Vol 4 No 3 Is the high end wine market imploding?

TB has been reading articles lately on demographics of wine buyers and here is the jist:

  1. Babyboomers start in 1946 and run to 1964 (note TB is in the twilight zone missed greatest generation too…Dec. 26, 1944; Generation X is 1965-1980; Millennials run from 1980 on…but for our purposes end at 1997 in order to be of age to buy (not necessarily to consume, right?).
  2. As the babyboomers retire, they are being forced to cut down on their consumption of high priced wines ($50+ for example). That means someone has to pick up the slack. In 2008, China did just that for Bordeaux saving it from catastrophe, driving the price of 1st and 2nd growths to the moon, Alice…the moon, as the Great One would say…quite a wine drinker he! So far, no one is trying to take the torch, which has given rise to online sellers of various sizes and value to buyers. One site TB is aware of and has used for obscure wines is Wine Till Sold Out dotcom. it is becoming apparent that this site is being used to offload unwanted inventory (distributors and retailers, of little interests to winery customers). I have heard no complaints about this one from winery owners although they are reluctant to go further for obvious reasons. There are other sites, as well as big box retailers like Total Wine & More, Beverages and More (BevMo), as well as Trader Joe’s that get mixed reviews.
  3. Millennials are a mixed bag: they don’t care to buy the same wines their parents did for the most part; are not collectors of rarities or wine for aging (generalization); many are making good incomes but many are not and some are still saddled with student loan debt, mortgages, car loans, etc.
  4. They want to discover their own fav’s and at affordable prices. That is the best answer TB can offer to the reason that wines in the $15-20 segment are the fastest growing in sales, while the $10 and under category is flat and has been for a few years running (it is also why TB believes the best values are in the $25-35 range (especially if you find them on sale), WTSO bears this out too if you look at their offerings).
  5. Daily TB sees wines in the $75-100 range…even $150…deeply discounted (that is one thing you may view as good or bad about the site as you will get perhaps a dozen offerings a day that are gone within 20-45 minutes…sometimes less  and price dependent, 1-4 bottles gets you free shipping!). This brings TB back to the last blog he posted a few days ago on when joining a wine club is desirable.

TB would appreciate observations of others on the veracity of the above, or other thoughts from readers.

These are/can be trying times for winery owners, particularly those who purchased vineyard land on the West Coast in the past ten years or so. What to they do with their surplus wines, particularly from their most recent vintages, that won’t drive down the price of their wine…permanently? The wrong plan can totally destroy the bottom line.

One outlet that is becoming more widely known is China, or Chi-na, as Trump would say (although he is a teetotaler, the family owns Trump Winery and which TB has no interest in trying – ever – it simply goes against his grain for a plethora of reasons). While the Chinese saved Bordeaux in 2008 during the global financial crisis, a byproduct was the demise of their three-tier system, it is also of interest to U.S. winemakers who need to get rid of inventory without ‘dumping’ it on the market. It simply vaporizes and unless someone wants to go into currency translation for the Yuan (real name Renmimbi), no one will ever know. TB believes this outlet originated when U.S. and other producers thought they could market their brands their but ran into a lack of copyright protection, fraud, and governmental bribes. The answer was to go to an exporter, who may be owned partially by the Chinese, and poof! Problem solved and no one will ever know what it was sold for. If this helps destroy our own post-Prohibition extortionist three-tiered wine laws, TB is all for it! Why should the grower/winemaker take the most risk yet make the least when with nothing but a law and some knowledge of wine (in some cases distributors even promote favorites while letting their smaller wineries hang.), make most of the retail price. The unfairness of this is further complicated by some state laws that say if you fire a distributor you can’t replace him until the last case is sold…and some are vindictive enough to never sell that case!

I could name extremely rare cult wines that are in the predicament of not being able to sell all their wine when there used to be a waiting list to buy it, but are having to resort to China to bail them out. Now do you understand the problem?

We will close on the topic of wine fraud. TB is willing to bet that virtually every collection has at least one bottle of counterfeit wine. In many cases, auctioneers turn a blind eye, some actually aid and abet it for their own profit and then deny culpability. Makes you want to rush down to your local wine auction house and get your bidding paddle, doesn’t it? Not TB, he had fun at wine auctions, got some great wines at reasonable prices, and watched others pay premiums for that could be bought at many wine shops…for less!

But his greatest success was selling some cult wines at huge premiums with the intent to buy more wine, but alas his wife saw things differently…the money simply vaporized.

TB will close with a quote from the great Andre Tschelistcheff (that you may have seen here before but what the hey…it’s a damned good one: “we spend far too much time tasting wine, and not enough time drinking it.”

Drink up, this ain’t no library!

TB

(c) 2018 traderbillonwine.com

Vol. 4 No. 2 when should you join a wine club?

***Update: this article based on Silicon Valley  Bank’s observations, they the big lender to the wine industry, drives home what this article is all about. High priced wines are not selling…could mean a big shakeout. https://www.wine-searcher.com/m/2018/01/us-wine-growth-slows-as-clouds-gather

Over the years I have joined (and eventually left) several wine clubs. I didn’t leave them due to dissatisfaction, on the contrary I had way too much wine piling up that I wasn’t drinking fast enough. From what I hear from others it is a common problem, and an expensive one.

At the big wineries you sign up for two to four shipments a year, sometimes with only a choice of white or red. You may not like some of them or even see them much cheaper at a discount store or as in the previous post, an online purveyor.

So here is my advice: first, skip the big wineries because you can find most of their wines in shops. Second, even with some of the smaller wineries, they may not be able to sell all off mailing lists, especially the larger their production is. This can lead to discounting.

Of course, if you just ‘gotta have’ a wine and it is hard to find, then go for it. Then there are the ’boutique’ cult wineries that don’t command the three digit prices, but for them it is a two-way street: a loyal following, availability for the buyer, and much better prices for the seller which can make the difference between making a profit or taking a loss.

As shown in my last post, and I didn’t even use the example of a $100+ wine selling for $29, but the more common one. Just did a search of my trash emails and found what I was looking for:

 

Notre Vin Howell Mountain Cabernet Sauvignon 2012
94 rating and 67% off!

Free Shipping on 2 or more


Comparable Price*: $150.00
Yesterday’s Best Web Price (With Shipping): $N/A
Our Price:

$49.99

Buy Now

wine bottle Description
Appellation Howell Mountain
Unit Size 750 ml
Varietal/Grapes Cabernet Sauvignon
Vintage 2012
Country United States
Region Napa Valley
Alcohol Content 13.80
67% OFF!

This is a perfect example: Howell Mountain is not only the first AVA subdivision in Napa Valley, but has volcanic soil, which is rich and imparts incredible flavors and body. Among the famous producers are Dunn, CADE, Black Sears, Duckhorn, Outpost (formerly part of Lamborn, which is still active and going strong. Members of the Howell Mountain Vintners & Growers Assn. now total 35.  When I first started going up there to see Bob and Mike Lamborn in the late 1980’s (two different vineyards on opposite sides of Summit Lake Drive), you could count all of them on two hands and still have fingers to spare.  At the base of Howell Mountain, along the Silverado Trail are Beringer, Heitz, and Joseph Phelps, which also benefit from the rich soil.

Notre Vin is also ranked as one of the top Howell Mountain wineries. Even so, they can’t sell all their wine and thus it appeared on WTSO. But more interestingly, this was the second time in about a month that the offering appeared. Now imagine if you were a member of that wine club, how would you feel.

On the other hand there are many small producers (relatively), where if you want the wine you have to join (not talking about the BIG name cult wines and note even they have problems moving their wines). More power to those who can make the transition, they deserve it for the hard work and of course, passion. You will also be able to offer wine to friends that have never seen it before and that should make you feel good.

Forget wine clubs at retail outlets and especially online sellers. Remember that by joining a wine club at a boutique winery you are making a difference and rewarding the ones who do the work, instead of middlemen (made possible by our antiquated post-Prohibition laws.

I just received a blog email that is worth looking at http://blog.merchant23.com/why-2018-will-be-the-year-of-blind-price-wines and ties indirectly into this article. If you like wine, buy it at a local wine shop that has knowledgeable people and fewer, but carefully selected wines. You may pay a little more but at least you will be insuring that they will still be in business, a plus for you! What I am opposed to is the big box stores, especially Total Wine which is destroying competition here in Minnesota that started with a feud with a local store that dared to open one in Florida. To me, it looks like a vendetta but it is the other stores that are being hurt. Some tell me of losing 30% of their sales…that can be the difference between making a decent living and breaking even or worse. While it is true that the big box stores can sell cheaper, they are also marking up the lesser known names by buying all of the wine (i.e. Vino 2015 Cabernet Sauvignon), and selling it for a fraction of the retail price AND they buy it deeply discounted then market it up 35% or more and you thought you were getting a bargain. It also hurts the winery because from then on when they see their similar wine they think it is too expensive. So tell me: who is the winner and who are the losers?

That’s my take on wine clubs and big box stores, use them wisely.

TB

(c) traderbillonwine.com 2018

Vol.4 No.1 are premium wines worth the premium?

Happy New Year to all! Have been thinking about this piece since the beginning of the year. I have found, personally, the sweet spot in wines is about $25-30…if I win the lottery tomorrow night that will likely change, but if I do, would I be buying $100-150 wines?

First, I find the best value in the $25-30 range…not that there aren’t a lot in the class below of a slightly expanded $18-20 range,  and of course some sleepers in the $12-15 range. Below that are some well made wines but not to my liking…or I haven’t found them yet. The $15-20 range for the third straight year is the fast growing sector, and represents a step up from the under $10 range that held for so long. As an aside, Rosé’s continue to increase in popularity but remain less than 5% of the market which begs the question: who is making money with what seems like hundreds of them out there and growing continually? Most are in the $12-15 range.

About those high priced wines. I have mentioned Wine Till Sold Out (www.wtso.com) previously and have had excellent experiences with them. To recap: they post wines perhaps one or two an hour or until they are ‘sold out’. Here is an example of what I am talking about:

Saint-Émilion Grand Cru 2014 La Croix Saint Christophe
91 rating and 71% off!

Free Shipping on 4 or more


Comparable Price*: $70.00
Yesterday’s Best Web Price (With Shipping): $N/A
Our Price:

$19.99 71% OFF!

Buy Now

wine bottle Description
Appellation Saint-Émilion Grand Cru
Unit Size 750 ml
Varietal/Grapes Red Blend
Vintage 2014
Country France
Region Bordeaux
Alcohol Content 14.00
Peter Kwok has been breathing life into aging Saint-Emilion chateaux for a couple of decades, giving us new, delightful opportunities to enjoy the wines of this classic region in Bordeaux. Sourced from vineyards nestled among Cru Classe estates, this Merlot-driven bottling effuses a fruity and smoky intensity that speaks to its premier situation among the Right Bank hills. Try this wonderful Saint-Emilion with kebabs and shawarma!
91 Points – International Wine Report!
“The 2014 La Croix Saint Christophe Saint-Émilion Grand Cru delivers lovely aromas of ripe cherries, blackberries followed by violets, tobacco, wet stones and a touch spice. This medium-bodied red is wrapped in fine silky tannins, showing great structure and balance all the way through the long finish, which is laced with even more dark fruits and tobacco flavors.”
Pretty complete, no? So here are the salient points:
1. Good description and note that you can get free shipping (the number of bottles required varies inversely with the price but four is standard).
2. Note that they ship quickly from their N.J. warehouse so if you aren’t going to be home for a few days, want to avoid it being shipped in extreme weather etc.,you just let them know with your  order, which, once set up is just a click.
My experience is limited as I have only had a need for a specific wine twice but it was consistent. Also, if you have a problem they are prompt in getting back to you to fix it.
First time, I bought was Meyer Family Vineyards, 2011 Syrah. This is the late Justin Meyer’s winery after he sold out of Silver Oak.  I bought six bottles for, if I recall, $15 each – on a $35 wine. It was summer and the day it arrived it was over 100 degrees! I cringed when I thought of drinking it as my laser thermometer showed a bottle temperature of 90 degrees! That night I tried the first one and it was ‘raisainy’, not undrinkable mind you but not what I had bargained for. I notified them of the problem and they told me I should have told them to hold the delivery and then let them know when to deliver. Surprisingly, they offered to send me six more bottles and hold them until the weather cooled down. I did and when I received them they were in excellent condition…and I did, by the way finish the others. Not bad, eh?
But I was curious, what would the winery say about this? So, I called and spoke to Justin’s son, Matt (Justin’s wife Bonnie, for whom a Silver Oak vineyard was named, is still alive and active in the winery). He said that the 2011 vintage received poor reviews, but that they had harvested and bottled late and it was very good. The problem was stores had too much of the vintage so there was no market for it. That is when they went to WTSO. Matt sold two pallets, roughly 98 cases per pallet, to clear their inventory.
So what did Matt accomplish? He sold wine that he couldn’t do anything with at a price that was acceptable to him (don’t know what that was), the wine wasn’t sitting on shelves at a deep discount price (think Trader Joe’s or any large retailer). Instead it was up for perhaps 20 minutes and then disappeared. Remember they still had wine left which they would bring up at another time. That is why you will get lots of emails in a day, and it forces you, if interested, to act quickly. Gradually, they will sell all the wine in the lot. A win win for all concerned.
Contrast this to the other wine sites that show the price for long periods of time and it can be compared to other lots they are selling. The other alternative is selling to someone like Total Wine at an even steeper discount which they will advertise as “Winery Direct”, with a large markup. The cheerful staff will direct you to these sometimes in response to a ‘do you carry’ question, saying if you like that you can save a lot by buying this instead. Nothing wrong with that but is it really the same quality?
So there you have it and if we didn’t have the post-Prohibition, three-tiered market all would be better off. Most distributors are reputable, but some including the biggest ones don’t do a good job of marketing ALL the wines, especially from smaller wineries which is unfair because storage costs can quickly eat up profits or worse, turning them into losses.
As with all internet sellers WTSO is having a big impact on wine strategy for buyers. It becomes increasingly difficult to shell out $100 and then find it on line for significantly less. If you can find a good wine specialty shop, support their effort, not some liquor store with lighting that is hard on wine, improper storage, and a lack of knowledgeable help. Since moving to the Twin Cities seven years ago I have been pleased to find FIVE, and all but one with in five miles of my home (that is even more than when I lived in the San Francisco Bay Area. It is worth the search!
I will close with this quote from the great Andre Tschelistcheff, who knew of what he spoke: “We spend far too much time tasting wine and not enough time drinking it.”
TB’s kind of guy!
NEXT: Should you join a wine club?
(c) Traderbillonwine.com 2018