Tag Archives: wine prices

Winebits 525: Blind pricing, legal weed, wine theft

blindpricingThis week’s wine news: Blind pricing, or why retailers carry expensive wine you can’t buy elsewhere, plus legal weed goes after booze and a rare wine theft

Blind pricing: This blog post by distributor Olivia Schoenwise is aimed at small retailers and how they can compete against their biggest competitors. But it also explains why it’s so difficult to find so much wine, even without the restraints imposed by the three-tier system. The idea, writes Schoenwise, is for small retailers to find wine to stock so they have “a competitive advantage against big retailers; and many are turning to blind price wines” – wine that we can’t price shop on phones or on Winesearcher.com. That’s because these wines are a form of private label. And since they’re only carried by one retailer in one area, the retailer can charge more for it, unburdened by competition. Writes Schoenwise: “[B]lind price brands are where the big profit margins are made.”

Wine is evil: That’s the theme of a campaign from legal weed, targeting alcohol, says the New York Post. “’ ‘Marijuana,’ blares a billboard in Arizona. ‘Less Toxic! Less Addictive! Less Scary Than Alcohol!’ ” The Wine Curmudgeon has been warning the wine business about this for a couple of years, but with little success. Maybe, now that legal weed is hurting alcohol sales in some legal weed states, says the story, wine will notice. Otherwise, reports the Post, “Hello Marijuana, Goodbye Hangover.”

Good help is so hard to find: An employee stole $1 million of wine from New York investment tycoon David Solomon, including some of the rarest bottles in the world. The employee was supposed to collect wine shipments at Solomon’s Manhattan apartment and then take them to the banker’s wine cellar in East Hampton. But the wines apparently never got to the Hamptons; instead, the employee sold them to an Internet retailer in North Carolina.

Wine prices 2018

Wine prices 2018: Price creep, price confusion, and crappy wine that costs more money

Wine prices 2018 will be even more confusing than wine prices were in 2017, and that was confusing enough. This year, expect producers and retailers to use even more sleight of hand to get us to pay more money for the same quality wine — or even wines of less quality. My look at wine trends in 2018 is here.

There are four reasons for this:

1. The end of standard pricing. Traditionally, a wine cost about the same at every retailer in the country, whether it was $10, $20, or $50. No more. Today, as long-time reader Rex Warburton and I discussed, “the price spread is incredible. This is not a big problem for regular wine drinkers, but a nightmare for beginners or occasional buyers.” Which is the point. Expect to see a wine at $11 cost as much as $18 elsewhere (which was the case with the Ferrari Carano fume blanc I reviewed in the fall).

The reasons revolve around consolidation in retailing and distribution, and which are too complicated to explain here. It’s enough to know that the biggest retailers get incredibly better pricing than a neighborhood independent or even a small chain, so they can afford to sell wine for much less money. The catch for consumers is that the big retailer’s pricing is a one-off, and there is no guarantee it will sell the wine again, let alone at the same price.

2. Price creep. Or, when a $10 wine costs $12 for no particular reason. It’s not necessarily a price increase, since the wine can still be found for $10 elsewhere (and most retailers remain reluctant to raise prices). It’s just a retailer testing the market.

3. Price positioning. Look for wine to be made so it will cost a certain amount, probably between $15 and $20, and not because the wine is worth that much. This is not new for expensive wine, but it has started happening in the past couple of years with cheap wine.

The textbook example, which should be studied at every business school in the world, is E&J Gallo’s La Marca Prosecco. It’s probably $10 or $11 worth of wine, but its average retail price is $14 – and consumers are happy to pay it, turning La Marca into the top-selling Prosecco in the world.

I saw the same thing recently with a cabernet sauvignon from California’s Lodi region, listed at $17. This is twice what it was worth (and about six or seven times what the grapes cost), but the producer figured the consumer would bite. Because wine has to cost more than $15 to be good, doesn’t it?

4. Price confusion. This is more of what grocery stores and the World Market chain have been doing for years – three, four, or even five prices for the same bottle of wine. This is called fake front end pricing; the producer suggests a retail price that is artificially high so that the retailer has lots of room to “cut” it. My Kroger, for example, listed the Layer Cake rose for $21, and then put it on “sale” for $10, when $10 should have been the price all along. This practice will expand to other retailers, and it will be almost impossible to believe any wine price listed in a supermarket or World Market.

Finally, as a corollary to all this pricing foolishness, availability – already awful – is going to get worse, and it will be more difficult to find interesting wines at a fair price. First, the biggest retailers prefer to buy from Big Wine, since it’s more cost effective, and most quality cheap wine comes from smaller companies that don’t sell to grocery stores. And grocery stores sell more than half of the wine in the U.S.

Second, the biggest retailers can demand exclusives for national brands (though that’s technically illegal), further reducing availability. Finally, private label wine – those wines only sold at one retailer – will become even more common, and they will take up shelf space that might have gone to more interesting wine.

In the end, all of this will amount to price increases without there being any actual price increases. Aren’t we lucky?

Illustration courtesy of Fix.com, using a Creative Commons license

Winecast 31: Rob McMillan, Silicon Valley Bank

Rob McMillanSometime in the next several years, the pricing sweet spot for wine will be $15 to $25 a bottle, compared to $12 to $15 today.

Rob McMillan, the executive vice president and founder of Silicon Valley Bank in Napa, may know more about wine pricing — what will happen and why — than anyone else in the world. And he doesn’t see that cheap wine has much of a future.

Sometime in the next several years, the pricing sweet spot for wine will be $15 to $25 a bottle; today, it’s about $12 to $15 a bottle. In this, McMillan sees the increase as the next step in premiumization, the process he has identified as the gradual increase in the cost that wine drinkers are willing to pay for what they consider a quality bottle.

We talked about premiumization, as well as how difficult it is forecast wine prices given the lack of quality information — what McMillan calls the same sort of self-interest that the tobacco companies displayed when they were discussing the relationship between cigarettes and cancer.

Also, he said, don’t expect to see wine price increases in 2018. There are enough grapes in the world so that supply will be steady, while demand looks to be about what it has always been. In this, it will be easier to start a new brand at a higher price than to raise prices for and existing brand.

Finally, we had an intriguing discussion about Barefoot, the $7 wine that accounts for as much as five percent of U.S. wine sales, and how it fits into premiumization.

Click here to download or stream the podcast, which is about 21 minutes long and takes up 6 1/2 megabytes. The sound quality is good; we recorded it using Google Voice.

Amazon, Whole Foods, and wine prices

amazon whole foodsDon’t expect the Amazon-Whole Foods deal to change wine prices for the better at the upscale grocer

Know one thing first – no matter how much wailing, gnashing of teeth, and rending of garments we’ve seen in the cyber-ether, Amazon’s purchase of Whole Foods will mean almost nothing for wine prices or the wine business.

There are a variety of reasons for this, but the three most important are:

• Amazon bought Whole Foods for reasons that still puzzle people who understand grocery stores. Whole Foods has about 440 stores in the U.S., hardly enough to matter against Walmart’s 4,200 or Kroger’s 2,800. The best guess why the deal happened? Whole Foods’ 400-some warehouses, about four times a many as Amazon has.

• Whole Foods is not a wine retailer; it’s a grocery store that sells wine, and does so at higher markups than most retailers because it’s an expensive grocery store. The days are long gone when I went to Whole Foods to find a deal. This is the store that sells the $5 Rene Barbier for 40 percent more than most Dallas retailers.

• Our old pal three-tier, which restricts how Amazon can sell wine through Whole Foods. Again, the couple of high-profile Amazon wine projects that got so much attention recently weren’t about Amazon selling wine, but about Amazon listing the wine for sale and then sending you to another website to make the purchase.

In fact, my most recent visit to Whole Foods reminded me why the chain was in such trouble before the Amazon sale. It’s still pricey, despite all the cost-cutting publicity; $2 for a container of yogurt is three times the usual grocery store price. And a Gascon white wine I bought elsewhere for $10 was $13. In this, it reminded me of the Neiman Marcus department store chain, whose customers aren’t supposed to care about price, either. And Neiman’s is in trouble, too.

Winebits 506: Cheap beer, Lidl wine, college wine class

cheap beerThis week’s wine news: Cheap beer and wine, but not in the U.S., plus college athletes think they can use a wine class to stay eligible

But cheap if you have the three-tier system: The BBC reports that beer in the most expensive city in Britain costs £4.40 for a pint, or less than US$6. Which is damn cheap, considering what we pay for beer in this country. And which made me wonder: Why do I pay the same price for a 12-ounce bottle of mass-produced Big Beer at many Mexican restaurants in Dallas? Note, too, that 12 ounces is three-quarters of a pint. The only reason I can think of (and it isn’t real estate, since London is one of the most expensive cities in the world)? The British don’t have the three-tier system adding its percentage to the price of a cold one. And yes, the Wine Curmudgeon understands that items like this on the blog are the reason why I don’t get invited to trade tastings any more.

Running out of wine: I can only hope this happens in the U.S. after Lidl, the discount grocer, has stores near me. British shoppers who didn’t show up when the stores opened didn’t get a chance to buy six bottles of Prosecco for £20, about US$4 a bottle. The best-selling Prosecco in the U.S., E&J Gallo’s La Marca, costs about $12. The English Lidl stores ran out of the Italian sparkling wine, sparking an outrage that careened throughout the English cyber-ether. As the BBC put it, “It seems that the country has now effectively divided into two camps — those who arrived at Lidl early enough to purchase cheap Prosecco, and everyone else.”

Not in my class, you don’t: The New York Times, discussing college football’s academic and criminal morass, reports that football players enrolled in a wine class at Florida State University may not have done work required to pass, and cheated as well. And when the instructor told school officials that she felt pressured to give special breaks to the athletes, she was ignored. This item, which combines two of the Wine Curmudugeon’s careers, shows how sad sports has become and reminds me why I got out of sportswriting. And no student in any of my El Centro wine classes would get away with that crap. The instructor has my sympathy and condolences.

Winebits 502: Wine prices edition

Wine pricesThis week’s wine news: Lidl unleashes its cheap wine collection, plus Total Wine wins court victory and cheaper orchestra wine

Score one for Lidl: Lidl’s $6 Fleur Saint-Antoine red Bordeaux, a blend of merlot and cabernet franc, is a winner, writes Bernard Showman on the South Carolina Wine Joe blog. Showman lives in South Carolina, where the discount grocer that has promised great cheap wine, has opened its first stores. I’m impressed; I know I haven’t seen anything like that from France at my local Aldi, which is Lidl’s arch-rival. That may explain why two distributors were in my Aldi the other day, trying to figure out how to get better quality wine on the shelf. And, yes, I was eavesdropping.

Score one for Total Wine: The almost national liquor store chain has won a court victory in Massachusetts which will allow it to sell wine, spirits, and beer at deep discounts. A state court judge said that a Massachusetts law didn’t forbid Total from discounting if it met certain criteria. The ruling is fairly dense, involving how to determine the actual wholesale price of the products that Total sells. The result, though, is another victory in the battle to eliminate minimum pricing in Massachusetts, where state law regulates what retailers can charge.

Score one for the San Diego Symphony: Regular visitor warbu forwards the wine list from the San Diego Symphony’s summer concert series, and it’s amazing – quality wine at fair prices. A glass of more than drinkable French rose for $9? Or a bottle of decent Spanish albarino for $29? This raises the question of how an orchestra can do what so many restaurants can’t or won’t. Case in point: I ate a high-end Dallas chain last week, where a bottle of vinho verde was listed at $30, or a six to one markup. Can’t get much more greedy than that, can you?

Winebits 495: Imported wine prices, Justin Beiber wine, Big Wine brands

imported wine pricesThis week’s wine news: Why a strong dollar doesn’t cut imported wine prices as much as it should, plus a rant about too commercial wine and Big Wine’s fastest growing labels

Not so cheap: The strong dollar has finally cut the price of imported wine, but it took surprisingly long and import prices don’t seem to be as falling the way they should be. A working paper in the Journal of Wine Economics may explain why: Laura Werner of Germany’s FernUniversitat writes that as the dollar gets stronger, other pricing pressures and how the supply chain works may slow price cuts. For example, the price of wine already in the U.S. or on its way here won’t fall, so that means a delay in cheaper wine until it’s sold at the higher price. The paper is incredibly complicated for those of us who don’t speak math, but my interpreter, Suneal Chaudhary, explained it to me. In the end, he said, a 25 percent drop in the euro may only result in a 10 to 15 percent drop in retail prices here.

Take that, crappy wine: A top Italian wine type has lashed out at wines that are too commercial, saying that “Winemakers need to gain more confidence and feel more comfortable in doing their own thing and making authentic wines that are true to themselves. Oherwise, you end up with the wine equivalent of Britney Spears and Justin Bieber – commercially focused wines made to suit the market.” That’s not the WC ranting, but Italian winemaker and consultant Alberto Antonini speaking to thedrinksbusiness magazine website. “I don’t like to make wine for the market,” he told the magazine. “I like to go out and make wine that is true to a place and then find a market for it.” Antonini was also scathing about winemakers who make what he called boring and ineffective Bordeaux knockoffs, because they don’t know what else to do.

The big get bigger: We’ve written many times on the blog about how much of the market is controlled by Big Wine, and this chart from the Wine Industry Insight website reminds us of that once again. It lists the 10 fastest growing brands in the U.S. from 2015 to 2016 – five of which are owned by Big Wine, including the top four. How about 1,600 percent growth for Constellation’s Ravage, which seems to be something the WC would write long diatribes about, and 400 percent for E&J Gallo’s Vin Vault boxed wine?