Category Archives: Wine Economics

Price Matters: Important Words from Giorgia Casadio

“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.”

Amen.

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.

Tuscan vineyards

The vineyards of Villa Trasqua in Tuscany

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.

Unscientific Reflections from a Millennial Wine Writer

As a wine writer, reader, and consumer, I hear a lot about the significance of the Millennial Generation on both the current and future wine trade. Millennials in the United States have taken to wine at a younger age than previous generations–my personal experience concurs. Projections suggest we, Millennials, will continue to play a substantial role in the evolving wine world. Therefore, I posit a few reflections as a Millennial wine enthusiast and writer.

I was born in 1984, placing me on the mature end of the Millennial Generation. During the thirty-one years of my life, the wine industry witnessed a brief decline, followed by a boom sparked by the easy money of the ’90s and an evolving American palate (over-simplification noted). Since the early ’90s, Americans have doubled their consumption of wine (1).

Today, most of my friends and acquaintances fall into the middle and upper-middle class, and nearly all drink wine (only three of us work in the industry). Weekday gatherings, summer celebrations, and special events typically involve wine alongside craft beer. Male-centric events will often go without wine. Conversely, events including more women frequently have a higher proportion of wine served. When my friends and I buy wine, we seek value–quality for the dollars we spend–and rarely spend above $15-$20. $20+ bottles stay in the cellar (basement–let’s be real) for special events. My peers fortunately fall in the rare minority by making it into the upper-middle class. However, this has come with significant debt burdens that accompany master’s degrees and PhDs. We will continue to spend most our dollars in the $8-$15 wine category for the next decade.

Any politically or sociologically aware person has learned of or experienced the effects of a dwindling middle-class. For Millennials, college debt sits at the center of our financial challenges. Skyrocketing college costs in conjunction with the shrinking middle-class should raise concern for the wine industry (as well as other industries). It bodes poorly for the future if trends continue. Wine spending is discretionary spending–first to go if when times get tougher. While the top 25% can sustain a wine industry, including boutique wineries, we should all hope for a broader and more robust economy. In other words, I can only imagine how vigorous the wine industry would be if the Millennial generation also lived the reality of a strong middle-class as we did in the 1950s (a decent graph to demo this point). Drink for thought.

Beyond price, when my friends and I buy wine, we seek authenticity, exploration, and a story–especially stories that display respect for the land. I seek out second label wines from small to mid-size wineries for these reasons. Large businesses make mass-market wines–good, drinkable, and forgettable. They often taste just like that other mass-market wine you drank last week. I have great respect for the mid-size winery that crafts distinctive second label wines. The Old World does a better job, unfortunately, of creating a diversity of wine styles, types, and flavors at lower price points, even within one wine region (the Loire Valley, for example). In addition, those who enjoy affordable, diverse Old World wines have recently benefited from a strong U.S. dollar, which has lowered the price tag on imports.When you add this up, no surprise that Millennials seek deals. Deals and steals often require middle-men (distributors) to get out of the picture. Naked Wine, Garagiste, and 90+ Cellars all exemplify a model that Millennials have supported and will continue to embrace (see previous post on buying wine). Distributors will continue to see their influence shrink. I shed no tears.Finally, expect more canned and boxed wine, as well as wine on tap (kegged wine). For the sake of the environment, convenience, and economy, Millennials appreciate these relatively new means of delivery. I embrace tradition with ambivalence. Wineries of the world, give me a story I can believe, grow grapes and craft wines of distinction, and speak to how your place expresses itself in your bottles. I will be there to savor and write about it.

An example from this millennial’s cellar

(1) Wine Institute

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 I: The Land

Why can I buy a solid, terroir-nuanced Cabernet Sauvignon from Washington for $18, while I can’t buy an equally alluring Pinot Noir from neighboring Oregon for under $30? Why the huge variety and volume of respectable Languedoc-Roussillon red blends (France) for under $15, while I can’t buy equally unadulterated* cabernet sauvignons for that price from California? These two scenarios only hint at the tip of the economic iceberg when it comes to wine. The price tag at our local wine shop reflects a complex web of factors leading to that ultimate number. I will devote a series of posts to the factors that weight price tags toward affordability or incomprehensibility.

Part I: The Land

Location, location, location–economically impactful in real estate, retail business, and wine. How can one Napa Valley Cabernet Sauvignon sell for $150, while another bottle from vines grown within eyesight sells for $18? Vineyard location plays a role (discussion of other factors in upcoming posts). The $18 bottle almost certainly originates from grapes grown on the flats at the bottom of the Napa Valley. Flat, fertile valley bottoms encourage abundant growth and yields, and frequently mediocre wine as a consequence. Hillsides, even gentle slopes, typically have more shallow, less fertile soil. Grapes stress in these soils, and as a consequence put more energy into the fruit for the propagation of the plant. Stressed vines produce better wine. Therefore, hillside vineyard sites cost more money in notable grape producing areas–Napa Valley, for instance. The steepest vineyard sites can also add additional expenses due to the relative inaccessibility and associated labor costs to maintain the vines. 

More broadly, land values fluctuate drastically because of other geographic factors. California and Washington’s Columbia Valley serve well as counter-examples. For those who have travelled the Columbia Valley AVA, it is a vast, sparsely populated desert. As a consequence, the value of vineyard land often costs pennies to the dollar in comparison to most California vineyards. Many California AVAs, on the other hand, exist near population centers. California has also received global praise for the production of fine wine for decades longer than Washington. Both of these factors drive land prices higher than similar vineyard sites in the Columbia Valley. The Columbia Valley, of course, has exceptions to the rule. Some sub-AVAs have garnered reputations that drive prices sky-high. Red Mountain, for instance, recently sold land at a competitive auction for a hefty price. Expect more Columbia Valley vineyard land to follow suit as Washington continues to gain international respect. Back in California, the Central Valley, well away from the moderate climate on the coast and the largest population centers, proves the exception in the state, but few grapes recognizable as important wine grapes grow here. Rather, this relatively inexpensive valley produces an abundance of teinturier grapes intended as additives to serve as an inexpensive filler for many, if not most, bottles under $20 from California (and around the world). Wine regulations in California, and most regulations nationally and globally, allow for 10-15% of the juice to come from varietals not listed on the bottle, which gives wineries the option to top off bottles with inexpensive filler. Up north, Washington wineries producing bottles under $12-15 likely use similar or identical additives made from teinturier, but the climate, in conjunction with inexpensive land, greatly reduces the need for additives in most years.

The Columbia Valley AVA. Note the vastness and lack of development in the background. Courtesy of Seven Hills Winery.





Land ownership can also give wineries an economic advantage. For instance, an upstart winery in Oregon, which recently purchased 40 acres of prime Pinot Noir growing real estate, now owes banks or investors for this purchase. This new winery will need to pass on the land expense in the final cost of the bottle (unless the owner cares naught for the economic viability of the winery itself, a scenario that plays itself out with surprising frequency–enter the “hobby winery”). Some wineries in the Old World have had the economic advantage of owning their land for hundreds of years. This allows them to either lower their price, giving them a competitive advantage, or provide additional revenue to invest as they see fit.

The land grapes grow upon exists within our global, competitive economy. As evidenced by the details above, many of the same factors that create disparities between home values significantly impact the cost of wines we purchase from our favorite wine shop. Location, for one, matters. 

Many simplifications exist in the information above. Economic factors certainly overlap and intertwine in a complex manner. For instance, not all low-lying vineyards produce bad wine. Proper vineyard management in low-lying vineyards can produce excellent wine. The soil also plays a substantial role. However, people seeking to produce bulk, value wine frequently choose cheaper land–the lowlands. Generalities are necessary to discuss the topic meaningfully, even if imperfectly.

Finally, excuse the long hiatus. An unexpected death in my family, in conjunction with the holiday season, postponed my writing ventures. 

Coming soon, Wine Economics Part II: Grape Varietals and their Economic Impact. Happy New Year!

*Unadulterated = limited technological and chemical manipulations e.g. additives (Mega Purple), spinning cones to reduce ABV (alcohol by volume), etc.

A Sense of Place

A sense of place through honest winemaking and minimal intervention.

Those with a pulse on the wine industry have familiarized themselves with a new additive called Mega Purple, and its brethren Mega “Cherry Shade” and Mega Red. These concentrates are made from the teinturier grape, a lesser known, though massively produced, varietal from the steamy central valley of California. This grape is used to fill portions of bottles under $10 (and often higher priced wine, shhhhh). If your wine provides nothing more specific than “California” as its geographic location, you will be drinking some Teinturier, likely straight juice and concentrate.* 

Mega Purple is not inherently evil, nor is the grape used to make it. For most of us, our simple economic realities will require us to consume some (or even a lot of) Mega Purple. Some evidence suggests that most bottles under $15 use some form of the concentrate. Why? It rounds out the flavor in bottles lacking fruit, adds richer color, smooths bitter tannins from hard press, and, perhaps most important to the industry, provides consistency. Some wineries, especially mega-wineries, want a dependable, repeatable product. All of the benefits and trappings of this industrial model show in the finished wine. Economies of scale—check. A “go-to” bottle under $10—check. Wines using Mega Purple, however, notoriously mask or even eliminate varietal and locational character. The dark-underbelly of this relatively new phenomena* is a loss of place—homogeneity. 

Place matters. Not only in wine. Dr. Woodard, a mentor and professor of mine, spoke eloquently of the grounding nature of our native environment—the oaks in our neighbor’s grove, the Cardinal aggressively hoarding the bird feeder, the tall, fat thunderheads steadily trodding across the prairie. This sense of place is powerful. Energy giving. Life giving.

Swirling and tasting wine in the Columbia Gorge of Oregon

In front of me sits a bottle of 2011 Fourmen Pinot Noir from Vista Hills Vineyard in the storied Dundee Hills of Oregon. I swirl and smell place—bright, candied cherry, hints of earth, and acid. While industrial wine may be an enjoyable reality, or one forced upon us, we all benefit from taking the time to seek out bottles, at least on occasion, that speak of a specific place. With some care, conversation with local wine shop owners, and wise purchasing (case discounts, for example), wines of place can be found at many price points ($12 for my bottle tonight). 

Tonight, I drink to diversity. I drink to place.

Reasonably priced wines of place**:

  • Beaujolais, France 
  • Muscadet, Loire Valley, France
  • Southwest France 
  • Douro, Portugal
  • Toro and Jumilla, Spain
  • Columbia Valley, WA—seek out second label wines from esteemed producers. Example: StoneCap Wines.
  • Occasionally, if patient, even the Dundee Hills of Oregon’s Willamette Valley 

*For clarity sake, filters and additives have long been used by wine makers. Mega Purple-styled concentrates are, however, relatively new.
**Get to know a knowledgable steward at your local wine shop to find wines that allow the terroir from these regions to speak—not all wines from these locales are produced with fidelity.