Tag Archives: wine business

Three reasons to be optimistic about the future of the wine business

wine business futureMaybe there are reasons not to be so doomy and gloomy about the future of the wine business

Mike Dunne, one of the most perceptive people I know in the wine business, left a comment recently that not all is doom and gloom with wine. The Wine Curmudgeon has been especially doomy and gloomy about wine’s future, and with good reason. Just when it seems like the news can’t get any worse, it does.  How does Constellation, one of the smartest companies in the business, overvalue assets it’s selling by a billion dollars?

Still, Mike being Mike, his comment made me ponder. Does he see something that I don’t? In one respect, Mike is completely correct – the wine business isn’t going to vanish tomorrow. And who knows? Maybe young people, who currently seem as interested in wine as I do in the Kardashians, will eventually change their minds. I’m always willing to admit I’m wrong — and hope I am, in this case.

So, given those two conditions, maybe there are three reasons for optimism that I have overlooked:

• The re-emergence of lower alcohol wines. We won the battle against 15 percent chardonnay and 16 percent cabernet sauvigon at the end of the recession, and most wines today are made with more or less normal alcohol levels. If wine drinkers can convince producers we don’t want our rose to kick like tequila, then maybe we can convince them that smooth and sweet isn’t a good idea, either.

• Rose’s success. When I started the blog, rose was a dirty word and difficult to find in shops, stores, and restaurants. The wine business told us to drink white zinfandel and lump it. Today, white zinfandel is an afterthought and even the biggest of Big Wine companies are scurrying to produce what they call dry rose. So we won that one, too.

• Reform in the three-tier system, which limits the wine we can buy and where we can buy it, and decides how much we pay for it. I recently exchanged emails with the blog’s unofficial liquor law attorney, and he was excited about a Connecticut three-tier case that upheld that state’s minimum pricing law. Why excited, since three-tier won the case? Because, said the attorney, the appeals court’s decision was so silly and went against so much precedent that it could be overturned by the Supreme Court. Throw in the Tennessee case currently in front of the Supreme Court, and we have a chance to fire two silver bullets into three-tier’s body.

Winebits 583: Wine lawsuit, wine snobs, customer service

wine lawsuitsThis week’s wine news: A wine lawsuit involving a teeter-totter, plus a wine marketer says the industry is its own worst enemy and declining retail customer service

Another lawsuit: Regular visitors here know how much the Wine Curmudgeon enjoys wine-related lawsuits (and has even been, slightly, part of one). So it is with a fair amount of glee that I report this suit, via Wine Industry Insight – a small Napa Valley winery suing a large importer over a label where an elephant is on a teeter-totter. Yes, I know this is serious business for the parties involved, and trade dress and intellectual property are important legal concepts. But still, an elephant on a teeter-totter?

It’s not the Millennials? Someone in the wine business actually agrees with the Wine Curmudgeon about wine being its own worst enemy. Leandro Cabrini, the founder and CEO of Wild Yeast Media, writes: “We are killing [the wine business] with our snobbery and a refusal to listen and see what’s going on around us. We refuse to adapt, maintaining that everything is (and should be) the way it was 20, 30, 50, 100 years ago. Do you know what happens when we don’t adapt? We die. We don’t care about our consumers. … “ Wow. Hard to believe, but maybe someone will actually listen to Cabrini.

Speaking of which: Customer satisfaction with supermarkets dipped over the past year amid an overall decline in all retail, according to the American Customer Satisfaction Index annual report. Why does this matter to wine drinkers? Because grocery stores probably account for more than half of the wine sold in the U.S., and as much as 75 percent in some states. Reported the study: “Service personnel are less helpful and courteous in person and over the phone. The checkout process is slower and rates lowest.” Is it any wonder I always recommend a quality independent retailer for wine shopping?

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

Wine trends 2019

wine trends 2019Wine trends 2019: Higher prices, less choice, more plonk, and the return of sweet pink wine

Wine prices 2019

Most of the wine trends 2019 stories on the Internet describe a wine wonderland of rare vintages, exotic tastings, and unlimited opportunity. Which is probably true for the few who live in that particular wine bubble – they don’t have to worry about how much they pay and they can get their hands on any esoteric wine they want.

For the rest of us, wine trends 2019 are not particularly encouraging. Is it any wonder I worry about the future of the wine business? Here’s what to expect this year:

• An attempt to bake higher prices into the marketplace, not because prices should be higher – a grape shortage or better quality wine – but because the oligopoly that controls wine pricing wants higher prices. It’s worth noting that consolidation, which gave us the oligopoly, is no longer a trend. It’s an everyday part of the wine business.

• More three-tier reform failure. Yes, I am well aware that every smart liquor attorney and wine analyst expects the Supreme Court to kick the three-tier system in the groin in the upcoming Tennessee retailers case. And I want them to be correct. But it ain’t going to happen. This Supreme Court, which sees the 1950s as the Golden Age of American life, isn’t going to change three-tier in any way, shape, or form.

• The return of white zinfandel. It won’t be called that, of course, but will be disguised as dry rose. One example: The Seaglass rose. The 2016 vintage was made with pinot noir, “with barely ripe strawberry fruit and surprising freshness instead of the cloying, almost sweet quality that some wines have.” So what did the 2017 vintage (apparently minus the pinot noir) taste like? Cloying and almost sweet.

Bring on the recipe

• More formula wine, as producers treat wine production like a recipe at a chain restaurant. We’ve seen a lot of this already, especially in the $10 to $15 range, but it will expand to wines costing as much as $25. Who ever thought we would see wines at that price made to focus group specifications, with residual sugar, barely any acidity, and washed out tannins? One large bulk winery owner told me last week that he has to make two styles of wine now: sweeter for the U.S. market and drier for Europe.

• Top-quality brands losing distributors and importers, further reducing consumer choice. We saw this when the French Domaine du Tariquet lost its U.S. importer in 2018, and that was just the beginning of the bad news. Last year, California’s McManis Family Vineyards, which makes 300,000 cases annually, had to sign a distribution deal with The Wine Group, the fourth biggest producer in the country. McManis couldn’t find a distributor with national scope willing to carry its wines; in the age of consolidation, 300,000 cases isn’t big enough for Big Distributor. The McManis family still owns the winery, but it has to depend on another producer’s sales force to sell its product. How screwed up is that?

• Continued flat demand here and in Europe. As one California winemaker told me recently, “No one is buying wine anymore. What’s going on?” Or, as Wall Street put it: “Shares of Constellation Brands skidded as much as 11 percent Wednesday morning. … [thanks to its] disappointing wine and spirits business. …”

• The attack of previous vintages. Flat demand, combined with increased wine production, means there is lots and lots of older wine on warehouse shelves. More retailers – and even some that are usually more scrupulous about this – are mixing the older vintages in with the current stuff in hopes you won’t notice. Or, you’ll see older wines discounted, even if they’re so old they aren’t very drinkable.

Winebits 573: Sweet red wine, pension plans, Barefoot

sweet red wine

Eric Asimov is not a fan of Big Wine

This week’s wine news: The New York Times’ Eric Asimov takes on sweet red wine, plus wine helps a pension plan go belly up and Barefoot reaches 20 million cases

An unlikely review: The Times’ Eric Asimov, who makes no secret of his disdain for Big Wine, discusses three top-selling Big Wine products in a recent Times’ wine school column. His comments about E&J Gallo’s Apothic and Constellation Brands’ The Prisoner and Meomi are almost as priceless as as the comments readers left. It’s also worth noting that the wines are sweet reds – Apothic more or less labeled as such, and the other two hiding sugar behind a dry red wine label. As such, there are three of the most contentious wines among those of us who do what Asimov does.

How to make a million in the wine business: Dallas’ police and fire pension fund almost went broke last year, and only tremendous sacrifices by the cops and firefighters – who weren’t responsible for the collapse – saved the system (which is a story for another day). The point for the blog? The pension system was so badly mismanaged that it had investments in wine real estate. How is that mismanagement? Because the first rule of the wine business is this very old joke: How do you make a million in the wine business? Start with two million.

Only 20 million cases: Barefoot, also an E&J Gallo brand, has grown to 20 million cases – or about one bottle for every drinking age adult in the U.S. That’s a mind-boggling statistic. The story from the Shanken trade news site is mostly puff (boxed wine is hardly an innovation in 2019), but it’s worth reading to note how important $7 Barefoot is to the health of the U.S. wine business. We can talk about premiumization all we want, but if Barefoot was a winery, it would be the fourth biggest producer in the U.S.

Winebits 560: Wine trends, Wine Spectator lawsuit, Coke and weed

wine trendsThis week’s wine news: The Italian Wine Guy notes several disturbing wine trends, plus the Wine Spectator sues another magazine, and Coke wants in the weed business

Making money: Apparently, I’m not the only one worried about the future of the wine business. The Italian Wine Guy, who spent the last three months visiting retailers and restaurants around the country, writes that price “seems to be one of the biggest factors. It’s the economy, stupid. The wine trade has often been a race to the bottom, and these days, there is a significant concern for revenue and profit.” Consumers, he was told, are showing “high anxiety over a buying decision.” In other words, not everything is peachy-keen in the era of premiumization. And his take on the three-tier system? Intriguing and insightful for someone who used to work for the biggest distributor in the world.

It’s time for the lawyers: The Wine Spectator is suing a new marijuana magazine called the Weed Spectator for infringing its trademarks and copying its familiar 100-point rating scale for wine to rate cannabis. Reuters reports that the filing says Wine Spectator owner M. Shanken has no interest in associating Wine Spectator and the Wine Spectator marks with cannabis, a largely illegal drug. Any association of this type is likely to tarnish the reputation and goodwill that has been built up in the Wine Spectator marks and business for decades, resulting in dilution of the brand.” I’m most fascinated by the charge the weed magazine is copying the 100-point scoring system. I’d love to watch that unfold in court, given how many people use it and that the Wine Spectator didn’t invent it.

One more time: Those of us with long memories still laugh about Coca-Cola’s failure in the wine business in the late 1970s. So its foray into marijuana beverages elicits a similar chuckle. Nevertheless, reports the BBC, “the drinks giant is in talks with [Canadian] producer Aurora Cannabis about developing marijuana-infused beverages. These would not aim to intoxicate consumers but to relieve pain.” Apparently, it would be a “recovery drink,” aimed at the same market as Gatorade and Powerade. I’ll leave that straight line alone – it’s almost too easy.

One more time: The independent wine retailer is your best friend

independent wine retailer

No, this is not the selection at a quality independent retailer.

Only the independent wine retailer can save us from crappy wine and unfair pricing

The country’s pre-eminent “natural foods” grocer had two wine displays next to each other last month in a Dallas store. One wine was the kind you’d expect it to carry – Jules Taylor New Zealand sauvignon blanc, a terrific wine and especially for the $15 sale price. Next to it was mass produced schlock, a California chardonnay that uses intensive winemaking to taste sweet and buttery. It was also $15, and I saw the same wine for the same price at Target.

If a store that markets itself as carrying only the finest natural, organic, and sustainable products treats wine that way – junk next to excellence, and for the same price — how can we count on any retailer to offer quality and value?

Fortunately, that’s what the best independent wine retailers do. Because, as a wine business friend emailed the other day, “The consumer has a romantic view, with no idea of all the BS behind the curtain to sell the ocean of wine being made. And I feel the consumer is overpaying most of the time.”

The best independent wine retailers don’t do those things. They won’t sell you something like that chardonnay, where the bottle was probably the most expensive part of the product. In fact, most won’t even have it in their stores.

The best independent wine retailers understand that customer service matters, which is why they don’t carry junk. Better to sell you cases and cases of wine over the long term than six bottles of plonk and never see you again. And they price their products fairly, without the come-ons and phony discounts that dominate the marketplace. Right, Cost Plus World Market?

What makes a quality independent wine retailer?

To paraphrase from the cheap wine book:

• Does the retailer ask questions about your preferences, helping you figure out what you want – red or white, sweet or dry?

• Does the retailer let you ask questions? Do you feel comfortable asking those questions? Or do you feel you’re being humored in the way adults humor small children?

• Does the retailer answer your questions? Are the answers understandable or in winespeak? And, when you say you don’t understand what he or she means by leathery or oaky, do they explain so you do understand?

The best retailers do more than sell wine. They help you find wine that you didn’t know you would like. It’s easy to sell someone something that they already know about. What’s more difficult, and a mark of the best retailers, is to find something new – a Spanish albarino or French picpoul for an Italian pinot grigio, for example, or a fruity rose instead of a white zinfandel.

I’m lucky to have two top-notch independents in Dallas, and I have rarely been disappointed. I know if the wine is on their shelves, it’s probably worth buying. And I also know I can ask any question I want, no matter how Wine Curmudgeonly cranky, and I’ll get an intelligent answer. No one will sell me something because it’s on sale or because they get a bonus for selling it. They sell it because they want to make me happy.

And when’s the last time we could count on that in the wine business?