Category:Wine trends

Preparing for the 25 percent wine tariff

wine tariffFive ways to save money if and when the 25 percent wine tariff for France and Spain takes effect

So far, there’s been no sign that the 25 percent tariff on French and Spanish wine won’t go into effect at the end of the week. So those of us who are rightfully worried about all that quality $10 wine going away should act now:

• Stock up before prices increase. Last week, I bought what might have been the last seven bottles of Chateau Bonnet Blanc in Dallas, and also bought most of what was on the shelf of the Azul y Garanza tempranillo. The Bonnet, of course, is one of the all-time great cheap wines, but it almost certainly won’t be $10 after Oct. 18. The Azul, $11 for a 1-liter bottle, is not just a terrific value, but a quality wine as well – Spanish tempranillo that tastes like Spanish tempranillo.

• Look for closeouts and sales before Oct. 18. Central Market, the Texas version of Whole Foods, did a 20 percent French wine sale last week. So I bought a case of assorted $10 French rose for $8 a bottle; hopefully I can hold out for the first six weeks or so of the tariff.

• There is always Italy. The good news is that Italian wine was excluded from the tariff (though not its olive oil and some of its cheeses). The bad news is that this means that very ordinary $9 pinot grigio will become an even bigger attraction as retailers drop similarly-priced French and Spanish wine. But $10 Sicilian wines will still offer value, while regions in the middle part of the country like Umbria and Montepulciano d’Abruzzo have long been famous for price and quality.

• Sparkling is safe. One would have thought that if the U.S. really wanted to punish France, it would have taxed Champagne. Hence there should still be value in $12 to $15 cava, the Spanish sparkling wine.

• Think South Africa. South African wines haven’t been popular in the U.S. for almost 20 years, but this could be their time to shine, says James McFadyen, a long-time retailer and distributor on both sides of the Atlantic. Producers like Ken Forrester and Mulderbosch offer quality and fair prices for both red and white; the catch has been availability.

Wine prices 2019 update: Are prices coming down despite premiumization?

wine prices 2019Way too many grapes and continuing flat demand may lead to lower wine prices 2019

At the end of the summer, I was talking to an official for one of the big grape grower trade groups. I asked what he thought wine prices would do through the end of the year, as well as into 2020.

“Wine prices are coming down,” he said. How can that be, I asked. Because, of course, premiumization — its reason for being that wine prices are never going down again.

He laughed. “That may be,” he said. “But when you have too many grapes, which we do, and flat demand, which we do, wine prices come down. There’s nothing premiumization can do about it.”

The trade group official was not alone in his take on wine prices 2019. Whenever I interview a retailer or producer, I always ask about business. And their responses over the past nine months have not been nearly as optimistic as the last couple of years – and certainly not as optimistic as the official wine business position: “Ever more wine sold at ever high prices!”

The consensus: Business may not be bad yet, but it’s certainly slowing. And, no, this isn’t a highly scientific survey process, and yes, it’s overwhelmingly anecdotal. But, like the Wine Curmudgeon Wine Sample Index, it rarely steers me wrong. Because other signs point to the same thing:

Reports one trade website: California “supply levels remain higher than ideal and therefore the market remains favourable to buyers, with wineries quoting the lowest bulk wine prices in 5 years.” In other words, lots of grapes in the supply chain, and not too many buyers, so lower grape prices.

And that’s because the 2018 harvest was record-breaking, and the 2019 harvest may be equally as gigantic.

• And we all know about flat demand. In 2018, about one-fifth of regular U.S. wine drinkers were older than 65, compared to 16 percent in 2015. But the youngest regular wine consumers, ages 21-24, are decreasing, dropping 13 percent from 2015.

• Canceled grape contracts. Large producers are refusing to buy grapes they agreed to buy, ostensibly because of smoke damage from the 2018 wine country wildfires. But there’s a suspicion that the wildfires had nothing to do with the cancellations; rather, it’s because the producers already have too many grapes and don’t need any more.

• Wholesale alcohol inventories, measured in dollars, are at an all-time high, according to the U.S. Census Bureau. This could be nothing more than a side effect of premiumization – the same amount of wine in warehouses, but since it costs more, its value is setting records. Or it could mean there is a lot of wine stacking up because no one wants to buy it.

Last week’s tariff news should only make things worse, since it will raise prices for many European wines, while most cheaper French and Spanish wines could disappear from U.S. shelves. Which will further cut demand and increase the overall supply.

If, in fact, wine prices are coming down, will it happen in time for the holidays? Probably not, though I’m willing to bet we could find terrific deals as producers, distributors, and wholesalers try to get rid of select wines they have too much of.

The real selloff may come at the beginning of next year, and especially if the holiday season is as slow as it looks like it will be. And then, finally, we could be able to see the beginning of the end of premiumization.

More abut wine prices 2019:
Wine prices 2019
2019 SVB wine report
The biggest factor in California wine prices

Photo: “Wine section of a supermarket” by piropiro3 is licensed under CC BY 2.0 

Higher wine prices, retailer margins, and premiumization

wine pricesWine price data may show that retailers are absorbing some of the higher prices that come with premiumization

The theory behind premiumization is that wine has become more expensive – not necessarily because wine prices have increased, but because we’re buying more expensive wine. Yes, it’s a fine distinction, but it’s one that the experts insist on.

And there may be some evidence to back that up.

What I’ve found, with expert guidance from Tarek Abdallah, PhD, an assistant professor of operations management at Northwestern University’s Kellogg School of Management in Evanston, Ill., is that retailers haven’t been raising prices as much as wholesalers have. In fact, says Abdallah, the numbers show that retailers have been getting squeezed since the end of the recession.

Since 2009, wholesalers have raised the prices they charge retailers by an average of 2.25 percent a year. But retailers have only increased the prices they charge consumers by three-quarters of that amount, about 1.84 percent annually. In other words, retailers are absorbing some of the price increases.

Abdallah points to two sets of data compiled by the federal government to demonstrate this: First, the consumer price index for alcoholic beverages, a derivative of the better known overall consumer price index, the standard measure of U.S. inflation. Second, the wholesaler producer price index for alcoholic beverages, which measures what the second tier charges for its products.

What’s the catch?

The caveat here: Neither index breaks out wine; rather, each tracks combined sales of beer, spirits, and wine. So we can’t be certain that wine prices by themselves are acting this way. But, says Abdallah, the data is broad enough and consistent enough so that we can be reasonably certain.

Which brings us back to the idea that wine price increases aren’t the most important part of premiumization. How can they be if retailers are working to minimize those increases?

This plays into the sense that producers, rather than raising prices for existing products, are bringing new, more expensive products to market. They want us to buy their new $15 wine instead of the old $10 wine, marketing the new wine as better than the old wine because it costs more – even if it isn’t necessarily better.

And retailers seem to be hedging their bets and not charging the full $15 for the new wine — and maybe for just that reason.

More about premiumization:
Premiumization be damned: $139.36 for 14 ½ bottles of cheap wine
Wine prices, razor blades, and premiumization
“Reasonably priced at $40:” Wine premiumization is out of control

Do new U.S. wine tariffs mean the end of most $10 European wine?

wine tariff

The European Union gave plane manufacturer Airbus illegal subsidies, so we may not be able to buy $10 French or Spanish wine.

It’s a question no one can answer yet, but some retailers and importers think the wine tariff will do just that

The U.S. slapped a 25 percent tariff on wine from four European countries this week, and some fear it may be well be the end of most $10 European wine in the U.S.

That’s the impression I got after spending yesterday on the phone, talking to retailers and importers in the wake of the U.S. announcement that it would tax wine imported from France, Germany, Spain, and Great Britain an additional one-quarter of its value. It’s part of a laundry list of goods and services, including olive oil and airplane parts, that are being taxed in retaliation for illegal European aid to the Airbus plane manufacturer.

That means every bottle of wine from those four countries, save sparkling and those with more than 14 percent alcohol, will cost at least 25 percent more. And France and Spain account for about one-quarter of U.S. imports.

I asked James Galtieri, whose Seaview Imports brings in 85,000 cases a year, 40 percent from France and Spain, if we’ll see any $10 French or Spanish wine left in the U.S. if the tariff takes effect. “Probably not,” he said. A Dallas-area retailer told me the same thing: “There’s no way anyone can afford to sell those wines for $10 if they cost 25 percent more because of the tariff.”

In fact, Galtieri said the tariff could even take down $15 to $18 wine. “Those are the kinds that could fall out of bed completely. Yes, a $1 or $2 prince increase on a $15 wine doesn’t sound like much. But $15 is the sweet spot, and people don’t want to pay more than that. So they’ll likely buy something else, and those wines will disappear from the shelf.”

A Spanish importer, one of the best in the world, was even more blunt. “I might as well close my doors,” he said.

One bright spot?

Italian wine avoided the new tariff. But Italian producers could take advantage of the situation to raise prices and still remain competitive. Will that happen?

“It’s going to be the consumer who decides about price increases, not the Italian producers,” says Giulio Galli, an Italian wine importer in San Antonio. “If you look at something like $8.99 pinot grigio, the consumer is just not going to pay $15 for it.”

The other bright spot? There’s still some confusion about how the tariffs will be applied. A spokesman for the U.S. Trade Representative, which announced the new duties, said: “For questions on how the increased tariff rate is applied to specific products, we recommend contacting U.S. Customs and Border Protection, which will be implementing the tariffs.”

And a spokeswoman for a custom broker in Houston, which guides companies through the import maze, said Thursday that it had not been officially notified of the tariffs, including how they would be calculated. So there is a chance, however slim, that 25 percent may not mean 25 percent.

Finally, several people told me there is a chance, also however slim, that the U.S. and the EU could negotiate a settlement to the Airbus dispute that doesn’t include the wine tariffs. That may be our best bet to save $10 European wine.

TV wine ads: John Gielgud makes a quick buck plugging Paul Masson

This early 1980s John Gielgud Paul Masson TV commercial is no “Arthur”

Did John Gielgud see a chance to play off his Oscar-winning role in “Arthur” and make a ton of money for very little work? Because, otherwise, there’s very little that makes sense in this early 1980s commercial for Paul Masson.

It’s not especially funny — ridiculing modern art was tired and old even then. And, as wine marketing guru Paul Tinknell has discussed on the blog, it makes the same mistake most TV wine ads do: It doesn’t focus on those of us who actually drink wine, but tries to make wine something that it isn’t. Most of us drink wine with dinner. Most of us don’t drink wine at art openings; in fact, most of us don’t even go to art openings.

The other oddity here? The wine business’ use of noted Shakespearean actors like Gielgud and James Mason for TV commercials through the mid-1980s. It’s probably an attempt — a very weak attempt — to make ordinary wine seem more high end. All it does, of course, iPauls make it look silly.

Video courtesy of Sean Mc via YouTube

More about TV wine ads:
TV wine ads: Drink Black Tower, invade a foreign country?
Wine business: Watch this beer spot to see how TV wine ads should be done
What was James Mason doing making a Thunderbird TV commercial?

Putting canned wine in perspective

canned wine

Somebody bring the rose. The socca is ready.

No, canned wine is not the end of the universe. So why do we keep hearing that it is?

A recent trade magazine story asked the question, “How seriously should we be taking the rise of wines in a can?” To which my answer was, “Who cares?’

The story was mostly the same winebiz-speak we’ve been seeing for the past couple of years as cans have become more popular. To wit: The wine business is shocked to discover that consumers will drink wine out of something other than a 750-ml bottle with a cork-style closure, so it’s obvious that cans are going to take over the wine business. So we need to do something!!!!!

Is it any wonder I worry about the future of the wine business?

We read the same stuff when Tetrapks were au courant and boxed wine was supposed to be the next big thing. And nothing changed – 75 percent of the world’s wine still comes in a 750-ml bottle with a cork-style closure.

So why the panic now? Yes, the quality of much canned wine is suspect. But why should that bother an industry that turns out vast quantities of plonk in bottles?

Because the wine business, and especially the wine business in the U.S., has so much time and money invested in keeping wine exactly the same way it has been since the end of World War II. So anything that threatens the ancien regime is to be feared. And it’s to be especially feared given the current wine climate of flat sales and increased sobriety. Even if, in the end, canned wine won’t make that much of a difference to flat sales and increased sobriety.

So why can’t we just drink wine – canned or otherwise – and enjoy it instead of rending garments and gnashing teeth about the future of the wine business? I recommend this blog post from food writer David Lebovitz. He is discussing socca, the chickpea flour pancake and or crepe thing famous in southern France, and his point is most welcome (as is his socca, one of my favorite Saturday night appetizers):

And for any wine snobs out there that think it’s folly to serve wine in cups instead of glasses haven’t had the pleasure of standing near a wood-burning oven, eating a blistering-hot wedge of socca with a non-recyclable tumbler of wine. Preferably served over ice, Marseille-style.

Photo: “FR’Nice 11’0925 – 13” by karendelucas is licensed under CC BY-NC 2.0

Chianti producers: We need to make our red wine more sweet

chianti producers

“These wines aren’t soft enough — let’s add sugar!”

Chianti producers are tinkering with 800 years of success to chase consumers who don’t exist

Chianti, perhaps the quintessential red wine – earthy, tart and oh so dry – is going to become more sweet. Why? Because Italy’s Chianti producers want “to sweeten its appeal to attract more women and a new generation of young consumers. …”

Is it any wonder the Wine Curmudgeon worries about the future of the wine business?

This approach is so pathetic on so many levels that I don’t even know where to begin to criticize it. Chianti is wine, not Hawaiian Punch or a rum and Coke. Why make it taste like something it isn’t?

More importantly, it works from a false premise: That women and younger consumers don’t like dry wines, don’t buy dry wines, and only want to drink sweet wines. Where do otherwise intelligent people (yes, this includes you, Bogle) get these ideas?

The world wine market is worth more than $300 billion, and almost all of that is dry wine. Why, suddenly, are those sales figures irrelevant?

Well, says the president of the group that represents Chianti makers, “When we participate in wine fairs in Brazil, America or in Asia, people often tell us Chianti is a great wine but too hard, with too much tannin.”

Ah, that’s it – anecdotes from other people who work in the wine business. Chianti producers are going to tinker with an eight-century success story because someone who sells wine told them what they heard from someone else who sells wine, who heard it from someone else who sells wine. Talk about hearing what you want to hear and disregarding the rest.

That’s an even worse reason to do something than a focus group.

The only good news in this is that the current legal residual sugar levels in Chianti are so low that the new, higher level is still less sweet than many California dry red wines. But that’s troubling, too, since the Chianti group president made the same point: ““It will still be a dry wine. The limit we have will be the same as other famous Italian wines like the Brunello and the Barolo. It won’t taste any sweeter.”

Methinks thou doth protest too much.

I wrote a guest piece for an Italian wine magazine in the blog’s early days; I was asked to offer my insight into the U.S. market and how Italian companies could continue to sell lots of wine here. Because, as the Italians never seem to remember, they sell more wine in the U.S. than any other foreign country.

I wrote: “Make Italian wines in Italy. Don’t make Italian wines that taste like they were made in France or California. What’s the point of that when people can buy French wines and California wines?”

I guess I need to find that piece and send it to the Chianti producers group.

Photo: “radda in chianti 012” by _gee_ is licensed under CC BY 2.0