This week’s wine news: A warning for those depending on the Baby Boomers to rescue the wine business, plus Total Wine appeals to the Supreme Court, and hard seltzer outsells vodka
• Pointed language: How is this for telling the wine business what’s what? “So if your wine clubs are full of people between the ages of 55 and 75, and you’re just trying to grind those guys to death in the last few years, be thinking about that transition.” That’s the blunt warning from a top wine analyst, speaking at a recent wine trade show. Robert Eyler told his audience that the wine business has not been able to convince Millennials to drink wine. Hence, given the aging of the Baby Boomers, who still support the market, the wine business could be in big trouble.
• Bring on the Supremes: Retailer Total Wine, struck down in Connecticut for challenging the state’s minimum pricing law, will appeal to the Supreme Court. This case, if accepted by the court, has the potential to further upset three-tier following this summer’s Tennessee retailer decision. Total is arguing that Connecticut’s pricing laws are no different from an illegal price-fixing conspiracy, since everyone knows the prices ahead of time and no one can deviate them from them.
• Still growing: Hard seltzer, those cheap, easy to drink, low alcohol products like Truly and White Claw, account for some 2.6 percent of the U.S. booze market – more than vodka, the best-selling spirit. That’s triple the share from a year ago, according to a recent report. That works out to about 82 million cases – almost 10 times the amount of Barefoot sold in 2018, which is the top selling U.S. wine brand.
Because the United States is not the only country with liquor laws that seem designed to baffle more than anything else. Although ours are certainly intriguing — right, Pennsylvania?
? Standoff over deregulation: The Pennsylvania Legislature didn ?t deregulate its state store system this session, though it came closer than ever before. Voters wanted an end to state stores, but that wasn ?t enough. Not enough Republican lawmakers, who should theoretically be opposed to government regulation, supported the plan. Democrats, who are supposed to be populists, were almost universally opposed to it. The measure, controversial enough, also got hung up in a dispute over transportation funding and a squabble between the state house and senate. Which means it ?s time for a Winston Churchill quote: ?Democracy is the worst form of government, except for all those other forms that have been tried from time to time. ?
? Minimum pricing: The British government, which had hoped to set minimum prices for alcohol to cut down on binge drinking, is backing off the plan, reports The Drinks Business trade magazine. Instead, the coalition government will try to persuade retailers that sell booze below cost not to do so. The plan, which has been endorsed by a variety of consumer and health groups, apparently fell victim to the upcoming British general election. The magazine reports that Conservative MPs persuaded the prime minister to focus on more ?core ? issues in the run-up to the election, given the government ?s poor poll numbers.
? ?It’s good to be the king:” Ontario liquor regulators know which side their bread is buttered on, and apparently have no qualms about making sure it stays buttered. The Canadian Press reports that the Liquor Control Board of Ontario sells booze to federal government agencies and foreign embassies and consulates at 49 percent less than it charges consumers. Plus, the board had to waive the minimum pricing policy that applies to everyone else to allow it to offer the discounts. Hence the reference to Mel Brooks, another great political philosopher.
? Is cheap wine profitable? Jamie Goode, the respected and award-winning British wine writer, argues that cheap wine will never make anyone any money. He compares it to the cell phone business, noting that if one carrier offered cheaper rates instead of what he calls the almost cartel-like pricing structure in use, then ?all profitability will be sucked out of the market. ? That ?s the opposite of the wine business, he writes, so no one must be making any money with cheap wine. His reasoning, though intriguing, misses a couple of points. Wine is not the cell phone business, which is limited by spectrum availability (as one comment to the post points out) and that lack of spectrum raises prices and margins. In addition, Goode overlooks the elasticity of cell phones vs. wine. We ?need ? cell phones; we don ?t need wine. Hence, there is little incentive for cheap cell phone plans. Finally, I think Goode doesn ?t understand the incredible marketing skill of U.S. producers like The Wine Group, which can create demand for cheap wine like Cupcake and still make money.
? Restaurant pricing: Says Chris Nuttall-Smith at Toronto ?s Globe and Mail: ?There is perhaps nothing more galling than flipping open a restaurant ?s wine list to find a $15 bottle that you know and love listed for more than $50. That ?s been happening to me a lot lately; where many Canadian restaurateurs are loath to price their chefs ? cooking at levels that would make it profitable, they show no such restraint with wine prices. It ?s in-your-face enough to make some diners want to stick with Diet Coke. ? The Wine Curmudgeon couldn ?t have said it better. Is it any wonder that restaurant wine sales have never really recovered from the recession?
? When are wine sales illegal? When you ?re in a state that forbids them. Like Wisconsin, which enforces a 1939 law that sets minimum prices for many retail goods. The story does a good job of explaining why Wisconsin wine prices can be 20 to 30 percent higher than in neighboring states, and how the World Market chain had to correct its Wisconsin advertising and sales offer to comply with state law. Note to Wisconsin residents: Drive across the border to Illinois. Wine is much cheaper there, and maybe even worth the price of the gas for the trip.
? UK minimum pricing: British doctors are convinced that raising the price of liquor will reduce alcoholism, using something called minimum pricing. Under one plan, this would raise the price of a 2.99 bottle of red wine (about US$5) 3.76 (about US$6). The British government is expected to announce its plan this week. What ?s interesting about this for U.S. wine drinkers is that some states already have some form of minimum pricing, but not necessarily as a health measure. Rather, it ?s part of the three-tier system, and is more law enforcement than anything else. When Americans want to deal with the health aspects of sin, we tax it, whether strip clubs or cigarettes.
? Ricky Ricardo wine? For all those men who forget anniversaries, birthdays, and the like. Or so seems the idea from the Safeway grocery store chain, which has launched a line of gift-wrapped wines. Because, frankly, can you imagine anyone else going to the grocery store store at the last minute to buy a pre-wrapped bottle of wine to give as a gift?
? Don ?t drink those assets: The latest academic study finds that investing in wine is ?is superior to equity, as it gives both higher return as well as lower standard deviation. ? My math isn ?t good enough to follow the entire discussion, but before we take our 401-Ks to the Live-Ex market, it ?s worth noting there are only 17 years of data in the study. Which, of course, coincide with the wine investment boom but take in the last two recessions.