Category Archives: Retail

The Sandbox

“He walked in, pulled out a roll of hundreds, and flipped me two,” gnarled the no-nonsense owner of a boutique wine shop. He had been paid by the largest distributor in the state for bringing in ten cases of wine.

This is illegal.

In his case, a customer requested the cases for a special event—he had no intention of stacking* them in his store. In fact, he thought the wine was shit. He also didn’t know he’d get the payout. From the perspective of the conglomerate distributor, his purchase had triggered the payoff. Send in the man with the wad of Benjamins. Interestingly, Mr. Heavy Pockets is a separate employee than the distributor’s sales rep who typically services the shop.

Nestled on the edge of a wealthy, Midwest suburb, this one-man wine shop prides itself on small-production and high-quality wines. The owner doesn’t cower to the Powers. He simply received an unexpected, free date night, paid for by a customers large order, and mediocre taste.

Courtesy of Wikipedia Commons

As I walked out the door with my distributor’s sales rep, he said, “Yeah, I’ve heard it before. I’ve talked to some larger shops that say, “I’d love to stack your wine, but I can’t give up the $140 a month I get for that stack.” Both the winery that employs me and our distributor here can’t play this game. Both small and family-owned with honorable values statements, we wouldn’t dare, nor can we afford to dance this dance.

The words “pay to play” get thrown around frequently in the wine world. In the age of wine distribution mergers, the game keeps getting scarier for the thousands of small to medium-sized wine producers. You want your wines on certain shelves and restaurant wine lists, get ready to pay. While not always Benjamins, money flows to these accounts circuitously. And we’ve only talked about distributors.

Over the past week, Wine Spectator released their “Top 10 Wines of 2016” through a countdown. Seeing the producers on the list from my region, and having tasted hundreds of 2014 Willamette Valley wines, I have a tough time believing these producers landed on the Top 10 by merit of the juice alone. In fact, Wine Spectator doesn’t even deny the non-blind nature of the picks. While most of the industry uses the term “X factor” to describe a thrilling bouquet or texture that carries something unique and sublime, here Wine Spectator directly states something quite different:

“Then when you take the bag off, that’s where the X Factor comes in. Is it a new domain, new producer, great value? What is it about the wine—that’s the back story that adds to the excitement.” Senior Editor James Molesworth, Wine Spectator 

And of course, how did these wines receive their high scores in the first place? Plenty furrow their brows at the correlation between advertising dollars spent and scores received. Here I do not levy my claim at Wine Spectator alone, nor do I levy it at all publications. None the less, plenty of room to wonder.

While none of this news should surprise us in the 21st century, it should still unnerve us. And if you want to settle those nerves, go find that honest suburban shop owner and ask him what he recommends. It is the path to better wine and a better world, locally and globally.

 

*Stacking = to stack multiple cases of the same wine to prominently display it, typically reserved for the $15 and under category in medium to large wine, beer, and liquor stores.

Sources

How to Lose a Sale

Step one: Pull the cork on your winery’s award-winning Pinot Noir.

Step two: Fail to test the wine for flaws prior to pouring or test the wine and fail to notice flaws.

Step three: Pour two-thirds of the bottle to other tasting room guests (title shift, “How to Lose a Silly Number of Sales”).

Step four: Pour award-winning wine, while gloating over the award.

Step five: Fail to acknowledge a flaw (cork taint, aka TCA) when guest, backed by group of four other tasters, states the wine is corked. More specifically, taste the wine in question in front of the guest, then tell the guest that she is wrong. Do so while holding the questioned bottle, which now contains three ounces of award-winning Pinot Noir.

Step six: Admit to minimal wine experience during your time talking with this group.

Mission accomplished. Take a bow.

A Romantic Ideal Must Tumble

I recently read an excellent article on “White Label wines” by Madeline Puckette and Co. over at Wine Folly. Except for one glaring bullet-point:

“Some wineries with tasting rooms will make a few own-vineyard wines, but will use bulk wine sources to make their cheaper, lower-end affordable bottlings. We’d ask what’s the point of selling something you pre-bought, rather than making at the winery? But it happens…”

It certainly does. Frequently. And understandably so.

First, what is bulk wine? Many established wineries at all quality-levels sell some of their finished wine on the bulk market. This is purchased by the gallon by other wineries or winemakers, typically at a fair tariff. Why would an established winery sell off the fruit (wine) of their hard-earned labor? Sometimes the wine is flawed. Other times it simply doesn’t make the cut for the premiere producer who grew the fruit and made the wine. One man’s trash is another’s treasure, though, and I have drunk many fine wines in the $12-$20 range that resulted from the latter. Finally, some producers sell finished, bulk wine to increase short-term cash flow. It turns out that bottling, labeling, marketing, selling, and then taking a hit in the three-tier system (producer, distributor, retailer) costs wineries a lot of money.

Punching down the cap of fermenting red wine.

Many wineries buy bulk juice, and for essential reasons. For instance, young wineries buy bulk to produce enough volume to create a viable business. Owning your own vineyards is an expensive proposition (understatement of the year at Wagon Wine), and buying fruit is also expensive as a result. Buying some bulk juice allows many new, small, and moderate-sized wineries to enter the market and sustain their business.

I certainly respect the notion that established wineries need not turn to the bulk market.

Thankfully, Madeline contradicts herself at the end by writing:

“We’ve pointed out several issues that white label wines can have, but we believe there’s a lot of potential with this segment of the market. The bulk wine market involves a lot of great wineries and great wines from special places all over the world. A lot of these producers are focused so much on making wine that they lack the resources to market it. Winemaking is very capital-intensive, and the winery may need to sell wines in bulk to raise cash faster than they can sell their own wines, even if the wine is perfectly good.”

Yep, and many young winemakers and wineries rightfully take advantage of this “perfectly good” juice to create their entry-tier wines. Perfectly understandable, and ultimately beneficial to us, the consumers.

So yes, Madeline, transparency matters. And not all bulk juice is equal. However, don’t take a sledgehammer to a nail. Bulk juice in entry-level bottles sustains many reputable, small to medium-sized family wineries.

The Tiers Produce Tears: Tear it Down

I recently returned from a marketing trip with my employer, a small Willamette Valley producer of Pinot Noir and Chardonnay. As we explored the Minnesota market, meeting with local wine shops, three separate owners asked pointedly, “Will you be in Total Wine? If so, we won’t carry you.” Early in 2014, Total Wine & More entered Minnesota, grabbed hold, and shook it like a martini. A few locally-owned shops have closed, including the beloved Four Firkins. While appreciated by many buyers for their substantial selection and low prices—a reputation buoyed by titles like “2014 Retailer of the Year” by Wine Enthusiast—we should pause and reflect on the big box economics of Total Wine.

Total Wine carries an array of wines produced by medium to large producers. Their margins? Minimal—lower than any locally-owned shop can match. This clearly harms the boutique shops, but it also abuses the smaller wineries carried by Total Wine. Yes, Total Wine pays the same price to the distributors as any other shop, and so the wineries make equal money when sitting on the shelves of Total Wine. However, the low markup ultimately devalues any wine on the shelf, and consequently any brand on the shelf. Small to medium-sized boutique wineries only thrive if they create a value brand rather than a discount brand. Big box economics undercuts the value.

Let the sun shine upon the back alley short cuts that lure so many of us.

Let the sun shine upon the short cuts that lure so many of us.

Total Wine makes one exception to their minimal mark up philosophy—their private labels. They amass a fleet of private label wines, which they create through contracts with wineries around the world. “You make the wine, we’ll provide the label.” This model allows the producers to move volumes of mediocre to crappy wine easily, thanks to the serious power wielded by large entities like Total Wine. It also masks the grape growing and production facts, allowing Total Wine to mark these private label wines up substantially more than the other brands on their shelves. Total Wine stocks over 2,500 private labels, and sources report 53% of their sales come from these private label wines. This ultimately means that Total Wine’s management, and subsequently store employees, have an incentive to push the private label wines.

Thankfully, unique Minnesota distribution laws allow some local stores to cleverly fight back.

Shop at locally owned and operated stores, wine and beyond. civiceconomics.com “Local Recirculation of Revenue”

This story, of course, is not unique to wine, and this fact only bolsters the message. We all benefit when we shop at locally-owned stores. Michael Pollan, food writer and journalist, first turned me on to the power of voting with my money. Every dollar spent is a vote for that product, that company, that retailer, and the business practices that support that chain of businesses. A son of a rural Minnesota business owner, I shouldn’t have needed Pollan to clarify the power of shopping locally. Yes, you may pay an extra dollar or two*, but the benefits so clearly outweigh the cost, sun to a grain of sand.

 

*Take advantage of case discounts at your local wine shop, and prices come nearer to alignment when comparing the superstores and small shops.

Sources:

Buying Wine

All of us share the experience of buying wine. Wine purchasing can feel anxiety laden, laborious, or blissful. Wine knowledge can thankfully increase comfort and help move a buyer from anxiety to giddy-with-delight. Coming soon, wine literature must reads to increase your understanding. Today, however, let’s focus on where to buy your wine. Who can you trust? Where can you find good deals–value at all price points? 

Local Wine Shop
First and foremost, find a local shop that you can call “yours.” Ensure friendly, unpretentious, service-minded staff proudly work for this shop. Then make it your wine home. You may need to shop around to find the fit for you–the balance between competent, committed staff, fair pricing, and a solid repertoire of wines. Once done, share your personal tastes with the staff, and encourage them to both compliment and challenge your palate. When you do head to the shop, plan to buy a case. Nearly every shop worth its weight has a 15-20% case discount, which undoubtedly helps the ol’ pocket book. Go less often, if need be, but load up while there. 

Garagiste and Full Pull Wines
These two Seattle-based online wine retailers use email to introduce wine offers of the week (Full Pull) or day (Garagiste). Jon Rimmerman, founder of Garagiste, writes about his daily offerings loquaciously, which may delight or irritate you depending upon your preferences. However his writing strikes you, he has a knack for seeking out and offering small to medium production wines at reasonable to striking values. If you reside near Seattle, you can pick up your wine, no fee (true for Full Pull also). If you live afar, Garagiste ships for a reasonable fee, especially if you live relatively close to Washington. I especially respect Rimmerman’s appreciation of food-friendly, moderate alcohol wines. Additionally, he often gets his hands on older wines from winery cellars. Examples? 1874 Sisqueille Riversaltes (ignore the $500 price tag), or the more reasonable 2006 Yering Station Chardonnay I now have cellared in my basement. Garagiste also puts great emphasis on provenance. Your wine will be cellared from production to the moment it hits the trucks to head to your door, and then the shipments to your door will only go out fall and spring to ensure reasonable weather during transport. 

Full Pull sends out less frequent emails, and typically offers multiple wines per email. Their greatest strength? If you seek out the best Northwest wines, the bottles fought over tooth and nail, Full Pull may be the connection you are seeking. Gramercy and Leonetti? Check and check. They do offer international wines, but maintain a solid focus on Northwest wines of all prices. 

Both retailers do not require purchase quotas–you can read the emails for years and never buy wine.

Winery Wine Clubs
Generally speaking, wine clubs at wineries offer little financial benefit. You can find the wines more reasonably priced elsewhere, even with the member discount they advertise. If you live locally, however, winery club membership comes with benefits beyond the “discount” bottle pricing–free tastings, invitations to member only barrel tastings, cellar room dinners, etc. I recommend a winery wine club only for these additional benefits, or the access to limited production and hard to find wines. 

Unique Online Retailers
Anytime we, the consumers, can cut out the middlemen from our wine purchases, we get more for our money. Online retailers like Naked Wines and 90+ Cellars fill this niche. Naked Wines uses a cooperative model in which wine drinkers, like you or I, can become “Angel” investors and help support small to medium production winemakers through our investment. Winemakers receive a venue to sell their wines to a large market (one of the greatest challenges in the business), and Angel members receive 40-60% retail from a plethora of producers funded by Naked Wines. Like most cooperatives, you need not become an Angel member to buy wine, but you receive the best deals if you do. 

Born out of the Great Recession in 2009, 90+ Cellars began as a means for high-quality producers to sell their luxury wine, which challenged producers and retailers at the time. 90+ Cellars simply uses their unique label, rather than the wineries in-house label, then they agree to keep hush about the producer and source of the wine. With 90+ serving as the distributor and retailer, producers sell portions of their wine quite effortlessly. Consumers, on the other hand, receive these wines at a steep discount along with a promise that all wines have received 90+ scores from the major wine press. You will know the country, state, and AVA of your wine, but nothing more about the producer or vineyard. 

Just another night with the boys

If you are like me, you purchase wine from a variety of sources–different shops, wine clubs, and online retailers. Keep exploring–quality and value await in this ever and rapidly changing market.

Wine Economics Part III: Reputation

“What’s in a name? That which we call a rose by any other name would smell as sweet.” The Bard strikes to the heart again. In many ways, the first two posts on Wine Economics (Part I and Part II) danced around the importance of reputation. Today, we will hit the nail squarely on the head.

Haut-Brion, Romanee-Conti, Screaming Eagle (can you tell which winery is in the United States?), Margaux. Want a taste? Go take out a loan first. These names have garnered every superlative under the heavens. Apparently, nothing smells as sweet as those that carry notable names. The famous palates of the globe (world, not theater) score these wines straight into the realm of untouchable—95 points on an off vintage. Many have earned the perfect one-zero-zero. Countdown—kaboom! Prices have taken off! All of the above wines fall into the “cult wine” category, and most readers don’t need the advice to steer clear. You don’t really have an option.

Reputation carries great weight, and that weight can pull the price down or lift it sky-high. Individual wineries work hard to differentiate themselves from the pack, and the aforementioned wine critics are one tool in the bag. Most wineries, however, will never see the famed 95+ point mark, and therefore strive for the more important 90 point threshold. Recommendation #1: If value matters to you, buy 89 point wines more often than 90+ wines. Many critics have a bias toward big and bold, largely because they taste so many wines that only the brutes stand out. A plethora of 89 point wines fill wine shop shelves waiting to be appreciated for the blend of primary and secondary aromas, balanced fruit and acidity, and food friendliness. The brutes will take a club to your meal.

Evidence also exists to deny and support Shakespeare’s claim. Many of the great wines of the world, when stripped of their name in blind taste tests, have not smelled as “sweet” to the loftiest of critics. A few famous blind tastings have lifted up the lowly, and cast the mighty down. So perhaps when we broaden “name” to a varietal, a Cabernet Sauvignon by a name other than Screaming Eagle, Caymus, or Shafer can smell as sweet, seductive, compelling, nuanced, and complex. I recommend you find out for yourself.

Now pan 180 degrees left. Lindeman’s, Columbia Crest, Hardys, Casillera del Diablo: these also carry weight—the weight of the masses. These wineries play a different game, and most of you have heard of them as a result. All of these names offer good wines under $10. Breaking into the bulk wine business requires big money, and connections with the Costco’s and Trader Joe’s of the world. These mega wineries, and many others, have succeeded at this disparate game. One thousand $10 bottles earn you as much as that bottle of Haut-Brion.

Once out the doors of the winery, we look out upon the vineyards (location) and varietals discussed in Part I and II. Reputation plays hardball here also. Napa Valley Cabernet increases confidence, and often the price, more than Colorado Merlot. Piedmont Nebbiolo more than Languedoc-Roussillon Grenache. A parable. The owners of Division Winemaking Company, a Portland, OR label, started receiving phone call after phone call one evening. “What is going on?” Finally, one of the numbers popped a friendly face onto the screen, and so the owner answered. “Eric Asimov just recommend your Gamay Noir as the top choice this Thanksgiving.” Division Winemaking Company makes wine at a local cooperative winery they started. Number of cases? A grain of sand in the Sahara of wine. Read more here

Learn from this story. Reputable wines have typically earned their acclaim, but delightful value wines, at all price points, sit in plain sight in the new AVAs, at the local cooperative winery, in the lesser known wine-producing states and countries.

Recommendations to exemplify the point:2013-pinot-noir-bulls-eye_fitbox_300x800

And here ends the III part series on wine economics. Many simplifications exist in the information above. Economic factors certainly overlap and intertwine in a complex manner. However, generalities are necessary to discuss the topic meaningfully, even if imperfectly. 

Clearly, these three posts have only tickled the surface in regards to the manifold factors tilting wine prices. For example, labor costs, the winery facility and tasting room, and distributors also affect prices, and have gone unmentioned until now. I have also discussed economic factors in isolation without attempting to weigh the importance of these individual puzzle pieces. None the less, these broad strokes afford us the  opportunity to analyze our purchasing choices, and hopefully expand our wine repertoire. Allow the hidden gems to delight and surprise you.

Wine Economics Part II: Varietals

The New World has successfully managed to bring the names of specific grapes (a.k.a. varietals) to the forefront of our minds. Most Old World wines did not traditionally include varietal labeling, opting instead for location specific labeling–Pauillac, Rioja, or Barolo, for example. While much of the Old World continues this original labeling strategy, today I will focus on the varietals within the bottles, regardless of location, and their effect on the bottle price. If you have not read Wine Economics Part I: The Land, partake now.

Pinot Noir and Riesling serve as wonderful varietal exemplars. Respectable examples of Pinot Noir typically start at twice the price of their Riesling counterparts. Why? Winemakers age Pinot Noir, like many reds, in oak barrels–typically French oak for Pinot. New oak barrels from reputed Coopers in France cost $800-3500 per barrel (each contains 300 bottles of wine). This simple reality has obvious consequences for the finished price of many red wines. Cheaper red wines (under $10) frequently use oak chips or staves to reduce the economic impact, but nearly all well-respected wineries continue to use oak barrels.



Once beyond this clear difference, we now must dig deeper. Pinot Noir has earned a unique and significant reputation as the Poet’s Grape, the Devil’s Grape, the Seductress. All allude to the ethereal quality of this grape, which not only presents itself in the glass, but also in the vineyard. Pinot has devastatingly thin-skin, which has unfortunately made many vineyard managers and winemakers bald before their time–you think the presidency is trying! The fickle nature of Pinot Noir requires laborious attention in the vineyard, and this attention costs money–more hands and eyes on the vines. 

Riesling, however, suffers not from these monetary drains (or from want. . . we will get there). Riesling’s crisp acidity and frequent sweetness (for the semi-sweet and sweet wine lovers) needs no oak to shine. Many consider Riesling the ultimate terroir wine, as it has a unique ability to show its place, and the lack of muddling oak contributes to this reputation. Equally important, Riesling is hardy (like Cabernet Sauvignon) in the field. While Pinot Noir needs to be watched for downy and powdery mildew thanks to its volatile attributes, Riesling will quietly go about its slow, steady business of ripening like a stalwart tortoise.

Riesling also suffers not from want. Perhaps the most under-appreciated wine, except by sommeliers*, Riesling still manages to sell moderately well. However, it does not have the reputation for allure or stateliness like Pinot Noir and Cabernet Sauvignon. This diminutive reputation results in deflated demand at the mid and high price points. My recommendation to those on a budget seeking exciting wines with a sense of place–drink Riesling. You will find excellent examples of the varietal at $15 versus $25-40 for Pinot Noir. This lesson extends beyond Riesling to all the other under-appreciated varietals of the world, especially the lesser-known local grapes of many Old World wine regions.

  • Douro, Portugal
  • Loire Valley, France
  • Veneto, Italy 

These three Old World regions produce exciting, unique wines that many have never tasted. Why? The lack of varietal name recognition plays one role. Have you heard of bastardo, tressallier, or glera? These grapes take the main stage in these regions (with others alongside). In short, drink more grapes (and from locales) you have not heard of before. With help from your friend–the local wine shop employee you know (remember, this is a must)–you will find wines that surprise and delight.

The counter-examples, inflated bottle prices, lay in wines where you find varietal reputation aligning with a respected location–Napa Valley Cabernet Sauvignon and Willamette Valley Pinot Noir, for example. Reputation carries great weight, and not only the reputation of the varietal. Next time, Wine Economics Part III: Reputation.

As mentioned in Part I, many simplifications exist in the information above. Economic factors certainly overlap and intertwine in a complex manner–vinification techniques, location, varietal reputation and costs, and reputation are a few of the forces at work. However, generalities are necessary to discuss the topic meaningfully, even if imperfectly. Today is an attempt to isolate the varietal’s economic impact.

*Sommelier = a wine professional, frequently working in reputable restaurants or wine businesses.