Category:Wine rants

Land, Kendall Jackson, land: The biggest factor in California wine prices

California wine prices

Jackson Family Estates doesn’t want to make $10 wine, but there it is.

Real estate, not foreign tariffs, determines California wine prices

Consider two wines: Both white Rhone-style blends, both from respected wineries, both speaking to varietal character and terroir, both well-made and enjoyable. One costs $24; the other costs $12. So what’s the difference?

Vineyard land prices in California. The $24 wine is Eberle’s Cotes de Robles Blanc from Paso Robles, where land goes for $30,000 to $35,000 an acre. The $12 wine is McPherson’s Les Copains White from Texas’ High Plains, where land goes for less than $5,000 an acre. Otherwise, save for a fancier screwcap on the Eberle, the wines are the same – mostly the same grapes, the same style, and the same flavors (some lime and stone fruit, very clean and crisp).

We’ve spent a lot of time on the blog over the past couple of weeks discussing the Jackson Family Estates proposal to raise a tariff wall to keep cheap imports out of the U.S. What we haven’t discussed is the role that the cost of California land plays in all of this.

More than anything, that’s why California wine prices are as high as they are. The land – even in the less famous regions like Paso Robles – can be some of the most expensive in the world. Equally as important, a lot of vineyard land in Europe — even quality land — was paid for decades ago, so the price of a bottle may not include the cost of the loan to buy the land. In some parts of California, the cost of the mortgage is the difference between a $50 and $60 bottle of wine.

And the more demand for California wine that there is, the more money people will pay for California vineyards. And higher land prices in California mean more expensive grapes and more expensive grapes mean more expensive wine. It’s that simple.

That’s because all else is mostly equal: The cost of labor, the cost of the bottle, the cost of shipping, and it doesn’t matter whether you’re in Texas, California, or France. In fact, California might have a slight edge in some production costs, since it’s the center of the U.S. wine business. So, in the end, the price of the land in determines California wine prices.

Jackson Family, like other big California producers, likes high land prices. High prices make the company more valuable. So when it says it can’t afford to make $10 wine, it’s being honest – but it’s also crying crocodile tears. It has decided premiumization is the future of wine, and it doesn’t want to make $10 wine. Smaller producers, faced with the same land price constraints, aren’t nearly as sanguine. Many have told me they see their wines being squeezed out of the market by companies like Jackson Family, who can work on smaller profit margins on an $18 bottle and undercut the smaller producers.

The irony? There’s plenty of cheap land in California to make $10 wine, which is where Barefoot, Two-buck Chuck, and much of the state’s cheap wine comes from. It’s in the Central Valley, where a ton of grapes can cost as little as $300, one-sixteenth of the price in Napa. And, in another irony, premiumization has made this land even cheaper – so cheap, in fact, that some farmers are replacing grape vines with almonds, which offer higher profits.

In other words, Jackson Family Estates could do what E&J Gallo (Barefoot), The Wine Group (Franzia), and Bronco (Two-buck Chuck) do – use Central Valley grapes to make $10 wine. But it’s easier to ask for a tariff wall and punish U.S. wine drinkers. Which should demonstrate exactly where Jackson’s interests lie, and it’s not with the wine drinkers.

Follow-up: The foolishness of taxing European wine

taxing european wine

“Who needs this stuff? Let’s buy more expensive California wine, because that’s what the Americans say we should do.”

Taxing European wine, and the economic fallacy behind the Jackson Family Wines proposal

Know two things about the proposal by the man who runs Jackson Family Wines to put up a tariff wall to keep cheap European imports out of the U.S.:

First, Barbara Banke, the chairwoman of Jackson Family Wines, told Wine Business Monthly in February: The wine business “seems tougher this year and it probably will be tougher next year. It doesn’t seem like it’s as easy as it was.”

Second, the suggested retail price for the company’s flagship product, Kendall-Jackson chardonnay, is about $17. But you can find it for $10 or $12 without too much trouble, which no doubt causes much consternation at company headquarters.

Is a pattern emerging here?

The Jackson Family proposal for taxing European wine has nothing to do with free trade, the so-called “level playing field,” or any other political rhetoric. It has to do with profit – Jackson doesn’t want to sell $10 wine, so it doesn’t want anyone else to sell it, either.

Which I completely understand. I don’t agree with it, but I understand it. So why hide the company’s true intentions behind complaints about unfair trade? Because who would agree to tax $10 European wine to protect one company’s profits? Hardly anyone who doesn’t work for that company.

Which brings us to the Wine Curmudgeon’s wine supply and demand primer. California’s role in the world wine market is important certainly, accounting for about 280 million cases a year. But it’s not as important as Californians like to think.  The French, Spanish, and Italians combine for almost 1.8 billion cases a year, while the total production of Chile plus Argentina is some 11 percent higher than California’s.

So what makes anyone think that the so-called “level playing field” would change anything? The rest of the world already has plenty of wine of equal quality and that will probably still cost less, even without the offending tariffs and subsidies. Why would a European buy €15 or €20 California wine (assuming anyone in California could sell it for that little, given California’s pricing structure) when they could still buy €8 or €10 European wine in the supermarket?

And this assumes that California can somehow produce enough wine to export. Which, as I mentioned in the first post, it doesn’t. We drink almost all the wine made in the U.S. in the U.S., and that doesn’t look to change anytime soon. They’re pulling out vines in California, not planting new ones to sell cabernet sauvignon to France and sauvignon blanc to Chile.

So there may not be much demand in the rest of the world for California wine, even if there was enough supply to export it, tariffs or no. The Jackson Family proposal ignores those basics, because it doesn’t help their argument.

Fortunately for those of us who care about wine and not wine company profits, I’m here to make sure those basics aren’t ignored.

Photo of “IMAG0970”by thirstforwine is licensed under CC BY-NC 2.0

Top U.S. wine executive: Let’s make wine so expensive no one will be able to afford it

tax wine

“Buy California wine — or else!”

No, that’s not a Wine Curmudgeon joke – it’s a proposal by the man whose company makes Kendall Jackson chardonnay

No, this isn’t a Wine Curmudgeon April Fool’s post. It’s as true as it is unbelievable: A top U.S. wine executive wants to tax wine so that most of us can’t afford to buy it.

Rick Tigner, the CEO of Jackson Family Wines (home to  the legendary Kendall Jackson chardonnay), told a wine industry meeting last week that California can no longer afford to produce cheap wine. Hence, the federal government should tax wine imports because “we need a better, higher pricing structure.” In other words, $10 European, Australian, New Zealand, and South American wine should cost as much as California wine — because, of course, California wine.

Yes, that was my reaction, too. Wine consumption is flat and young people don’t seem particularly interested in it. So the man who runs one of the most important wine companies in the country wants to make wine even more expensive? That makes tremendous economic sense, doesn’t it? Let’s price wine out of the reach of most consumers, and our business will be even more successful.

The story was so incredulous that I almost called the reporter who wrote it to ask him if something had happened during Tigner’s speech. Was Tigner struck by a bolt of lighting? Was there an invasion of body snatchers? Does he have one of those evil soap opera twins?

I wasn’t the only one who was dumbfounded. A European wine analyst told me she was surprised a leading wine company official would say something like that. A Napa wine marketer said it was just one more example of California arrogance — because, of course, California.

Tigner overlooked two things (besides the most basic laws of supply and demand):

First, 95 percent of U.S. consumers won’t pay more than $20 for a bottle of wine – perhaps my favorite wine statistic, courtesy of the Wine Market Council. So who is going to buy all the expensive wine that tariffs will give us?

Second, Tigner can complain that other countries tax California wine unfairly as much as he wants, but that’s irrelevant. U.S. wine exports measured by cases (mostly from California) are insignificant – barely more than 10 percent of what we produce each year. That’s because we drink almost all the wine made here, so there isn’t much left to sell to the French (assuming they would want it). In fact, U.S. wine exports are so trivial that two of our biggest markets are Nigeria and the Dominican Republic, countries not usually associated with wine culture.

So, no, taxing my $10 Gascon white blends, Spanish cava, and Italian red blends won’t save the California wine industry from itself. The only ones who can do that are part of the California wine industry, which tells us everything we need to know about how that will turn out.

Dear Onion: Local wine is not shitty

local wine

No, Onion, your post was not worthy of Jonathan Swift.

Your post making fun of local wine is lame — and using “shitty” because you can’t think of anything funny to say is even lamer

Dear Onion:

The Wine Curmudgeon has long respected satire (Jonathan Swift! And Mark Twain! And Mel Brooks!) and has even written some. So it is with much regret that I write you regarding this week’s post about local wine, which was not funny, not satire, and not true.

In fact, your post was so lame that I am using the word “shitty” in my post, something I have not done in almost 15 years of writing the blog. When you are a good writer, you don’t need to use “shitty” in an attempt to make something funny. It’s funny because you are a good writer.

And whoever wrote “Shitty Region Of Country Figures It Might As Well Give Producing Wine A Shot” is not a good writer. Or even a decent one. It was bad writing at its worst, making fun of something without being clever, witty, or entertaining. (For the proper use of “shitty,” see the 1971 version of “Shaft.”)

Consider this line from your post. It’s as old and tired as any wine humor, the equivalent of the worst “Take my wife, please… joke: “We have all this space that’s just sitting here. How hard could winemaking possibly be? And it’s not like most people can tell the difference between good and bad stuff.”

As I once wrote on the blog discussing this very topic, most people who make fun of wine think it’s stupid to begin with, so there is no need to be funny. Your post is an excellent example of this. Someone there, no doubt needing to make a deadline, said, “Let’s make fun of wine in the middle of the country!” Someone else, no doubt knowing the need to make a deadline, said, “Cool!”

Perhaps most depressing is that wine needs satire. As regular readers here know, I am always ready to make fun of the wine business. But this didn’t do that. There is excellent wine, as good as in France or Spain or Italy or California, in several of the states you mention. I know this because I am the co-founder and past president of a group called Drink Local Wine; in other words, I have actually tasted the stuff you brush off because wine is stupid to begin with, so wine in Texas or Michigan must be even more stupid.

Hence, I will make you the same offer I have made the mainstream media – when you venture into areas you know nothing about, check with me first. I am passionate about good writing, and always happy to help.

Yours in wine humor,

The Wine Curmudgeon

Is “pay to play” wrecking wine criticism?

pay to play

Teeter: Pay to play is the scourge of beverage journalism.

VinePair podcast says wine criticism, as well as beer and spirits, needs more transparency and fewer free trips

We need more transparency among wine writers and wine critics – and I’m not the only one who feels that way.

“It’s something we’ve always been talking about, among the staff,” says Adam Teeter, the co-founder of the on-line wine, beer, and spirits magazine VinePair. “And we thought it was time to start talking about it again.”

Hence a recent VinePair podcast discussing what Teeter calls “pay to play journalism,” where wine, beer, and spirits and writers take samples, free trips, free meals, and who knows what else – and then write exactly what will make the producer happy. Because they want to keep getting the free samples, free trips, free meals, and who knows what else.

“We call it book report journalism,” says Teeter, who also teaches at Columbia University’s prestigious journalism school. “It’s like when you wrote a book report as a kid, and you just rewrote what was in the book. The writers just rewrite what they’re told on the trip.”

I called Teeter to talk about this because transparency has always been a problem in the wine writing business. Yes, there has been progress, like most sites and reviewers acknowledging when they’re reviewing samples. That’s something that didn’t happen when I started the blog. But as technology has evolved, so has marketing, and the problem may be worse than ever. On one of the last trips I took, I was told what I could write – something no one had ever done before (and which I ignored). But many others are happy to write what they’re told, and that’s probably why I don’t get invited on trips any more.

As Teeter noted on the VinePair site: “Well, there’s a scourge in the beverage journalism world, and it’s called ‘pay to play.’ Whether it’s brands getting guaranteed coverage or even inflated scores by taking wine critics on elaborate trips, or just a spot on someone’s [Instagram] story through sending them some sample bottles, it’s an ugly side to this industry that rarely gets talked about.”

So the podcast talks about it, in detail. “The amount of free stuff out there is insane,” Teeter told me, and he used the word insane three times during our brief conversation to describe a world where producers see an Instagram post as marketing nirvana. It costs nothing, save for the sample, and it makes the person posting the Instagram feel like a big deal. In other words, it’s infinitely more brand friendly than dealing with a cranky ex-newspaperman like me.

The good news for wine drinkers is that beer, which has almost no history of criticism, is probably the worst for pay to play. We may harp on the biases of the Wine Magazines, but it’s not like beer, where a beer company subsidiary owns a leading beer ratings website.

So the next time you see a surprisingly favorable wine review, don’t be surprised – it may have been pay to play.

Photo courtesy of VinePair, using a Creative Commons license

TV wine ad survey: 1980s Richards Wild Irish Rose

Constellation Brands sold its birthright in this month’s $1.7 billion fire sale to E&J Gallo — Richards Wild Irish Rose is the brand that made the company wealthy

There were many surprises when Constellation Brands sold 30 of its labels to E&J Gallo this month, but perhaps the most surprising was that Richards Wild Rose was included in the deal. The sweet fortified wine was named after Richard Sands, the son of company founder Marvin Sands (and who would eventually become its chairman when Constellation  expanded around the world). How important was Richards Wild Irish Rose to Constellation’s success? As late as the beginning of this century, it was selling 30 million cases a year. Those are Barefoot numbers.

Obviously, those sales weren’t because of this commercial. It’s not as offensive as some, and it’s certainly not as stupid. Rather, it’s almost bland, as if the ad agency can’t decide how to market a product with a less than stellar reputation. And I can’t figure out why the blonde playing the bass is in the band, other than to shake her very 1980s hair.

Video courtesy of tvdays via You Tube

Cigarettes, wine, and cancer

wine and cancerThe mainstream news media can’t report a story about wine and cancer correctly no matter how much I lecture them

Dear Mainstream News Media:

I realize this is the 21st century, and that journalism standards aren’t what they were when I was a young reporter. For one thing, the bosses don’t care any more, since caring costs too much money. For another, journalism education isn’t about getting the story right, but about marketing. Because, the money.

Still, your performance during the recent cigarettes, wine, and cancer cyber dust-up left much to be desired. It seemed like every headline and story thundered the news that anyone who drinks wine will die of cancer as surely as a three-pack-a-day smoker, wheezing and hacking to the grave. Or, as this epic screamed: “Put a Cork in It: Drinking a Bottle of Wine Per Week Is as Bad as Smoking 10 Cigarettes

Sigh.

I thought we had covered this ground twice before – during the Centers for Disease Control “wine with dinner is the equivalent of binge drinking” study and the “even one glass of wine is one glass too many” scare. Both times, as I noted, each study had its flaws and solid reporting should do more than parrot the results. Ask questions. Each time, I offered hard-earned wisdom about how to cover these kinds of stories.

Which you apparently ignored. So, one more time – how to parse a wine and cancer study before you write about it:

• Read more than the executive summary. Yes, I know wading through the technical stuff is boring, and that it’s often written to confuse those of us who aren’t scientists. But it is worthwhile, as I noted in the wine with dinner post linked to above.

• Pay attention to the math. I know this is also boring (and math is far from my best subject). But you’d be surprised what you can find, as my Starbucks pumpkin latte post shows.

• Look for the caveats, since every legitimate study will have them. Just like we did in the red wine study.

• Look for the biases, because too many studies have biases these days. The cigarettes, wine, and cancer report is British, part of a barrage of studies that have come out of that country over the past several years in the wake of Britain’s binge drinking crisis. So what else would you expect the study to find?

Because, as one reporter discovered at the end of an otherwise “We’re all going to die!” piece:

“The use of cigarette smoking as a measure of risk is clever, but somewhat misleading.” That’s the opinion of Larry Norton, MD, the deputy physician-in-chief for breast cancer programs at Memorial Sloan Kettering Cancer Center in New York City. “Association is not causation … On the other hand, we know for sure that smoking actually causes lung and other serious cancers. So putting it all together, the equating of tobacco with alcohol has some real flaws.”

See what I mean?

Your pal in better journalism,
The Wine Curmudgeon