Tag Archives: Big Wine

Winebits 643: Wine archaeology, consolidation, periods and spaces

wine archaelogyThis week’s (mostly) wine news: Archaeologists recover centuries-old wine bottles, plus impending wine industry consolidation and whether a period at the end of a sentence gets two spaces or one

• Old wine bottles: Regular visitors here know how excited the Wine Curmudgeon gets about wine archaeology. So there’s this: Scottish researchers have uncovered a massive mid-18th century glass factory whose cone furnaces once towered over the port district of Leith and supplied wine and whisky bottles to all corners of the British Empire. The Wine Spectator reports that the factory, near Edinburgh, may have produced as many as 1 million bottles a week. The factory’s downfall? The American Revolution, which cost the factory most of its business with the newly-independent United States.

• More consolidation on the way? The Wine Economist tells us to expect consolidation among wineries and wholesalers sooner rather than later, thanks to the coronavirus pandemic. Writes Mike Veseth: “Although much is lost in generalization, there is a tendency for larger distributors to focus their value chain on bigger retailers and larger wine producers.  Scale matches scale matches scale. This pattern magnifies an on-going movement to a two-speed wine market with those in the middle range (both domestic and imports) squeezed in the process.” This is not good news for consumers in wine business, which is already top heavy: the five biggest wineries make more than three-quarters of the wine sold in the U.S., while the three biggest distributors control more than half of the market. Fewer and bigger companies will restrict our choices even more.

• Periods and spaces: This item, courtesy of Lifehacker, has nothing to do with wine. But it’s a welcome respite from wine and the coronavirus – a discussion dealing with a significant post-modern writerly conundrum: How many spaces follow a period at the end of a sentence? The answer, of course, is one. The confusion comes from typewriter days, when we used two spaces – period, space bar, space bar – to set the new sentence off from the old. But post-modern word processors don’t need our help to set the new off from the old. Still, the argument comes up every once in a while, and the Wine Curmudgeon is always happy to remind younger consumers how much silliness their elders get into.

Photo: “Wine” by CyberMacs is licensed under CC BY-NC-SA 2.0 

Winebits 641: The “Big Wine makes mega-deals” edition

international styleThis week’s wine news: Constellation Brands and E&J Gallo finalize their cheap wine blockbuster, plus Geyser Peak is sold again and Treasury wants to set Penfolds free

• Finally done? Constellation Brands’ $1.1 billion sale of its low-price wine labels to E. & J. Gallo is expected to close by the end of June, despite the coronavirus pandemic, reports the Press-Democrat website. The deal will send almost all of Constellation’s $10 wines to Gallo, including Black Box, Ravenswood, Clos du Bois, and Mark West, as well as vineyards and wineries in California and New York. The original April 2019 deal, worth $1.7 billion, had to be revised after U.S. regulators objected.

• Poor Geyser Peak: When I started writing the blog, Geyser Peak’s $10 sauvigngon blanc was one of the most dependable cheap wines on the market. But that was also several owners ago, and quality has never been the same. So it’s not necessarily bad news that the brand has been sold once again. The current owner, Australia’s Accolade Wines, will sell Geyser Peak, Atlas Peak, XYZin and Outlot to something called 2 Bears LLC. No word on who is behind 2 Bears.

• Whither Penfolds? Australia’s Treasury Wine Estates, one of the two or three largest producers in the world, has been feuding with stock analysts for the past year or so, defending what the analysts have been calling the company’s poor performance. So Treasury may spin off Penfolds, one of the world’s great wine brands and home to the legendary Penfolds Grange (which I’ve been lucky enough to taste and so can attest to its greatness). Whether this pleases anyone in the shadow boxing world of financial analysis is anyone’s guess, but it points to the pressures Treasury faces in a world where people drink less wine and Big Wine companies are being urged to shed brands.

Big Wine 2020

Big wine

Big Wine isn’t enough for a healthy U.S. wine business these days.

Big Wine 2020: Just being big doesn’t seem to be enough to reinvigorate wine in the U.S.

We need some sexy brands at $7 or $8 per bottle, and I’m not sure how many people in the industry want to try and do sexy things with $7 or $8 a bottle.
— Wine analyst Jon Moramarco

That quote tells you pretty much everything you need to know about the 16th annual Wine Business News magazine survey, which tracks the yearly ups and downs of the U.S. wine business and ranks the 50 biggest producers in this country. In this, it’s the second consecutive year that the trade magazine has painted a Wine Curmudgeonly-future of wine in the U.S.

How big is Big Wine 2020? There are more than 10,000 wineries in the U.S., and the top 50 account for some 90 percent of production. But that’s just the beginning of how top-heavy the U.S. wine business is. Almost one out of every four bottles of wine made in the U.S. comes from E&J Gallo, the world’s biggest producer. The top 3 companies account for 52 percent, and the top 5 account for 77 percent.

So if we need someone to ask about what’s gone wrong, we know who, don’t we?

Among the highlights

• Sales by volume may actually have declined last year, depending on whose numbers you believe. Nielsen said sales dropped 1 percent as 2019 drew to a close, but Gomberg, Fredrikson & Associates estimated that volume could end 2019 up one-half to one percent. Regardless, it’s a far cry from the 3.5 percent annual growth rate during the wine boom, and it’s not enough to keep pace with the increase in the U.S. drinking age population.

• Even premiumization slowed. Sales by dollar volume were up just 1.7 percent in 2019; that compares to a 5 percent increase last year. Interestingly, several industry types quoted in the story insisted that cheaper wine was not the answer, since consumers don’t want to pay less.

• The average price of a bottle of wine sold at retail in 2019 was about $11. That’s more or less what it has been for the past several years, taking into account the various statistics used to calculate the cost.

• Gallo’s share of the U.S. wine market increased from 17 percent last year, even though its sales remained flat. Go figure.

• The share of the three biggest producers – Gallo, The Wine Group, and Constellation Brands – fell three points from last year and eight points from in 2017. In addition, the share of the top 10 companies declined for the fourth year in a row, from 84 percent in 2016 to 81 percent in 2017 to 78 percent in 2018 to 77 percent in 2019. That sounds awfully damn ominous, doesn’t it?

More about Big Wine:
• Big Wine 2019
• Big Wine 2018
• Big Wine 2017

ancient rome

Ancient Rome and its surprisingly sophisticated wine business

ancient romeAncient Rome, and how its wine business dealt with natural disasters, mass production, and wine critics

Does the following sound familiar?

They refined production by using barrels and cultivation techniques that allowed them to make more for less cost. … experts estimate that a bottle was being consumed each day for every citizen.

No, this isn’t a description of Big Wine and the U.S. wine boom that lasted from the 1980s to the beginning of the 21st century. It’s the role of wine during the Roman Empire, about 1,800 years before any European had ever heard of Napa or Sonoma.

The more things change, right?

In fact, the parallels between Roman culture and 21st century California wine business are more than spooky:

• The Roman Empire’s version of Napa Valley, perhaps in and around Pompeii. The city, near what is now Naples on the Mediterranean, was a key Roman wine center. When it was wiped out in 79 when the Mount Vesuvius volcano erupted, “the vineyards were destroyed, and the cost rose so rapidly that only the rich could afford it.”

• High land values. In 92, Emperor Domitian banned new vineyards in Rome and ordered the uprooting of half of the vineyards in use so grain could be grown. Farmers had been planting vines and taking out grain to replace the vineyards lost in Pompeii. Because, of course, vineyard land had become more valuable.

• Their own Winestream Media. Pliny the Elder, who was killed in Pompeii, was among the most important Roman wine critics, and not just because he wrote: “In vino veritas (in wine there is truth).” Book 14 of his 37-volume Naturalis Historia covered wine, which included a ranking of Rome’s top vineyards. Book 17 discussed viticulture and defended the notion of terroir. And Roman critics, as I discussed in the cheap wine book, were notorious for their disdain for the wine most people could afford to buy.

Slider photo courtesy of Aveine, using a Creative Commons license

More about ancient wine:
• Ancient Hebrews: “If there is any wine send it”
• A brief history of wine, wine writing, and the wine business

Ask the WC 21: Mulderbosch rose, older vintages, Big Wine

This edition of Ask the WC: What happened to the Mulderbosch rose? Plus, why are there so many older vintages on store shelves and what’s going on with Big Wine?

Because the customers always have questions, and the Wine Curmudgeon has answers in this irregular feature. You can Ask the Wine Curmudgeon a wine-related question by clicking here.

Hey Wine Curmudgeon:
Did you know the Mulderbosch rose, one of your well-reviewed $10 roses, went away a year or so ago? It doesn’t seem to be coming back anytime soon. Do you have any information? I’m sure many of your followers would like to know also. Thanks.
Where’s the Mulderbosch?

Dear Mulderbosch:
The past couple of years have not been kind to Mulderbosch — the South African winery was sold and it lost its U.S. importer. Plus, says Bob Guinn, the vice president of sales for the winery’s new owner, “the brand had been ‘footballed around’ for the past few years so we have spent the majority of this year cleaning up older inventory and pricing.” But there is good news: There is a new importer, and there are still distributors in 47 states. So we should be seeing the wine return to store shelves sooner rather than later.

•

Dear Wine Curmudgeon:
I’m seeing a lot of old vintages for wine that costs $10 and $15 on store shelves, some as old as 10 years. They can’t be any good, can they?
Older vintages

Dear Older:
Oddly, I’m seeing more of that, too, even in supermarkets where they tend to pay more attention to inventory rotation. The standard rule is two years for white wine and three years for reds. That means nothing much older than the 2015 or 2016 vintages for white wine and nothing much older than 2014 or 2015 for reds. The exception, of course, is for wine made to age, but most wines aren’t. In addition, we may be seeing more older wines as wine sales remain flat and more older wine remain unsold and stays on shelves.

•

Dear WC:
Why is Big Wine dumping all its cheap wine brands? I even heard a rumor Yellow Tail was for sale.
Call me curious

Dear Curious:
Yellow Tail may well be for sale, as Big Wine seems to be trying to be less about wine and more about legal weed, craft beer, and spirits. A couple of weeks ago, a second-tier whisky brand sold for $266 million. That makes it more valuable than most of the cheap wine brands Constellation sold to E&J Gallo in its fire sale this spring. Says Rob McMillan of Silicon Valley Bank, one of the smartest people in the wine business: “The overall growth rate in spirits is better than wine today, so even a second-tier whisky brand is more valuable. We are losing the young customer because of a bogus negative cumulative health messaging, like the ‘One bottle of wine is the same as smoking 10 cigarettes’ and because young consumers are more frugal.”

Photo: “Rose” by aliciagriffin is licensed under CC BY-NC-ND 2.0 

More Ask the Wine Curmudgeon:
• Ask the WC 20: White Bordeaux, crossing state lines, lower alcohol
• Ask the WC 19: Supermarket wine, plastic wine bottles, corked wine
• Ask the WC 18: Sweet red wine, varietal character, wine fraud

Wine business history: The more things change, the more they stay the same

wine business historyIn the wine business, history repeats itself – and we know what premiumization, overpriced wine, and consolidation mean for consumers

Premiumization, overpriced wine, and consolidation are nothing new in the wine business. Go back 80 years, and wine business history is eerily familiar. In this, some of the earliest and most influential wine critics, including Leon Adams and Frank Schoonmaker, warned the industry about the mistakes it was making.

And I would be remiss if I didn’t quote Winston Churchill here: “Those who do not learn from history are doomed to repeat it.”

Premiumization

Schoonmaker was a wine importer and wine writer whose 1930s’ “The Complete Wine Book” might have been the first attempt to explain wine to the U.S. consumer. In 1947, in a piece for Gourmet magazine, Schoonmaker lamented what sounds a lot like what we’re seeing now:

And in the past five years we have hardly seen any real vin ordinaire (by which I mean a common, inexpensive table wine) sold in America. The humble gallon jug virtually disappeared in 1943 from our wine merchants’ shelves; instead, the undistinguished reds and whites from the mass production areas of California appeared in fancy dress at a fancy price, and elaborate advertising campaigns were launched to convince us that bottles which we used to buy reluctantly for 60 cents were suddenly worth $1.50 and were being sold us as a special favor.

In other words, $15 wine is the new $8 wine.

Overpriced wine

Adams was perhaps even more influential in his time (the end of Prohibition to the 1960s or so) than Robert Parker was in his heyday. He is usually given credit for pushing the California wine business into the 20th century; he advocated for regional wine long before there was much of it; he helped start the Wine Institute; and he wrote several of the most important wine books in U.S. history.

He also had no use for over-priced wine, and regularly urged California producers to make wine that most of us could afford:

They should be as cheap as milk. High price wines are not for daily consumption with meals. Real wine drinkers know this; most Americans still don’t.

How spooky is that quote, that it’s still so relevant today?

Consolidation

Adams also saw the dangers of too few wineries producing too much of the country’s wine, something he first warned about shortly after World War II. He explained this in a 1974 interview:

The point was mine, and I think it has stuck to this day, that the little wineries should be encouraged to exist. The larger the number of small wineries that operate in the United States, the safer the big wineries are from attack, legislative attack in particular. If the wine industry ever fell into the hands of only a few major factors, the wine industry and the whole cause of wine would be in trouble. It would be endangered. … The big wineries have never agreed with me about the need to foster the small wineries. … My purpose is to encourage the use of wine, to introduce the use of table wine, which local wineries can do. Moreover, it’s especially to the advantage of California to thus expand the wine market, because with the ideal grape-growing climate of this state, California wines will always be the best buys.”

I wonder: How many of the biggest California producers have ever read that?

Photo courtesy of Sedimentality blog using a Creative Commons license

Big Wine 2019

Big Wine 2019Big Wine 2019: It still has a stranglehold on what we drink, but the biggest companies aren’t quite as big

A funny thing happened to Big Wine 2019: The three biggest companies didn’t dominate the market in 2018 the way they did in 2017. Neither did the top 10. But the top 50 still sell 90 percent of the wine made in the U.S., according to the 15th annual Wine Business News magazine survey,

In other words, it’s business as usual for Big Wine. They’ve just rearranged the profits.

Still, before you get too depressed, know that the magazine study acknowledged that the wine business is in trouble, citing the usual reasons – aging Baby Boomers, competition from craft beer and spirits, and the neo-Prohibitionists. Or, as the woman who runs the company that makes the ubiquitous Kendall Jackson chardonnay told the magazine: “It seems tougher this year and it probably will be tougher next year. It doesn’t seem like it’s as easy as it was.”

Which, hopefully, is good news for those of us who are tired of higher prices, declining quality, and more plonk on the shelves. If Big Wine sees the problem, maybe they’ll do something to fix it besides putting sugar in dry red wine.

Among the highlights

• Sales by volume were almost flat, from 403 million cases in 2017 to 408 million in 2018. That’s a 1.2 percent increase, far less than the growth in the legal drinking age population. Which means younger drinkers are drinking something else or aren’t drinking at all.

• The average price of a bottle of wine sold in 2018 was $14, which includes restaurant sales. Hence, the number is higher than the average usually cited for retail sales, $9 or $10 a bottle.

• Imports, as a share of U.S. wine sales, were only 23 percent. That’s also much lower than the numbers usually cited, which range from one-third to 40 percent of all the wine sold in the U.S.

• E&J Gallo controls 17 percent of U.S. sales, and its Barefoot brand accounts for almost 5 percent of all the wine sold in this country. Which succinctly describes the power of Big Wine.

• The share of the three biggest producers – Gallo, The Wine Group, and Constellation Brands – fell to 55 percent in 2018 from 60 percent in 2017. The share of the top 10 companies declined for the third year in a row, from 84 percent in 2016 to 81 percent in 2017 to 78 percent in 2018. Was this decline caused by premiumization, since these producers tend to have the least expensive wines? Or was the cause something more ominous, related to the decline in wine’s popularity?

• The magazine said there are 10,047 wineries in the U.S. Take out the top 50, and the other 9,997 sold 31.5 million cases in 2018, or about 3,150 cases each. The average Big Wine company sold almost 6 million cases – making it almost 2,000 times bigger. Which, regardless of any changes in the market share among the 50 producers, shows just how top heavy the U.S. wine business is.

More about Big Wine:
• Big Wine 2018
• Big Wine 2017
• Big Wine 2016