Tag Archives: wine prices

Winebits 621: 1 Wine Dude rant, grape glut, Robert Parker

1 wine dude

Joe Roberts: “Some of us have been sounding warnings for almost an entire decade.”

This week’s wine news: 1 Wine Dude’s Joe Roberts takes on premiumization, plus the grape glut worsens and the Wine Advocate is sold

• “Impending hangover?” Joe Roberts, who writes the 1 Dude Blog, doesn’t mince words: “It seems that, in focusing on selling higher and higher priced wine to a dwindling set of older consumers, the U.S. wine business has painted [itself] into a corner. …” I asked Joe about the piece, which rips the wine business as few others have, and he pointed out he has been warning the wine business about its follies for as long as I have. Maybe we can beat this premiumization thing after all.

• “A steep decline?” California’s grape glut continues to get, well, gluttier. The Napa Valley Register, the industry’s hometown newspaper, reports that “2019 has been a year where it’s tough to sell grapes and bulk wine.” In fact, even Napa Valley cabernet sauvignon – the epicenter of premiumization – has plummeted in price. Quality cabernet, says one broker, has been selling for one-quarter to one-third the price of past years. This almost certainly points to lower wine California wine prices – if not in the next six to eight months, then by the end of next year.

So much for that strategy: In 2012, Robert Parker sold the Wine Advocate to a group of Singapore inventors. The goal, the company said at the time, was to expand the reach of perhaps the most influential magazine in the history of wine to China. So the news that France’s Michelin Guide has bought the 60 percent that it didn’t buy in 2017 probably speaks to the end of the strategy. The story in the link is mostly a puff piece that really doesn’t explain what’s going on, but there’s a sense that Michelin’s need to expand its food and wine review business trumped whatever plans an independent Advocate had or could afford.

Winebits 616: Direct to consumer, wine as a luxury, and the wine glass chair

Direct to consumerThis week’s wine news: Texas goes after direct to consumer wine shipping, plus has wine become a luxury and the wine glass chair

Not so fast: The Texas Alcoholic Beverage Commission is cracking down on shipments to Texas from out of state wineries. The state agency will apparently review all of the roughly 1,600 license holders permitted to ship wine to Texas customers. And that will include a request for a voluminous amount of paperwork, including licenses, label approvals, and customer invoices, reports the ShipCompliant consultancy. Why does what Texas does matter to the rest of the country? Because the TABC often sets the example for alcohol cops in the rest of the U.S., and if they’re gong to this much trouble, other states may see the need to do the same thing. And if Texas is cracking down, the next question is why?

Hard to believe: One of the wine critics who helped create the high-end wine world is asking: “Have you noticed how expensive wine is getting?” Yes, actually. But that Jancis Robinson, perhaps the most important European wine critic, is saying so complements the Wine Curmudgeon’s usual rants. That’s because her analysis is spot on – slowing demand yet rising prices. “Not so long ago, it seemed that prices were relatively modest initially, until reputations and/or high scores were won. But now, from where I sit, more and more wine producers dive in at the deep end, asking really quite ambitious prices from the get go.”

Just for sitting: A Spanish interior and product designer has created a chair based on a wine glass – “The Merlot.” In one respect it doesn’t look all that different from what those of us of a certain age know as a Felix Unger chair. But the designer, Marta Del Valle, acknowledges they “aren’t ideal for tedious and work-oriented actions such as studying, working or consuming long meals. But for all you fun-loving design enthusiasts, and not to mention wine lovers out there, such a piece would only liven up any space it is placed in.”

Photo from Yanko Design, using a Creative Commons license

Wine prices 2019 update: Are prices coming down despite premiumization?

wine prices 2019Way too many grapes and continuing flat demand may lead to lower wine prices 2019

At the end of the summer, I was talking to an official for one of the big grape grower trade groups. I asked what he thought wine prices would do through the end of the year, as well as into 2020.

“Wine prices are coming down,” he said. How can that be, I asked. Because, of course, premiumization — its reason for being that wine prices are never going down again.

He laughed. “That may be,” he said. “But when you have too many grapes, which we do, and flat demand, which we do, wine prices come down. There’s nothing premiumization can do about it.”

The trade group official was not alone in his take on wine prices 2019. Whenever I interview a retailer or producer, I always ask about business. And their responses over the past nine months have not been nearly as optimistic as the last couple of years – and certainly not as optimistic as the official wine business position: “Ever more wine sold at ever high prices!”

The consensus: Business may not be bad yet, but it’s certainly slowing. And, no, this isn’t a highly scientific survey process, and yes, it’s overwhelmingly anecdotal. But, like the Wine Curmudgeon Wine Sample Index, it rarely steers me wrong. Because other signs point to the same thing:

Reports one trade website: California “supply levels remain higher than ideal and therefore the market remains favourable to buyers, with wineries quoting the lowest bulk wine prices in 5 years.” In other words, lots of grapes in the supply chain, and not too many buyers, so lower grape prices.

And that’s because the 2018 harvest was record-breaking, and the 2019 harvest may be equally as gigantic.

• And we all know about flat demand. In 2018, about one-fifth of regular U.S. wine drinkers were older than 65, compared to 16 percent in 2015. But the youngest regular wine consumers, ages 21-24, are decreasing, dropping 13 percent from 2015.

• Canceled grape contracts. Large producers are refusing to buy grapes they agreed to buy, ostensibly because of smoke damage from the 2018 wine country wildfires. But there’s a suspicion that the wildfires had nothing to do with the cancellations; rather, it’s because the producers already have too many grapes and don’t need any more.

• Wholesale alcohol inventories, measured in dollars, are at an all-time high, according to the U.S. Census Bureau. This could be nothing more than a side effect of premiumization – the same amount of wine in warehouses, but since it costs more, its value is setting records. Or it could mean there is a lot of wine stacking up because no one wants to buy it.

Last week’s tariff news should only make things worse, since it will raise prices for many European wines, while most cheaper French and Spanish wines could disappear from U.S. shelves. Which will further cut demand and increase the overall supply.

If, in fact, wine prices are coming down, will it happen in time for the holidays? Probably not, though I’m willing to bet we could find terrific deals as producers, distributors, and wholesalers try to get rid of select wines they have too much of.

The real selloff may come at the beginning of next year, and especially if the holiday season is as slow as it looks like it will be. And then, finally, we could be able to see the beginning of the end of premiumization.

More abut wine prices 2019:
Wine prices 2019
2019 SVB wine report
The biggest factor in California wine prices

Photo: “Wine section of a supermarket” by piropiro3 is licensed under CC BY 2.0 

Higher wine prices, retailer margins, and premiumization

wine pricesWine price data may show that retailers are absorbing some of the higher prices that come with premiumization

The theory behind premiumization is that wine has become more expensive – not necessarily because wine prices have increased, but because we’re buying more expensive wine. Yes, it’s a fine distinction, but it’s one that the experts insist on.

And there may be some evidence to back that up.

What I’ve found, with expert guidance from Tarek Abdallah, PhD, an assistant professor of operations management at Northwestern University’s Kellogg School of Management in Evanston, Ill., is that retailers haven’t been raising prices as much as wholesalers have. In fact, says Abdallah, the numbers show that retailers have been getting squeezed since the end of the recession.

Since 2009, wholesalers have raised the prices they charge retailers by an average of 2.25 percent a year. But retailers have only increased the prices they charge consumers by three-quarters of that amount, about 1.84 percent annually. In other words, retailers are absorbing some of the price increases.

Abdallah points to two sets of data compiled by the federal government to demonstrate this: First, the consumer price index for alcoholic beverages, a derivative of the better known overall consumer price index, the standard measure of U.S. inflation. Second, the wholesaler producer price index for alcoholic beverages, which measures what the second tier charges for its products.

What’s the catch?

The caveat here: Neither index breaks out wine; rather, each tracks combined sales of beer, spirits, and wine. So we can’t be certain that wine prices by themselves are acting this way. But, says Abdallah, the data is broad enough and consistent enough so that we can be reasonably certain.

Which brings us back to the idea that wine price increases aren’t the most important part of premiumization. How can they be if retailers are working to minimize those increases?

This plays into the sense that producers, rather than raising prices for existing products, are bringing new, more expensive products to market. They want us to buy their new $15 wine instead of the old $10 wine, marketing the new wine as better than the old wine because it costs more – even if it isn’t necessarily better.

And retailers seem to be hedging their bets and not charging the full $15 for the new wine — and maybe for just that reason.

More about premiumization:
Premiumization be damned: $139.36 for 14 ½ bottles of cheap wine
Wine prices, razor blades, and premiumization
“Reasonably priced at $40:” Wine premiumization is out of control

Winebits 614: Alcohol consumption, “bargain” Bordeaux, overpriced beer

alcohol consumptionThis week’s wine news: The Russians cut alcohol consumption by 40 percent, while we find that affordable red Bordeaux costs $20 and a stadium beer vendor got caught overcharging even more than restaurants do

Impressive decline: The neo-Prohibitionists must be rejoicing at the news: “Russian alcohol consumption decreased by 43 percent from 2003 to 2016, a World Health Organization report says.” The BBC report says the decline is credited to advertising restrictions, increased taxes on alcohol, and a ban on alcohol sales between certain hours – all of which have been proposed in one form or another by groups like the Centers for Disease Control to cut U.S. wine, beer, and spirits consumption. The catch? Russia has traditionally been one of the heaviest drinking countries in the world, and the drop in consumption more or less caught Russia up to the rest of the world. For example, the average life expectancy for Russian men rose to all-time high at 68. But it’s 70 for men in the U.S, despite a recent decline, and 79 for men in western Europe, where drinking is common.

Such a deal: Charles Passy, writing in Market Watch, says we can still find affordable red Bordeaux, and he defines affordable as almost $20 a bottle. This is where the Wine Curmudgeon reminds the Winestream Media that $20 a bottle is more than twice the average price of wine sold in the U.S. and that most of us will never spend $20 for a bottle of wine. Or that much French wine that isn’t rose has been overpriced for years. But, given the current climate, if I do that, I’ll probably be criticized as a so-called consumer wine champion full of faux outrage.

Expensive beer: Overpriced booze is nothing new on the blog, as the last item attests. But a Miami beer vendor did us one better. Says the New York Post: “A beer vendor … was arrested after charging a fan $724 for two beers on a personal credit card reader.” How did the vendor get caught? The fan’s credit card company alerted him to the attempted theft on his phone – saved by the same technology that made the overcharge possible. And no, the Wine Curmudgeon won’t make a joke about the winless Dolphins.

Premiumization be damned: $139.36 for 14 ½ bottles of cheap wine

cheap wine

Look at all those bargains at Jimmy’s just waiting for us to buy.

It’s still possible to buy quality cheap wine for $10 a bottle

So what if the cheap wine news these days is about failure? The Wine Curmudgeon, undaunted by the obstacles of premiumization, perseveres. The result? 14 ½ bottles of quality cheap wine for less than $10 a bottle.

How is this possible? I followed the blog’s cheap wine checklist. It’s even more valuable today, when $15 plonk is passed off as inexpensive. So look for wine from less pricey parts of the world, wine made with less common grapes, and shop at an independent retailer who cares about long term success and not short term markups.

The retailer was Jimmy’s, Dallas’ top-notch Italian grocer – so the wines are all Italian. Here are the highlights of what I bought for less than $140, which includes a case discount but doesn’t include sales tax.

• A couple of bottles of the Falesco Est Est Est, $10 each. This white blend used to be $7 or $8, but it’s still a value at $10.

• A 350 ml can of the Tiamo rose for $5 – hence, the half bottle in the headline. There wouldn’t be an onus about canned wine if all canned wine was this well done, . Highly recommended.

• Banfi’s Centine red Tuscan blend, $10. The Centines (there is also a white and rose) are some of the best values in the world. This vintage, the 2017, was a little softer than I like, but still well worth $10.

Principi di Butera’s Sicilian nero d’avola, $10. This was the 2016, but it was still dark and plummy and earthy, the way Sicilian nero should be. Highly recommended.

• A couple of roses – a corvina blend from Recchia, $8, and the Bertani Bertarose, a $15 wine marked down to $8. Because who is going to buy a $15 Italian rose made with molinara and merlot? They were in similar in style – fresh and clean, with varying degrees of cherry fruit.

More about buying cheap wine:
Cheap wine checklist: $82.67 for a case of wine
Once more: A case of quality wine for less than $10 a bottle
Nine bottles of wine for $96.91

Wine prices, razor blades, and premiumization

razor blads

“Dude, shaving is so old school.”

“Lower shaving frequency” is a fancy way of saying razor blades cost too much, which means men don’t shave as often

More men are apparently growing beards, costing one of the biggest companies in the world $8 billion this year. The reason? “Lower shaving frequency,” according to the financial analysts. I prefer the reason given by one of the Millennials quoted in the story in the link: Razor blades cost too much money.

In other words, men aren’t shaving as much; they’re shaving better. Sound familiar?

In this, the wine and razor businesses are eerily similar. A handful of big companies control each category, which means oligopoly pricing. A razor and two or three blades can cost more than $20, and there’s no way the actual cost of a little metal and some plastic is anywhere near that.

And razor-speak can be as indecipherable as wine-speak: “Gillette Fusion ProGlide Razor Handle with FlexBall Technology,” for example. Can anyone who doesn’t work for Gillette’s ad agency explain what that means?

The high cost of shaving

Obviously, there’s more going on here than the high cost of shaving. Most importantly, the culture has changed; the days of coats and ties and offices, where men had to shave every day, are something for TV shows like “Mad Men.” My beard dates to the late 1980s, and even then they weren’t common. And we certainly didn’t grow them to be hipsters, a common occurrence these days.

But you can’t ignore the cost of razors and blades. Says a Millennial in the MarketWatch story: “I don’t love the $5 price for a replacement blade, since it equates to a yearly expense of more than $200 — an amount equal to a good dinner at a decent restaurant, even perhaps with a bottle of wine. And trust me: I’d much rather be dining in style than shaving.”

In all, the men’s shaving products market has shrunk by more than 11 percent in the past five years. This dovetails with a recent Nielsen survey, comparing the drinking habits of Millennials, Gen Xers, and Baby Boomers.

Overall, a little more than two out of five Millennials don’t drink for health reasons and almost one-third don’t drink because it’s too expensive. Drill down, and Nielsen finds that the youngest group is 11 percent more likely to not drink because it costs too much, compared to their parents and grandparents.

High wine prices, decreased consumption. High razor blade prices, decreased use. Does anyone else see a pattern here?