This week’s wine news: Italian police bust up a fake wine ring, plus bad news for high-end winery profits and Hardys money-back wine guarantee
• Phony Sassicaia: Italian police seized almost 350 cases of fakes of one of Italy’s most famous wines, which can cost as much as $400 a bottle. Operation Bad Tuscan, reports Manchester’s Guardian newspaper, uncovered a ring that used cheap wine from Sicily to counterfeit Bolgheri Sassicaia, what the story called a “prestigious Super Tuscan wine.” The wine included fakes from the highly-praised 2010 and 2015 vintages. The wines, sold for two-thirds less than their usual price, were destined for Russia, Korea, and China. So far, 11 people have been arrested. Italy’s wine cops have been busy this year: They raided Sicily’s Feudo Arancio winery as part of a Mafia investigation into money laundering.
• No profit here: The Seeking Alpha financial website details just how difficult it is to make money in the wine business, even – and especially – if the company makes high end wine. Analyst Ian Bezek is frank about Crimson Wine Group, whose brands include $100-plus producers Pine Ridge and Archery Summit: “Simply put, if a company like Crimson can only earn 26 cents a share in the best of times, and outright loses money during industry downturns, the stock isn’t worth a whole lot on a P/E basis.” That an analyst outside the wine business has noticed what’s going on with wine speaks volumes about the problems the industry faces, and that hopefully the industry will address.
• Money-back guarantee: The Australians know how to sell wine: Hardys is offering its Aussie, British, and Irish customers a 100-percent refund if they don’t like the Hardys wine they bought. This is a brilliant idea, which is why (assuming it’s legal in the U.S.) we won’t see it in this country. The guarantee includes all the brand’s wines, from the US$80 Eileen Hardy Shiraz to the US$10 Nottage Hill label. Why brilliant? Because the biggest obstacle most consumers face with trying something new is that they don’t want to waste money on something they aren’t sure about. This promotion eliminates that uncertainty.
As many as one in four say they anticipate forgoing restaurants – and restaurant wine – in the future
A Florida consultancy predicts that restaurant spending could fall by as much as one-half by the time the pandemic ends. Even more surprising, says its study: Consumers seem content to cook and eat at home. If true, this has tremendous implications for the wine business.
And if that happens, we could be looking at lower prices but also more winery failures – and especially on the high end, since that’s where much restaurant wine comes from. This might also lead to more winery consolidation, which means less consumer choice. The biggest wineries have the deepest pockets, and will be better able to survive a massive glut.
The results come from Florida-based Acosta, in a study called “COVID-19: Reinventing How America Eats.” It described what seem to be massive shifts in consumer eating habits: 44 percent report eating breakfast at home daily, compared with 33 percent pre-COVID. Similarly, 31 percent are eating lunch at home every day versus 18 percent pre-COVID, and one-third are eating dinner at home daily versus 21 percent pre-COVID. All of those people eating at home, says Acosta, translates into 31 to 50 percent less spending at midscale, casual and fine dining restaurants.
Don’t panic yet
But let’s look at the caveats:
• Acosta didn’t respond to a couple of requests for an interview. The study is based on “online surveys of Acosta’s proprietary shopper community” in early July, as well as industry data and “proprietary information sources.” Proprietary means the company doesn’t discuss how the survey works, which means it’s OK to be skeptical about the results. We know how Nielsen measures sales; we don’t know how Acosta divines its results.
• On the other hand, Acogta’s pessimism about the future of the restaurant business dovetails with most of the gloom and doom prognosticated elsewhere. USA Today reported in early October that 2.3 million restaurant jobs have been lost during the pandemic, while 12 percent of sit-down restaurant chain units that were open before COVID-19 had closed.
• The 40 percent restaurant wine sales number is misleading, since it’s measured in dollar terms. Given that restaurant wines tend to be more expensive, and that restaurant markups inflate that total, the amount of wine sold in restaurants in actual bottles is probably much less than 40 percent of the U.S. total. Hence, the loss of the restaurant market wouldn’t be quite as devastating, and it would also be mitigated by people buing less expensive wine at the supermarket.
• Some of the results in the survey require a second look. For example, “35 percent of consumers said they’ve discovered a new passion for cooking amid the pandemic.” Which is all well and good, but does it actually mean anything? And one-fifth to one-quarter of the respondents say they anticipate eating out less in the future, which is understandable in July but may not mean much next spring.
So, yes, more not good news for the restaurant and wine businesses. But maybe, given all the bad news we’ve had, not quite as bad as it seems.
This week’s wine news: Are fast food wine pairings the next big thing? Plus, 7th century BC wine, and more confusing numbers about pandemic wine sales.
• Bring on the Whoppers: Who knew the Wine Curmudgeon would be able to discuss the fast food of his youth two weeks in a row? But Christine Struble, writing for the Foodsided blog, asks: “Are fast food wine pairings becoming the newest food trend?” Perhaps, but the concept isn’t new. I received a release in the blog’s early days from a brand called Fat Bastard touting fast food wine pairings; I’ve written about it here several times; and I taught them to wine classes at the late Cordon Bleu and El Centro. Because if you’re trying to reach people whose diet consists of fast food, what better way to teach pairings? Or, as I asked one group of Cordon Bleu students, “What do we pair with a Burger King cheese Whopper?” The consensus was supermarket-style merlot; plus, they got to hear about working the broiler at the Burger King on Skokie Road in Highland Park, Ill., resplendent in my polyester uniform and paper hat.
• 2,700 years ago: Archeologists have discovered the first Iron Age wine press in present-day Lebanon, reinforcing the idea that wine played a key role in the ancient world. They found the press, used to extract juice from grapes, during excavations at the Phoenician site of Tell el-Burak near the present day city of Sidon (an important trading hub in wine and other goods in the Mediterranean region). Grapes were grown in and around Tell el-Burak, which was inhabited from the late eighth to the middle of the fourth century BC. Researchers have also found amphorae, ancient wine bottles, in the area. But no one was quite sure how the grapes were turned into wine until this discovery.
• More conflicting statistics? Blake Gray, writing on Wine-Searcher.com, finds even more conflict in wine sales during the pandemic. He cites research from California’s Sonoma State University, which found that even though U.S. wine sales overall are up, 57 percent of U.S wineries say their own sales are down. Or, as we have noted here, there’s little sense in trying to make sense of any of the numbers. Ostensibly, “Big wineries are taking more market share at the expense of small wineries,” said the report. You will also be happy to know, according to one analyst at the same seminar, that Americans may have had more disposable income than ever, despite the pandemic. I wonder: What country is he living in?
Photo courtesy of MeTV, using a Creative Commons license
There are many reasons for this, including the fact that lots and lots of wine is sold by lots and lots of independent retailers who aren’t tracked by companies like Nielsen. So why does this matter now? Because, according to one set of numbers, the wine business is in a pandemic-fueled crisis and things are going to get much worse before they get better. Or, if you believe these numbers, the past six months (as well as the past couple of years) are just a bump in the road and worrying about it is for small-minded people.
The reason for the discrepancies? Most agree that wine sales have declined since U.S. restaurants closed in March and April. What they can’t agree on is whether retail sales have made up most of the difference, so that the decline is insignifcant. Further complicating matters, based on yet more statistics, is that some insist sales are up for the year thanks to lots of foofry about the Internet, e-commerce, and wine delivery.
The WC wine business index
But no one has actually been able to figure out where we are seven months into the pandemic. Which is why the blog is unveiling the WC wine business index, where numbers aren’t the be all and end all. Instead, I’ve talked to retailers, producers, and marketers from around the country to see if I can sketch where the wine business is and what it means for consumers. Hence:
• There’s some desperate marketing going on in an attempt to boost sales. One major Texas wine event, forced to cancel, is trying to sell wine via email solicitations. Shudder. And one trade group wants you to buy its wine for the “iconic, uniquely-designed rose bottles that can be used for crafts and ingenious displays. …” Double shudder.
• Producer after producer, mostly smaller but also some larger, has told me that many of the 9,000 or so wineries that make up 90 percent of the U.S. total may be in danger of closing. The pandemic has shuttered their tasting rooms, and since most of them don’t sell much, if any, at retail, they depend on tasting room sales to stay in business.
• How about an Oregon pinot noir with a suggested retail price of $12.50? That means the street price is $10.99 or $11.99, almost unheard for Oregon pinot. In fact, most Oregon pinots that used to cost that little long ago went to $15 and $18. This points to way too much wine being made in Oregon, as well as slowing sales; the wine in question may be close to being sold at cost.
• The pandemic apparently clobbered the keg wine business, which has been a bright spot over the past couple of years. Wineries were putting their wine in kegs, just like beer, to sell to restaurants. But no restaurants means no need for keg wine. So keg producers are spending time and money to repackage their wines, often in boxes.
• Big Wine, save for a few glitches, seems to be doing better than most. One reason: It sells less wine, proportionally, to restaurants and more to supermarkets, which fits the pandemic consumer profile. In addition, consumers seem to be focusing on brands they know, and that fits the Big Wine product line.
And what about consumers?
Your guess is as good as mine. Most retailers tell me we’re trading down, and that Big Wine supermarket sales are OK speaks to that. And I’ve seen signs that some high-end wines, the $100 and up kind, are clawing for new business in a way they’ve never clawed before. That implies there is some trading down, though trading down from $150 to $75 isn’t exactly the traditional definition.
In this, there is still a lot of money in the hands of aging Baby Boomers, who will continue to buy their overpriced 92-point wine despite what else is going on. And the wine business will be happy to sell it to them to paper over any other problems.
So what’s the overall impression from the WC wine business index? That we’re in a holding pattern, though likely headed down sooner rather than later. Specific parts of the wine business are already suffering, and some are suffering badly, be it smaller producers or independent retailers.
But consolidation among producers and distributors has insulated the biggest companies from the worst of the pandemic. So expect to see two levels of pain over the next year or so: Something akin to an ankle sprain among the biggest companies, compared to a broken leg (or worse) among the smaller. And the consumer will get caught in the middle, which is exactly where the wine business likes us.
Churro, the new member of the Wine Curmudgeon blog, will help the WC extend his cheap wine mantra to younger consumers
Churro, an 11-month-old Chihuahua mix, has joined the blog as an associate editor. He’ll help Wine Curmudgeon Jeff Siegel in his continual quest to convince younger consumers that wine can be cheap and fun.
“Everyone knows that that the wine business doesn’t understand young people,” says Siegel, proprietor of the world-famous Wine Curmudgeon blog. “Now, with a younger voice and palate — as well as a keen sense to help me sniff out new and exciting wines — the blog will appeal even more to young people. Churro and I will be able to show them that wine is a lot more fun than hard seltzer, and not just something for their parents and grandparents.”
Churro, from suburban Dallas, was among the dozen or so applicants for the job, and was easily the most qualified. “He’s really the only one I talked to who thought wine should be fun and not be about winespeak or scores or initials after your name,” says Siegel.
“I can’t tell you what an honor it will be to work with someone who cares about wine as much as the Wine Curmudgeon does,” says Churro. “He wants to help people enjoy wine as much as he enjoys it, and that’s something that’s rare to find in the wine business these days. Mostly they want to sell you overpriced wine and don’t care about much else.”
No word yet on whether Churro will wear a hat. He did say he was excited to use an Asus eee netbook running Lubuntu to write and edit for the blog, since he says Linux as the future of the computing world.
Debbie Zachareas: Trading down is going on, even for people who buy $100 wine
Debbie Zachareas is a long-time San Francisco-area wine retailer; currently she helps oversee three wine stores and wine bars in the Bay Area. And of all the surprises during the coronavirus pandemic, among the most surprising has been that even people who buy $100 wine have been trading down. A $15 to $30 bottle, she says, seems to be what they’re looking for these days, what with staying at home and social distancing.
We talked about trading down, as well as what wines are popular — lighter whites instead of the heavier reds that had been in vogue, as well as imported wines instead of California wines. One exception: The incredible wines from California’s Jolie-Laide, a small but, unfortunately, hard-to-find producer.
Plus, customer service has improved during the duration — an odd, if unintended side effect during the duration that I’ve heard about from other retailers.
It hasn’t been easy for wine producers, marketers, and PR types during the pandemic
Yes, we’re buying more wine over the Internet than ever before, but that doesn’t mean the wine business is healthy. Ask anyone at the biggest distributors who was laid off in the past eight weeks. So how else is the wine business cutting costs and drumming up business during the duration?
This is what I have seen:
• Using Styrofoam inserts for packing wine samples. I really haven’t seen any in a couple of years, given Styrofoam’s environmental evil. Most shippers have switched to cardboard liners or plastic bubble bags. But during the duration, Styrofoam appeared again, since it was probably sitting in a back room and has already been paid for.
• Samples from producers who wouldn’t normally speak to me, let alone send me wine. I’m not the only who has had this happen; several of my colleagues have reported the same thing. Said one: “What am I going to do, writing about heavy Napa cabernet, in the middle of summer?”
• Old samples, as in the same samples I got last year. I’ve never had this happen before, but one producer sent me the same rose they sent in 2019. This speaks to how much wine is sitting in warehouses, unsold and unloved.
• Emails every two or three months offering me the same wines they just sent me. This has happened two or three times this year, where a PR firm offered me wine at the end of last year and the same wine a couple of months later. And then a couple of months later. Once again, this speaks to how much wine is sitting in warehouses, unsold and unloved.
• Virtual tastings, where I have to try and find the wine to taste with the producer. I don’t mind buying the wine, since I do so much of that anyway. But what’s the point of inviting me to a virtual tasting when I can’t find the wine to taste?
• Pleas for money. I’ve never seen this. Ever. But I one email I got from a wine trade association asked to help them find money to expand their marketing efforts during the duration. We’ll ignore the fact that my job isn’t to help them sell wine, but doesn’t asking for money from complete strangers smack of quiet desperation (to paraphrase Henry David Thoreau)?