Tag Archives: wine business

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

Wine Curmudgeon Wine Sample Index: Heavy weather ahead for the wine business?

wine sample indexPremiumization’s role in the wine slowdown

It’s not scientific, but the Wine Curmudgeon Wine Sample Index indicates that the wine slowdown is here

The wine slowdown, much written about and much discussed, has officially arrived. How do I know this? The Wine Curmudgeon Wine Sample Index.

The wine sample index is my highly anecdotal and decidedly un-mathematical system for gauging the health of the wine business. When business is good, and no one needs a cranky ex-newspaperman to review their wines, I get fewer samples. When business isn’t good, then I get more samples – including bottles from high-end producers who usually dismiss me as not worth their time.

And this spring and early summer, I have received more samples than I’ve gotten since the recession, maybe three or four times the usual amount.

As noted, this is highly anecdotal and decidedly un-mathematical, and I’m not sure the blog’s official statistician would approve. But the pattern has been there since the blog started in 2007. During the recession, I got more wine than I could drink, including $100 bottles. But the samples dried up in the couple of years after the recession ended, when wine sales recovered and premiumization took hold. I don’t write about the kind of wine that has dominated the market since then, so why send me something to review?

But now, apparently, they need me. I’m getting samples from producers who haven’t contacted me in years, and they’re sending wines that cost $25 and more.  Just the other day, in fact, an email me offered a case of wine, only one of which cost less than $24 and five of which cost more than $30. Hasn’t the marketer ever read the blog?

Also intriguing

More samples are coming from people who want me to write about their wines in the hope that my review will generate retailer interest as opposed to sales. They want to use a good review to place the wines in more stores in more parts of the country. That also happens more often when wines sales are slow.

In other words, any port in a storm, and this storm is beginning to look particularly intense. Know that samples are an expensive form of marketing – not just the cost of the bottles, but the cost of shipping, which can run as high as $100 a package. But wine sales are so flat and so many people are so worried that spending all that money to send me samples looks like a better investment than letting the bottles languish on a warehouse shelf.

Will this storm turn into a category 5, Hurricane Wine Recession? The sample index can’t tell me that. One sign of optimism: I still don’t get asked to attend trade tastings, where producers and distributors show off their wines for writers, retailers, and the like. Those invitations ended after the recession, too. So if trade tasting emails start to arrive, then maybe it is time to batten down the hatches.

Winebits 600: The Wine Curmudgeon has ulterior motives and is trying to destroy the wine business edition

Wine Curmudgeon

“Dude, you’re so not good for the wine business. Why are you trying to destroy it?”

This week’s wine news: The cyber-ether is ablaze in criticism of those of us, including the Wine Curmudgeon, who want people to enjoy drinking wine they can afford to buy. Because, of course, we’re up to no good.

July 3 update: Thank you for the kind words in the comments and your emails. Frankly, I was surprised, though I shouldn’t have been. The blog’s readers have always supported what I do and are the reason I keep doing it even when too many in the wine business wants me to sign off on selling $12 wine for $25.

Take that, Curmudgeon: Dwight Furrow, writing on the Food and Wine Aesthetics website, wants to know where people like me get off offering wine advice. After all, all we want to do is destroy wine and make money in the process. He links to the Jamie Goode post I wrote about earlier this year, and agrees with Goode that people like me are part of some vast conspiracy that has it in for “wine experts.” We’ll ignore for a moment that I am incapable of evil mustache twirling and that the only conspiracy I believe in is that Microsoft tried to destroy Linux. What Furrow misses, as Goode did, is that wine criticism is seriously flawed, and that responsible, legitimate critics who aren’t so-called cheap wine slime like me (Eric Asimov, for one) think so. So let’s figure out a way to fix the problem instead of pronouncing judgment on everyone else.

And this, too: I’ve been writing about wine and the three-tier system for more than 20 years, but I’ve never seen anything like a recent post in something called Alcohol Law Review. Apparently, those of us who oppose the three-tier system are lying scum who want to make money off the deaths of others. As near as I can tell, if we change the three-tier system in any way, we’ll end up with tourists dying after drinking tainted booze, as happened recently in the Dominican Republic. The enemy here is the same one as in Furrow’s post: “Various economic interests” who want to overthrow the system so they can get fat and rich. Who knew? I thought I just wanted to buy cheap wine more easily.

And don’t forget this one, either: Jamie Goode is back at it, reminding those of us who like cheap that we’re not only wrecking the environment, but that our greed ruins the wine business: “The race to the bottom in terms of price points sucks life out of the wine category. It also sucks out all the profit.” I would argue that the £5 wines he’s talking about are Barefoot and their ilk in the U.S., and the last time I checked, Barefoot owner E&J Gallo was one of the richest and most profitable companies in wine. But what do I know? I’m trying to ruin the wine business and feather my already fat and corrupt nest.

Winebits 598: RNDC distributor merger, local wine, red vs. white

RNDCThis week’s wine news: The country’s second biggest distributor, RNDC, is going to merge with the fourth biggest, plus Italians stick up for local wine and red wine drinkers are much cooler than white wine drinkers

RNDC tries again: RNDC, the country’s second biggest distributor, will merge with No. 4 Young’s Market. This comes in the wake of RNDC’s failed merger with No. 3 Breakthru Beverage in the spring, which the federal government said would violate anti-trust law. The story in this link calls the merger “a distribution joint venture,” but read it all the way through and it says Young’s will become a division of RNDC. Which sounds like a merger, but I’m not the one RNDC executives have to convince. That would be the Justice Department. Regular visitors here know how I feel about this stuff; it’s a great deal for the distributors, allowing them to cut costs and increase margins, and not so good for the wine drinker and too many wineries that aren’t Big Wine. But it’s all part of the thrill and excitement of the three-tier system.

Local wine means local wine: Farm house bed and breakfasts in the Italian region of Lombardy must serve only local wine to their guests, reports the The Local, an Italian news site. “Under a new amendment to the regional law. … the more than 1,600 agriturismi– farms offering tourist accommodation in Lombardy will have to prioritize local specialties. They will be limited to getting 20 percent of their products from outside the region, and none of their fish or wine (though wines from vineyards directly adjoining Lombard soil are considered acceptable).” The story doesn’t explain why the law was passed – no doubt it was caused by a particularly Italian dispute.

Red vs. white: Red wine drinkers are much cooler than white wine drinkers, according to a recent poll. “Nearly half of red-wine drinkers considered themselves ‘wine aficionados’ compared to 31 percent of white-wine drinkers. And red-wine drinkers also showed they knew slightly more about wine in a series of follow-up questions compared to white-wine lovers.”And who took this poll? None other than Coravin, the $250 wine opener whose target audience, not surprisingly, is expensive red wine drinkers. This is yet another example of someone paying for a study to get certain results, something I have written about many times before. And, to her credit, the woman who wrote the story in this link mostly did just that.

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