn’t discern the difference between an 87 point wine and a 90 pointer.

Think of a ’90’ as being the initiation fee at a club. Those achieving it either ‘jack up’ the price immediately, or in the case of a well-known brand like Lafite-Rothschild, the demand from the Chinese does it for them. Bordeaux producers making large volumes of wine set their price and sell all of it (albeit no longer in the U.S. and U.K., the former principal purchasers), but the ability for other producers to do that has dissipated due to the huge number of competitors. Remember too, that a rating is on the ‘type’ of wine or the varietal, which you may or may not like. A good friend, cannot stand and recognizes any Pinot Noir and won’t/can’t drink it. I know, we have tried repeatedly to fool him and it almost makes him sick…must be some chemical inherent in the wine (?).

So now you have millions of gallons of wine in warehouses (expensive), in the producers cellars (taking up valuable space), and on retailers shelves. What’s a winemaker to do? Enter WTSO, which from what I can determine is one of the few that is approved of by the producers (based on limited questions).

Imagine you are a producer with a big inventory overhang. You could offer them to a distributor at a low price (provided the wine is not being offered publicly, such as an older vintage), for a pallet (roughly 50 cases or 600 bottles), and get immediate cashflow – the mothers milk of a winery. WTSO, unlike Trader Joe’s or other retailers, will offer it on their site, but they are generally up for an hour or less before being ‘sold out’.

The offering looks like this:

93 Pt. La Mannella Brunello di Montalcino 2011
93 rating and 65% off!

Free Shipping on 3 or more


Comparable Price*: $85.00
Yesterday’s Best Web Price (With Shipping): $N/A
Our Price:

$29.99

Buy Now

wine bottle Description
Appellation Brunello di Montalcino
Unit Size 750 ml
Varietal/Grapes Sangiovese
Vintage 2011
Country Italy
Region Tuscany
Alcohol Content 14.50

Here are the key points:

1.Comparable Price – nebulous because most have no ‘comparable’. Do they mean what it would cost in a wine shop? Winery (they used to say ‘retail price’ which was the one set by the winery per law).

2.Yesterday’s Best Web Price – lately they are like this one with a strikeout through the price, so it is useless.

3. Their price and discount to the ‘comparable price’. Also the number of bottles you need to purchase to get free shipping – a very good deal! the number of bottles required for this is inversely proportional to the price (i.e. $100= 1 bottle; $20 = 3 bottles, etc.)

4. The point rating can come from any number of critics, WTSO members (?), Wine Spectator, Wine Advocate, etc., so you have to know which ones are reliable and which have their own interests at heart.

Before you think this is a scam consider, that it is an offering price, you have all the information you need (and some you don’t) to make an informed decision. That is all that business ethics require. I have purchased wine from them and found contacting customer service easy and responsive. I purchased some wine that was delivered in extremely hot weather. When I checked the bottle temp it was 90 degrees! They replaced it for me at no cost and held it until I felt it was safe to deliver and pointed out that they will hold the wine for you for up to a year (they ship quickly so if you are going to be away for a few days have them hold it, since a signature is required).

The point is that they try to serve their clients needs (both buyers and sellers), and judging from the volume of transactions, do both well. You, the buyer get the wine at a reasonable price, while the producer helps cashflow without damaging the value of future offerings.

But if they have a dozen or more offerings each and every day, what does this tell you about the retail price? It is too high…that’s Econ 101!

That translates to value for you, but note that ‘cult wines’ don’t face this problem: they have member lists, usually full and not taking names, small production, perhaps 250 cases, and if you want that, and can afford it, go for it. Personally, I would rather see the winery get 100% of the retail price, rather than distributors (some of whom are less than reputable and some downright lazy). The problem with wine club membership is this: shipping adds greatly to the cost, but in many areas like Minnesota, where TB lives, you ae not going to be able to get many of the best wines without joining.

As the popular phrase goes, “it’s complicated”.

Hope you found this useful and remember to support wineries you like, local wine shops that provide information and tastings, and keep trying new wines and ‘inching’ up your prices, that goes for restaurants where the biggest markup is on the cheapest wines.

Best,

Trader Bill ©traderbillonwine.com 2016

 

 

 

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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

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