Tag Archives: Big Wine

Winebits 363: CDC, lawsuits, Big Wine

CDC excessive drinking ? Saving us from ourselves: The Centers of Disease Control is at it again, reassuring those of us who drink too much that there is hope. Says the head of the health agency’s alcohol program: ?Many people tend to equate excessive drinking with alcohol dependence. We need to think about other strategies to address these people who are drinking too much but who are not addicted to alcohol. ? This strikes me like being sort of pregnant, but what really matters is that the CDC’s definition of excessive drinking is wine with dinner, and this fact doesn’t appear in the story. For which the Wine Curmudgeon must call out Tara Parker-Pope at the New York Times for repeating that assertion. Which, as near as I can tell after doing the reporting, is scientifically unfounded.

? When is Champagne not Champagne? When it’s the name of a wine writer, reports Decanter, the British wine magazine. Hence the lawsuit filed by France ?s Champagne trade association against Australian Rachel Jayne Powell, who goes by Champagne Jayne. Since Powell also writes about other sparkling wine, the Champagne group says her name violates European Union rules. Their logic? That Champagne can only come from the Champagne region of France, so a writer who uses Champagne as a name can only write about Champagne. The case is scheduled to go to trial next week in Melbourne, believe it or not, and Decanter reports that it could set precedents. The Wine Curmudgeon, whose aversion to silly lawsuits like this is well known, has a suggestion: Settle by letting Powell call herself champagne Jayne with a small C, since every wine geek knows Champagne only comes from Champagne with a capital C.

? Yet another million case producer: One of my goals with the blog is to help consumers understand that most of the wine we drink doesn’t come from artisanal producers, but from Big Wine — the multi-million case producers who dominate the business. That’s why this two-part interview with someone I’ve barely heard of is worthwhile. In it, Vintage Point’s David Biggar talks about his company’s 17 brands, the best known of which is Layer Cake. In this, what the wines taste like barely comes up, though there is plenty of discussion about pricing, distribution and the three-tier system, and margins. Which is what the wine business really is, and not all that foolishness that the Winestream Media would have you believe.

Winebits 356: Big Wine edition

wine news big wineBecause it’s always worth knowing what the six companies that control 60 percent of the U.S. wine business, plus their biggest competitors, are up to:

? The biggest producer you’ve never heard of: Delicato Family Vineyards makes 5 million cases of wine a year, almost all of it Great Wall of Grocery store stuff, and almost all of it in anonymity. You might have heard of some of its brands, like Bota Box and Gnarly Head, but the winery itself is perfectly happy to be little known. That’s why this two-part interview (here and here) with Delicato president and CEO Chris Indelicato, conducted by the Shanken News Service is worthwhile. Indelicato talked about wine prices and that another big harvest in California this year will mean lower margins for producers, if not lower prices for consumers; that we’ll see more cheap pinot noir that doesn’t exactly taste like pinot noir because consumers want it; and that consumers are smarter than they used to be. Which doesn’t exactly jibe with doing Bota Box pinot noir and what Indelicato calls the consumer’s demand for soft — i.e., sweet — red, but who am I to argue with a 5 million case producer?

?Big companies, big results: Each year, the Impact trade magazine names its Blue Chip Brands, which have to meet growth and profit targets. Not surprisingly (at least for those of us paying attention), one of the Big Six, Constellation Brands, and Diageo, in the top 15, account for nearly one-third of the 2014 of Blue Chip Brands for beer, spirits, and wine. Constellation’s wines included Woodbridge, Black Box, Estancia, Ruffino, Kim Crawford, and Simi, though Diageo ?s brands were all beer and spirits. I’d also mention that all but one of the Constellation wines cost $10 or less, but that would probably be preaching to the choir.

? Big and getting bigger: The news release itself is close to useless, full of jargon and terms most of us don’t understand. But the gist is what matters: That Chile’s Concha y Toro, the biggest Latin American wine producer with $950 million in sales, is growing at a rate of 18 percent a year. That makes it one of the 15 biggest wine companies in the U.S. market, with more market share here than Diageo. Again, this is a company that most wine drinkers don’t know (though they have likely heard of Fetzer, which Concha bought in 2011). In this, it’s another example of how the biggest companies continue to tighten their grip on the market.

Big Wine tightened its grip on the U.S. market in 2013

Big Wine tightened its grip on the U.S. market

So how many smaller wine companies should we buy this year?

Big Wine tightened its grip on the U.S market in 2013, with new figures showing that three companies accounted for more than half of all the wine produced during those 12 months. E&J Gallo, The Wine Group, and Constellation Wines totalled some 187.5 million cases of the 370 million produced.

Throw in the next three biggest companies — Bronco, home of Two-buck Chuck; Trinchero Family Estates; and Treasury — and that total rises to 241.4 million cases — about two-thirds of the wine made in the U.S. The top 30 by themselves account for some 90 percent; in other words, all the wine that those of us who write about wine love to write about? Hardly anyone drinks it. No wonder availability is such an issue.

The report, Wine Business Monthly’s annual ranking of the 30 biggest U.S. wine companies (requires free subscription), follows up on last year’s Michigan State study that found that Big Wine controlled about 60 percent of the U.S market. The two studies didn’t use the same methodology (Wine Business Monthly doesn’t include imports like Yellow Tail, but apparently does include foreign brands owned by U.S companies), but the trend is obvious. The big are getting bigger.

A few thoughts about the results:

? There is big, and then there is really big. No. 1 Gallo, with 80 million cases, sold more wine than the bottom 26 companies combined. That’s a staggering statistic, and speaks to Gallo’s understanding of the post-modern wine business — marketing, certainly, but also how to leverage the three-tier system and how to develop products, like sweet red wine, that elude other wine companies.

? Adding brands. “One of the things that surprised me was the number of big wineries that are not introducing new brands,” said Wine Business News editor Cyril Penn. “It’s mostly just the Gallo’s and Constellations of the world are doing a lot of that this year.” These so-called line extensions are another sign that the biggest companies see wine the same way Proctor & Gamble sees cleaning supplies and Campbell’s sees soup.

? Consolidation is all. Wine Business Monthly included its 2003 top 30 list, and 12 companies on that list are gone, sold or merged into bigger companies. In addition, five companies are on the 2014 list because they bought other companies to get big enough to make the list.

? Big isn’t as big as it used to be. One million cases used to be the hallmark of a big wine company. These days, it will only get you 18th on the list.

Is all this bigness good? For prices, almost certainly. The biggest companies can afford to sell wine for less and make up the difference on volume (to say nothing of their lower costs of production, thanks to economies of scale). Wine quality, at least technically, should also benefit, so now flawed or unripe wine. What’s less clear is what bigness means for value. Big Wine focuses on price and technical quality, and whether the wine is interesting is an afterthought. Hence all those $10 California merlots that taste the same.

The fear for those of us who love cheap wine is that, as the big get bigger, it will be more difficult to find interesting cheap wine. I’m seeing some of that this year, with producers sacrificing interest in favor of cheaper grapes to keep prices down. The last thing any of us want is for wine to turn into beer, where cheap means Budweiser and Miller Lite, and where it’s almost impossible to find the $10 values that exist in wine.

Winebits 324: WC favorites edition

Winebits 324: WC favorites edition

Will empty tables force restaurants to change the way they approach wine?

Because the things that fascinate me about wine and that consumers need to know — and which rarely include toasty and oaky — keep making news:

? Distributor clout, once again: When in doubt, they get out the checkbooks, reports an Ohio newspaper group. The state’s beer and wine wholesalers donated $146,000 to Buckeye state lawmakers around the time the Ohio legislature passed a bill — apparently, without anyone knowing — that made it illegal for the world’s biggest brewer to buy more distributorships in the state. In addition, said the story, “both Republicans and Democrats benefited from the wholesalers’ cash. And donations sometimes rose noticeably around the time a key vote was scheduled.” My favorite part of the article is the quote that says the distributors, who have a constitutionally-protected monopoly that all but guarantees them profits, were saving Ohioans from the nefarious actions of an evil multi-national beer company. Talk about the pot calling the kettle black.

? Restaurant sales still slow: The restaurant business continues to struggle, says this story from Nation’s Restaurant News, and no one is quite sure why. Is it the result of the worst winter in 40 years? Is it a hangover from the recession, which never really ended for all but the most high-end restaurants? Is it a fundamental shift in the way Americans eat? The restaurant business matters in wine, as regular visitors here know, because restaurants go out of their way to hurt wine. And the slump in restaurant sales, which has lasted more than five years, may force changes in the way restaurants deal with wine, which means better quality and lower prices. Or so some very smart analysts have told me.

? The biggest wine companies: Mike Veseth at the Wine Economist looks at disintermediation, an economic term that refers to the specialization of labor. In this case, it’s about the number of employees needed to to make a case of wine. Not surprisingly, the formula is not as simple as it sounds, and speaks to the way post-modern business works — outsourcing, contractors, and the like. Many of the biggest wine companies don’t own vineyards or even wineries; one company, Castle Rock, produced 550,000 cases with just nine employees. “With product chain disintermediation, the number of people actually employed by a winery can be surprisingly small with that tiny workforce specializing in coordinating the various firms and contractors that make up the links in the chain,” wrote Veseth. What this means for consumers? Less expensive wine, of course, since disintermediation lowers the cost of production.

Image courtesy of Berenika, via stock.xchng, using a Creative Commons license

Marketing foolishness, or ‘Yes, but what does the wine taste like?’

One of the most important developments in wine, and especially for consumers, is the upsurge in marketing. Yes, the business always marketed its product, but the approach usually focused on the wine.

No more. Today, it ?s almost all about wine as lifestyle product. If the following are any indication of what ?s to come, wine drinkers are in deep, deep trouble.

? From Trinchero Family Estates, one of the Big Six wine producers, for a new product called Fancy Pants: Fancy Pants has certainly struck a chord with consumers. It ?s a memorable brand name with a stunning package, but more than anything Fancy Pants is about bringing ?fun ? and ?fancy ? to any occasion. ?

? Also from Trinchero, for its best-selling Menage a Trois line: ?As a seductive wine, M nage Trois wines are a perfect fit to watch ?The White Queen ? series. STARZ urges viewers of ?The White Queen ? to ?choose your side, ? and at M nage a Trois, we offer our consumers the chance to ?choose your wine, ? with a portfolio that now includes 11 different varietals. ?

I was going to write something snarky about each blurb, but what ?s the point? Each is already snarky enough, and that certainly wasn ?t the intention. Sadly, the people who wrote these, like this person, probably figure they ?re award winners.

One day, perhaps, the Wine Curmudgeon will figure out why some producers treat wine drinkers like we ?re idiots. Because I sure don ?t understand it now.

Big Wine and the search for authenticity

One of the most important changes in the California wine business over the past decade has been the rise of Big Wine and the role it has played in the growth of better quality cheap wine. It ?s a story that has not been told, and why I spent a lot of time writing about it in The Cheap Wine book. Otherwise, many of us, myself included, wouldn ?t be here.

It ?s a subject that David Michalski of the Unversity of California-Davis handles admirably in the spring issue of Boom. It ?s longish and a trifle academic in tone, but stay with it. Michalski reviews four books centered around the idea of authenticity in wine, but to get there he must explain why authenticity has become an issue. Because, before the 1980s, the very nature of wine was authenticity. French wine tasted of France, Italian of Italy, and so forth.

Then, writes Michalski, came California.

This manifesto for a new taste, one in which California figured centrally, resonated with a new generation of wine-drinkers. It was a message tailor-fit for an industry looking to reinvent itself, too, as California positioned itself in opposition to the snobbery of Old World wine. And although many of the so-called new breed wineries had close connections to the older generation, the image of California as an innovator and a challenger forever changed a trade once dominated by European markets and taste regimes. It opened wine to a wider global audience. It gave encouragement to developing wine regions across the globe. And it gave license to winemakers, even those back in Europe, to experiment with craft and science in the service of wine beauty.

This, says Michalski, is the double-edged sword of Big Wine and globalization and a result of what happened in California ? cheaper wines that make wine more accessible and democratic, but by their nature lack authenticity and the terroir that is part of authenticity.

In this, he finds a middle ground that not many others have discovered, though one I share: That globalization does not mean the end of authenticity, and that it ?s possible for Big Wine to co-exist with it. ?A fuller study of the way terroir works in today ?s economy reveals the importance of local branding within the global economy, a phenomenon scholars of consumption call glocalization, ? he writes.

Yes, a crappy word, but a concept that explains a lot. It explains how Sicilian winemakers can use modern techniques developed in California to produce high-quality wine that still tastes of Sicily. It ?s how Gascon wine, barely a consideration outside parts of France a decade ago, can be sold by large U.S. retailers who wouldn ?t carry it unless there was a demand for it. And it helps account for local wine, which wouldn ?t exist without the improvements in viticulture and enology that started in California 40 years ago.

Big Wine: 5 companies, 60 percent of sales, 200 brands

Call it serendipity. Shortly after my blog posts about Big Wine at the end of last year, a Michigan State study offered even more data about how Big Wine works and how it has changed the business.

The paper, “Concentration in the U.S. Wine Industry,” was compiled by Phil Howard, an associate professor who studies consolidation. After doing soft drinks and beer, he told me, wine was the next logical step.

“And even I was surprised by what I found,” Howard said. “Wine was much different than what I thought. If you go to the stores, it seems like you have all these choices, because the shared ownership is not very apparent. We wanted to help consumers understand what they were really buying.”

The study consists of two parts — third-party sales data and store visits from Howard and his graduate assistants. The former, displayed in some very nifty charts on the study website, paints a fascinating picture of market share as well who owns what labels. Three companies — E&J Gallo, The Wine Group, and Constellation Brands — account for more than half of wine sales in the U.S.

This is my favorite chart. For example, you can see how important Cook’s champagne is to Constellation Brands (about as much as Robert Mondavi, believe it not), and that Bronco, which makes Two-buck Chuck, has a bigger market share than much larger companies like Diageo and Altria, which owns Chateau Ste. Michelle.

The store visit results were even more fascinating. Howard and his graduate assistants counted wine at 20 Michigan retailers, where they found more than 3,600 unique varieties (where chardonnay was one variety, merlot another, and so forth). Those wines came from more than 1,000 different “companies,” although, as the study noted, the “top firms each contribute to an illusion of diverse ownership by offering dozens of brands (and hundreds of varieties), many of which do not clearly indicate the parent company on their label.”

The reason for that, said Howard, is not difficult to figure out: “A company known for producing cheap wine and not quality wine does not necessarily want to be identified with a premium, high-end brand.”

Other key points:

• The only unique varieties of wine found in more than half the retailers were Clos du Bois chardonnay, from Constellation, and Cavit pinot grigio. In other words, wine has no national brands, in the way every retailer in beer carries Bud Light and Coke and Pepsi are in every store that sells soft drinks.

• Half of the stores carried the same six varieties — Blackstone merlot, Ravenswood zinfandel, and Woodbridge chardonnay, all from Constellation, and Apothic red, Barefoot chardonnay, and Ecco Domani pinot grigio, all from Gallo. What this says about retailer selection, customer preference, and distributor clout is worth a second study.

• The top six wine companies in the U.S. accounted for more than one-fifth of the varieties found in the stores. That it isn’t higher speaks to retailer determination to carry other brands, something else not seen in soft drinks or beer.

• Howard said that the variety and number of wines, as impressive as it is, would probably be even more impressive in states that are less regulated than Michigan, which has one of the tightest three-tier systems in the country.

Finally, though Big Wine isn’t as top-heavy as Big Beer, it may be headed that way, said Howard. He said the wine business resembles the beer business in the 1950s, when 30 companies dominated the market. Today, just two beer producers — AB InBev and Molson Coors — account for three-quarters of all sales.