Real wine is hard to find. The charade that populates most store shelves is a group of elixirs, created to poke and tickle the right taste buds. Made in the vein of Pepsi or Fritos, these commodity wines typically showcase excessive fruit, residual sugar, and serious chugability. These are circus wines with circus labels, and the industry has created a sometimes-impenetrable wall of them—one that obscures the wines made by real people, from real grapes, for our honest pleasure. . . .
Jancis Robinson recently wrote an article defending winemaking as an innately “craft” process*, and displayed deep concern over beer and spirits capturing the hearts and taste buds of the younger generations of craft beverage consumers. Robinson clearly feels threatened by the upswing in craft beer and spirits. The threat may be real, but the source is much more expansive.
Wine has the history and allure to stand firmly on its feet. With 10,000 years of wine history and with the first winery dating to Armenia 4100 BCE, the record shows that homo sapiens have an affinity for wine. Robinson herself also rightly highlights how the confines of vintage – a single chance each season – set wine apart from spirits and beer. Winemakers must work with the weather and climate to produce a wine that will undoubtedly range in style and quality due to the growing conditions. Beer and spirits, on the other hand, can be made much more consistently with an ability to scale volume rapidly.
The wine industry has reason for concern, and the rise of craft beer and spirits points to the heart of the issue without being the source. Craft wine costs more than craft spirits or beer. Craft wine starts at $12-$15, and more frequently sells for $20-$50 per bottle on retail shelves. This averages out to $4.00-$10.00 per drink SRP (5 oz pour). Craft beer often falls in the $1.50-$4.00 per drink (12 oz), and craft spirits cost $1.00-$3.00 per drink (1.5 oz). Simple economics pushes many younger drinkers toward craft beer and spirits – it costs less to enjoy something authentic, especially when drinking at home (also a trend that now pains the restaurant industry). My Millennial generation, of which I’m an elder, is the first generation to have “less” than our parents, and this will only become more evident as we age and retire. School debt, retirement woes, and slower and later wealth accrual adds up to a diminished economy for all. Craft beer and spirits enable younger generations to support smaller and local businesses while living within their means.
At the same time, boomers are now moving into their fixed income retirements, and some are no longer stocking cellars. “If I buy Bordeaux or Barolo today, I won’t be alive to enjoy them in their prime.” Some are drinking their cellars down – not building them – and many will join suit soon.
And cellars will not be built by the younger generations as they were by their parents. We, the wine industry of which I am a part, should fear this. Concern over beer and spirits is misguided – it’s yelling at the river overflowing the banks, rather than the poor environmental stewardship that drained the wetlands.
I will keep enjoying craft wine and beer – though less wine than I would enjoy if societal and economic circumstances were different.
*While the bulk of the wine on the market is not craft, the majority of producers are. A few large corporations produce tens of millions of cases of wine. However, tens of thousands of boutique producers craft relatively small amounts of transparent wines.
A few months back, Leslie Gevirtz of Wine Enthusiast interviewed Craig Wolf, president of the Wine & Spirits Wholesalers of America.¹ Wolf strikes an upbeat tone, and Wine Enthusiast largely maintains that confident tenor. A closer reading, however, provides evidence that Wolf has reason to celebrate . . . at the expense of the consumer. “Let the good times roll” for the large and expanding mega distributors.
Wolf begins, “Our numbers have actually risen….People always see all these mergers at the higher level, but what they don’t see are all the small guys coming in to fill gaps….So, the number of wholesalers that are active across the country has increased.” The September 2017 edition of Wines & Vines states the following, “According to winery and distributor sources, in 1995 the United States had about 1,800 wineries and 3,000 distributors. Today, there were more than 9,200 wineries and nearly 1,200 distributors.²” A five fold increase in wineries, and a 60% reduction in distributors. At best, Wolf is intentionally focusing on a small window of time to bolster his (inaccurate) point. At worst, this is Trumpian era disinformation—smoke and mirrors.
Wolf goes on to say that, despite the recent consolidation trends, “(I)t hasn’t affected the consumer because the number of SKUs has only grown over that period of time.” If we can trust that the number of SKUs (individual wines on shelves) has increased, we must ask whether the quantity also brings us quality. As the article posits, the number of “private labels” has increased recently. Large to mid-sized retailers contract wineries to produce private labels so they can offer exclusive products with conveniently opaque pricing, which allows for dramatic markups and profit margins. The wines within the bottles? Too often mediocre at best, an unavoidable reality when asking large wineries or custom crush facilities to make a wine that tastes like plum juice concentrate or cherry jam with Hi-C for $2.40 per bottle.
With the number of wineries today, the demand for distribution is great. Many of these producers craft authentic and intriguing wines. As wineries boom, distributors serve as gatekeepers, deciding which wineries and wines deserve to come to your market. Somebody must certainly filter what sits on the shelves and restaurant lists. However, when consolidated mega distributors, well known for using corrupt practices to buy shelf space and restaurant lists³, serve as the gatekeepers, we have reason to be concerned.
The WSWA serves as a mouthpiece for the large distributors, while offering small benefits to mid-sized members. The association exists to solidify the dominance of the middle tier in our three tier system. I, for one, hope we can give more power to consumers. The WSWA certainly doesn’t have this interest at heart.
³ Previous article about distributor corruption: http://wagonwine.com/2016/12/05/the-sandbox/
In the February edition of Wine Business Monthly, Kevin O’Brien penned a noteworthy article filled with curious nooks and crannies.
Good news! Wine sales continue to grow, especially in the $10-$25 category. Sales of $6-$10 wines have meanwhile declined. This has resulted in the “premiumization” of the wine business. Even better, wine drinkers are lusting for honest wines. “. . . consumers are continuing to demand premium products across all beverage alcohol categories as they seek an authentic, high-quality experience.”
Of course, corporate wineries want in on this action, but only have a few options (beer drinkers, this should sound familiar):
- Increase price of existing wines
- Create new labels and reprice
- Buy premium brands*
As a consumer, beware of number two and a flip side of three. Thankfully you aren’t being duped by numero uno.
In the face of falling cheap wine sales, corporate wineries with substantial vineyard holdings have the need to put that fruit to better use. Quick, put the marketing department to work! Slap a new, shnazzy label on the identical bottle of vino (or nearly identical), get the PR machine buzzing, and out of the corporate sphincter comes a glimmering new bottle for the new and improved price of $15 (formerly $8).
Massive producers have also used a related though sneakier tactic. “It should be noted that these large transactions, as well as several other completed during the year, were primarily focused on the brand rather than underlying vineyard or production facilities. A leading driver behind ‘asset light’ transactions is the flexibility in grape sourcing and resulting scalability of the brand.”
Decode: Corporate wineries gobble up a sexy, premium brand name, leave the vineyards and production facilities behind, and then put their less costly, already held vineyards to work under the newly acquired brand label.
Clever, clever, and harder to detect. The answer, the same tried and true answer, can be found in the following:
“The recent wave of wine industry transactions has been notable for its size and breadth. These acquisitions have been driven by suppliers’ desire not only to improve profitability through increased scale but also to remain relevant to their wholesaler and retailer partners. The past few years have seen several significant mergers between some of the country’s largest wholesalers and retailers. As the distribution funnel continues to narrow, wineries are finding access to the market increasingly difficult. . . . In general, larger retailers prefer to work with larger wholesalers in order to better integrate and simplify their supply chain and forecast demand.”
Corporate wineries need one of the big three distributors to move their product into the large retailers. It’s that simple.
Gallo Constellation Brands The Wine Group Bronco Wine Company
Breakthru Beverage Southern Glazer’s Republic National
Safeway Total Wine Costco Whole Foods*
The answer, my friends, remains the same. Shop your locally owned wine retailer, get to know your steward, and you will bring home bottles with authenticity, character, and value. You will also support three authentic tiers rather than the behemoths above.
- *Premium brands = wineries producing $20+ wines
- *Whole Foods has historically worked hard to diversify shelf space with large and small wineries. However, results at any given store vary by state, and market pressures continue to push retailers of this size to consolidate and simplify i.e. work with fewer distributors and reduce options on the shelf.
“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.
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.
- “Mergers Continue for Major Distributors” http://www.winesandvines.com/template.cfm?section=features&content=161449
What makes expensive wine so expensive? I get this question more than almost any other. And it is a great question. Many layers weave together to create a wine’s price tag (Wine Economics Part I, Part II, and Part III only scratch the surface). However, a remarkable reality persists—the large majority of wine drinkers don’t particularly enjoy drinking expensive wines, especially the exalted wines of the Old World*. Blind tastings of regular folks have consistently shown no correlation, or even a negative correlation, between the wines they like and the price of the wine.±
The tasting descriptors of lauded Old World regions provide clues as to why this phenomenon exists. Open a five year old Beaujolais Cru from Morgon, France, and the slate stoniness and tart acidity, along with the second-fiddle role of fruit aromas and flavors, shock many wine drinkers. Head south to the Northern Rhone of France, and the Syrah punches the palate with savory black olive, bacon, white pepper, and charcoal. Aged Bordeaux? Wet dusty road, tobacco, truffle, compost, and gravel, with fruit once again singing back-up. The list of the “great” wines goes on in similar fashion. And on. Karen MacNeil argues that Great Wine must display a degree of non fruitedness. See the tasting notes above, and you get her point. For most, though, non fruitedness dominates many of the great wines, sucking the pleasure provided by the primary fruit flavors.∞
So why the hell does anybody want to drink the expensive stuff? Some argue that wine drinkers experience an evolution of the palate. In reality, the exploration of wine becomes academic. How does a presentation on the macroeconomics of suburban zoning arouse the minds of some fellow humans (this one’s for you, Mom)? The act of diligent study, over time, begins to stimulate neural connections that never previously existed. Consequently, hard work and forced study slowly shift into a pleasure inducing experience. In the words of Twain, “Then his work becomes his pleasure, his recreation, his absorption, his uplifting and all-satisfying enthusiasm.” Blessedly, for wine drinkers, we get to relish in the initial “work.” Absorption and enthusiasm grab hold, and the mind takes the reigns. How do soil, place, and grapes create this? No, winemakers in the Piedmont commune (village) of Barolo don’t add tar extract into their wines. So how does this happen? A wine enthusiast is birthed.
Enjoy the wines you enjoy. When the hard work takes you to a new place, step into the bizarre novelty that surrounds you.
*Old World = Western and Eastern European winemaking regions, including France, Italy, Spain, Germany, Greece, and Austria, where winemaking first took root.
∞There is certainly an American bias in this article. This bias likely plays a substantial role in answering why Americans’ prefer cheap wines. Our processed food, salt and sugar-added diet likely skews our palate toward sweeter, fruit-driven wines. I would love to see a break down of “average consumer” wine preferences in Europe compared to the United States.
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.
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.
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.
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.
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.
- Star Tribune “Total Wine Uncorks Booze Battles in Minnesota” June 29, 2015
- Wine Business Monthly “Private Label Wine Brings New Brands to Market” July 2015
There are no short cuts.
As a new “insider” to the wine trade, I walk the hallowed halls with antennas tuned for insight. For one, I hope to uncover the vineyard gems that supply the best value Pinot Noirs in the valley. I, like many of you, spend most of my nights sipping wines in the $10-$20 price range. The Willamette Valley, however, only seems to deliver $20-$60 Pinot. How can we reconcile this dilemma?
Nearly half of Oregon producers purchase all of their fruitº from independent vineyards or significant estate vineyards owned by others. These wineries do not own vines, and as a consequence pay the market prices for their fruit. Pay $1600 per ton for your Pinot Noir, and you will get your $15 bottle from the Willamette Valley. Unfortunately, it will taste like it too, as these vineyards often rest on the flat lands outside of the blessed zones for primo Pinot Noir. Pay $3000 per ton for your Pinot, and you will start producing wines that sing. . . and you will charge $30 per bottle to cover the cost. Many have touted, “Great wine is made in the vineyard.” This is a truth, and as a consequence winemakers pay for quality wine. There are no short cuts.
Unless. Unless the producer owns an estate. Those who own a vineyard and make wine from it have unique opportunities, especially when they have owned portions of their vineyards long enough to bury the loan notes. Through ownership, they have fixed their costs for fruit*. If this estate is on ideal vineyard land, and if the owner and winemaker value producing value, and if they have volume enough to sustain a business**, and if they do not build a lavish, over-the-top winery and tasting room, then they could possibly produce memorable $18 Pinot Noir in the Willamette Valley. This estate likely needs to be outside the sexiest AVAs, or the allure of that name will tempt the hands in control to charge the prices they can command. Importantly, the $18 bottle will only be one of many wines offered by this winery, and the rest will fall into the $25-$60 price range to support a balanced ledger.
The odds of the stars aligning for you, the hopeful consumer? Minimal. Reality leaves me craving $15 Willamette Valley Pinot Noir that inspires, and thankful I receive industry discounts. Quality cannot come from wine cellar magic. “You can make a bad wine out of great fruit, but you cannot make a great wine out of bad fruit.” For the $10-$20 seekers of quality Willamette Valley Pinot Noir, a handful of producers do compassionately craft affordable, insightful Pinot. Ultimately, though, the economic winds of this challenging varietal blow, like a February gale, against us.
*Fixed cost is not 100% literal here. Tax payments will rise as land values increase, and labor costs for tending the vines will increase over time. However, you purchased the land at a set price, and you have locked in that value.
**5 acres of Pinot Noir will not allow you to produce $15-$20 Pinot Noir of quality if you want to sustain a livelihood, rather than take a vow of poverty (very few fit this bill).
“You must know the price. Ask! You are professionals!” Giorgia Casadio began to preach her gospel. Too many wine professionals had come to her table, tasted her wine, and failed to inquire about the price of each bottle. A group of Wine Bloggers Conference attendees shifted, alert on the chairs and bed corners of a fellow blogger’s hotel room. “I recently tasted a Cabernet in Napa Valley. It cost $140 a bottle. In Italy, it’s understood that it’s easy to make excellent wine when it costs $140. Judge a winery based on its table wine, its $15 bottle. That is the truest test.”
Expensive wine deserves respect, and if worthy of the price, it can penetrate your psyche for years to come. However, with a high price comes the unique opportunity for the winegrower to coddle the vines and juice endlessly to massage them into producing profound wine. Terroir also influences quality, and it too adds to the price tag—prime vine real estate commands fortunes. Some wine historians contend first and second growth Bordeaux* grew into their titles rather than earning them justly in 1855. Essentially, the chicken or egg debate applies, and world-class quality came second. The prices the “First Growth” designation allowed wineries to charge gave them the capital needed to produce stellar wine.
Flip the equation. What can a winery create for $10 a bottle? This depends on terroir, care, and commitment. Vineyard managers and winemakers must take the time and energy to weave through the tangles and nuances of their vineyards and varietals. Which corner of your vineyard will blend with another vineyard row a mile away to produce a wine better than the two parts? Which varietals will uniquely meld to enhance and elevate the finished wine? Will you care for the lesser locales within your vineyards with as much force and drive as the rest? Will you seek out the over-looked acres hiding on and beyond the edges of your AVA? I respect producers who care enough to ponder these questions and heed their call. These winemakers craft memorable wine for the common man. Amen, Giorgia.
Giorgia attended the 2015 Wine Bloggers Conference to share her wines from Villa Trasqua. Her Tuscan winery deserves respect at every price point, which speaks to Giorgia’s truth. Seek value. Does the wine rise above others at the price point? Thankfully you can find her valuable wines in 14 states, including Washington and Oregon.
2013 Traluna Toscana Rosso ($13): Red fruited with a pinch of baking spices. Mostly Sangiovese with a bit of Alicante Bouschet, this table wine currently strikes me as a bit discordant. However, age will certainly allow it to meld (age-worthiness quickly became a theme when tasting through a line up of Villa Trasqua wines). 13% abv. Good (will likely move to “delightful” with age).
2009 Fanatico Chianti Classico Reserva ($25): 100% Sangiovese, this Reserva resonated purity. Rustic, sexy, honest, age-worthy, memorable—a benchmark wine. Stellar.
2008 Trasolo ($120): Made with 100% Merlot, round, dark fruit produces a lush depth. Aged in new French oak, the fruit stands up proudly against its force. Italian-style shows through this historically French grape. Surprising. Excellent.
*The 1855 Classification System solidified a hierarchy amongst the wineries of Bordeaux. First growth estates, the top-tier, only number 5. The list goes from first to fifth growth, though the large majority of wineries in Bordeaux exist outside this classification system.