Tag Archives: wine prices

Ask the WC 23: Wine prices, rose, South African wine

wine pricesThis edition of Ask the WC:  Has the wine tariff pushed up wine prices? Plus, why isn’t rose sweet and whether South African wine is worth buying

Because the customers always have questions, and the Wine Curmudgeon has answers in this irregular feature. You can Ask the Wine Curmudgeon a wine-related question by clicking here.

Greetings, WC:
Have wine prices gone up because of the tariff? I can’t tell, but I buy the same wine over and over, so I’m not a good person to ask.
Watching my pennies

Dear Pennies:
The biggest surprise with the tariff — to me, anyway — has been retailer reluctance to raise prices, and especially for the wines we write about on the blog. There have been exceptions, of course; I was in the country’s premier “natural food” grocer the other day, and it looked like every French and Spanish wine had gone up exactly 25 percent, the amount of the tariff. But many of the other retailers I have visited or talked to are making an honest effort to hold the line. I’m especially seeing many retailers bring in similarly-priced labels to replace the tariff wines. Which, all things considered, makes me a lot less cranky about the tariff. Still, as one Dallas retailer told me, all bets are off when the new rose vintages arrive in the next month or so.

•

Dear Wine Curmudgeon:
Is rose supposed to be sweet or not? Some taste like white zinfandel, and others don’t. When did this start?
Pinked out

Dear Pinked:
Rose is dry. White zinfandel is sweet. This used to be cut and dried. But in the wine business’ ill-conceived attempt to woo younger consumers, they’re sneaking residual sugar into “dry rose.” Typically, most European pinks are still dry, so you’re safe with French, Spanish and Italian wines. One way to tell: If the dreaded word smooth appears on the back label, I wouldn’t be surprised if the wine was sweet. Rose is supposed to be fruity, not smooth.

•

Hello, Wine Curmudgeon:
Am I starting to see more South African wine in the U.S.? Is it worth buying?
Curious

Dear Curious:
The answer to the first part of your question is yes and no — yes, because sales have increased substantially, and no because sales are starting from such a small base. South African wines, save for a burst of popularity in the late 1990s, have been few and far between in the U.S. But quality has improved markedly since then, and it’s possible to find Rhone-style red blends, whites like chenin blanc and sauvignon blanc, and even dry rose at a fair price.

Photo: “a Bourgogne” by miss_rogue is licensed under CC BY-SA 2.0 

Winebits 633: Supermarket wine prices, liquor stores, wine influencers

supermarket wineThis week’s wine news: Supermarket wine prices vary significantly from state to state, plus a study says liquor stores and high crime are related and the FTC is going after social media influencers

• Supermarket wine prices: A home product review and renovation site says U.S. supermarket wine prices vary significantly by state, with Mississippi and Georgia selling the most expensive bottles. I mention this not because it’s news to anyone who spends any time on the blog, but because it’s always fascinating to see how non-booze sites deal with wine. To its credit, House Method, which did the survey, doesn’t draw any conclusions about why there is such disparity. (Or explain how it bought wine in supermarkets in states without supermarket wine sales.) The results, at the link, are interesting, if nothing else. Who knew red wine was less expensive in Hawaii than in California?

• Less booze, less crime? That’s the approach one study is urging on Baltimore officials as city leaders rewrite its zoning laws, with an eye toward reducing the number of liquor stores and bars in the city. North Carolina researchers used a computer model that took into account homicide rates in Baltimore, as well as previous research that showed one-half of violent crime can be attributed to alcohol access. The result? The study found that cutting the number of alcohol outlets might reduce homicides by as many as 50 a year, as well as generate savings of as much as $60 million annually.

• Watch out, influencers: The Federal Trade Commission, which regulates advertising, will apparently clamp down on all those Instagram and social media influencers. The agency wants to know if consumers understand how influencers work; that is, that they are paid to endorse products and that they must disclose paid endorsements. This will matter in wine, given the increasing role influencers play in pushing products like rose.

Wine trends 2020

wine trends 2020

I wonder: Can I fit White Claw into this gizmo?

Wine trends 2020: The wine business will ride premiumization until it dies, plus more wine-like products, more neo-Prohibitionism, and a tariff that could kill the wine business

Wine prices 2020

• Premiumization will continue until it doesn’t. This approach is scarily similar to what happened to the newspaper business. In the late 1980s, many industry leaders knew that the days of throwing papers from cars at 6 a.m. were numbered. I was even told that in a meeting. But no one did anything about it, because newspapers were still obscenely profitable and the industry had so much money tied up in printing presses. The smart people in the wine business know premiumization is on its last legs, but they don’t have another plan and they’re still making money, so it’s easier not to worry about what’s next.

• More wine-like products – bourbon barrel wine, fruit-flavored wine, and the like. Because, of course, White Claw. The irony is that producers see White Claw-like products as their chance to attract younger wine drinkers, when White Claw’s success is about its cost and low alcohol. Which, of course, has nothing to do with wine. It’s also worth noting that White Claw and its ilk are hurting beer more than wine, and that not just younger people drink it.

• Neo-Prohibitionism becomes an accepted part of American life. In other words, this will be the year when we find out Dry January isn’t just a story in a woman’s magazine. The evidence has been there for a long time, not that anyone in the wine business paid much attention. But when designated drivers, mocktails, and all the rest are as common as smoking and drunk driving were when I was a teenager, then the world has changed significantly. And the wine business better figure that out, sooner rather than later.

• The tariff. Or tariffs, as the case may be, since the threat of a more inclusive 100 percent levy is hanging over our heads. I’ll go into more detail in Monday’s 2020 wine prices post. But know that as bad as the 25 percent tariff will be, the 100 percent tariff could destroy the European wine business and wreak havoc in the U.S. And, as I have noted many times before, spite is not a good enough reason to do either.

• More three-tier excitement. That’s because 2019 saw a couple of significant legal decisions, and 2020 promises even more. My best guess, after talking to attorneys who deal with this stuff, is that there is momentum for change in the way beer, wine, and spirits are sold in the U.S. So there’s a chance that Internet sales could eventually become legal. And there’s also a chance (though much smaller) that some states may eventually make it possible for wines to be sold at retail without a wholesaler. This would vastly increase choice. Having said that, those things won’t happen immediately, and what we could see in 2020 are more legal decisions that continue to chip away at three-tier.

Photo: “Modern wine tasting” by kellinahandbasket is licensed under CC BY 2.0 

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