Tag Archives: wine prices

Winebits 571: Ed Lowe, three-tier foolishness, wine prices

ed loweThis week’s wine news: Ed Lowe, whose Dallas restaurant served Texas wine when hardly anyone knew what it was, has died. Plus, New York state three-tier foolishness and cheaper bulk wine prices

Ed Lowe: How important was Ed Lowe to the U.S. regional wine movement? He served Texas wine for 30 years at his Celebration restaurant in Dallas, and when he started doing that Texas wine was chancy at best. Lowe, 69, died before Thanksgiving during a canoe trip in the state’s Big Bend region. I knew Lowe a little, and we talked several times about local wine, his half-price Thursday night wine promotion, and quality local food. Celebration was farm-to-table long before the term was invented by some East Coast hype guru, and Lowe (who could still be seen busing tables) truly believed in the concept. The world will be a poorer place without him.

Take that, Wegman’s: The East Coast grocery store chain has been fined more than $1 million for illegally managing liquor stores by the New York state booze cops. That’s because grocery stores aren’t allowed to sell alcohol in New York, save in one location. The state liquor authority claimed Wegman’s violated any number of laws and regulations, including “illegally trafficking in wine.” That’s a delightful 21st century crime, yes? The infractions are arcane to anyone who doesn’t follow three-tier, and Wegman’s may actually have violated the law. The larger question, though, is why these laws still exist.

• “Awash with wine:” More bad news for premiumization – wine prices in the bulk market are dropping, “and in some cases, significantly,” reports a British wine trade magazine. The world is flush with wine after bountiful 2018 harvests around the world, and those interviewed in the story say prices could keep falling. Why do bulk prices matter? Because, save for the most expensive wines in the world, bulk prices influence the price of grapes everywhere. Cheaper bulk prices usually mean cheaper grape prices, and that usually means cheaper wine prices.

Illustration courtesy of Tampa Tribune using a Creative Commons license

Wine prices: What do wine drinkers pay for wine?

wine pricesMost of us spend less than $15 a bottle, which isn’t that much different from what we’ve been paying for the past 30 years

•  “What do wine drinkers want?”

What do wine drinkers pay for wine? Not what the wine business wants us to pay:

• About eight in 10 of us spend less than $15 on a bottle of wine.

• Only six percent of us spend more than $21 a bottle.

• The $8 to $12 range remains the most popular.

That’s the stunning summary from a 2018 study by Morning Consult (via Wine Industry Insight). Why stunning? Because the wine business has been feeding us premiumization – the idea that more of us are going to spend more money for a bottle of wine for no particular reason – since the end of the recession. Since then, it seems like every wine study, consultant, and industry wise guy has been insisting that premiumization is the future of the wine business. To listen to them, we’ll soon spend $20 a bottle and be grateful for the opportunity.

Which this chart says isn’t true (click on it for a bigger version). Its numbers aren’t that much different from the last significant pricing study, conducted in 2014 by the Wine Market Council. In that report, the council identified $20 as the cutoff for expensive wine in the U.S. and found that just five percent of us ever buy wine costing more than $20.

In other words, I haven’t been wasting my time for the past decade.

So why they hype and blather over premiumization? Because the wine business thrives on hype and blather. Yes, there have been changes in what we’ll pay for wine, with more wine being sold between $10 and $15 since the end of the recession and sales of wine costing less than $5 decreasing during that period.

But I’m convinced this is more about demographics, as older wine drinkers – who bought the least expensive wines – drink less and younger wine drinkers enter the market at $8 and $10 instead of $5 and $8.

And that’s more or less what this chart demonstrates.

More about premiumization and wine prices:
• “Reasonably priced at $40:_ Wine premiumization is out of control
Expensive wine prices in the real world
Another study agrees: We buy wine on price

Has the next phase of the wine slowdown started?

wine slowdownToo many grapes, younger people who don’t drink alcohol, and slowing sales among all age groups are signs of a wine slowdown

Call it a tipping point if you don’t mince words or an easing of momentum if you do, but the results are the same. It looks like a major change in U.S. wine consumption is underway. Call it the post-recession wine slowdown.

Know four things:

• California wineries, faced with an oversupply of grapes from yet another bumper harvest and lagging sales, don’t seem to be buying as many grapes this year. In fact, their attempt to get out of grape-buying contracts in some parts of the state is causing controversy and bad blood.

Wines sales have slowed, so that even an industry cheerleader termed growth for this year at a “sluggish 0.2% projected pace.” These numbers, from the company that publishes the Wine Spectator, confirm what has been reported elsewhere many times – U.S. sales by volume won’t exceed the increase in the drinking age population for the foreseeable future.

• One of the world’s biggest spirits companies expects that the “low-[alcohol] and no alcohol cocktail movement will increasingly shape the bar world” in 2019. The report went on: “What is most notable, though, is the differing consumption habits of the younger demographic, with 46 percent of people under the age of 35 likely to order a mocktail (non-alcoholic cocktail), versus just 16 percent of over-35’s. “

Rob McMillan of Silicon Valley Bank, one of wine’s leading statistical gurus, says the industry is at that tipping point. McMillan says there will be more grapes than are needed to meet slowing demand, and that the industry must come up with a Plan B to sell its product in this more challenging environment.

In other words, we have too many grapes, younger people who don’t necessarily want to drink alcohol, and slowing sales among all age groups. But the industry is hellbent on selling more expensive wine as if none this was relevant – if it was still the heyday of scores and wine magazines in the 1990s and that post-recession premiumization would go on forever.

Consumers – and that includes most wine drinkers – vote with their debit cards. You can only sell overpriced and lower-quality wine for so long before they put their debit cards away. If that is happening now, and I think it is, then we have a wine industry selling something fewer people want to buy. And that is not a recipe for success.

Wine value 2018: Where we’re at today and what could happen next year

wine value 2018Six things to know about wine value 2018

Wine value 2018 has become perilously close to an oxymoron – a contradiction in terms with little real meaning. Even the Australians, who are famous in most of the world for their cheap exports, are lamenting premiumization and the disappearance of value.

Why this is happening has been well documented, here and elsewhere. Whether it will continue is a point of much contention. The wine business is betting its future that premiumization is here to stay, and that consumers will happily pay $20 for wine that used to cost $10. Others, meanwhile, who are looking at data instead of wishfully thinking, see a wine world with an unsustainable pricing model.

Know the following six things about wine value 2018, where value is defined as wine that is well-made and fairly priced and usually costing less than $15:

• Yes, value still exists – in Spain, parts of Italy, and some of southern France. Many of these wines are still made to reflect terroir and treat their grapes accordingly. Use the category menu to the lower right to search for wines from these countries.

• It’s almost impossible to find value in U.S. wine for $15 or less, save for a brave few brands that are almost single-handedly holding out (and even they have occasionally wavered).

• Producer consolidation, which I once thought would keep prices in line, hasn’t. We’re this much closer to an oligopoly pricing model, where a handful of large companies decide what to charge and everyone else is happy to follow along. Remember, three out of five bottles on the grocery store Great Wall of Wine likely come from just three mega-wineries.

• Pricing is starting to devolve into three tiers. First, cheap and poorly made wine, costing $12 or less, marked by cute labels and gushy winespeak. Second, gimmick wine, often red blends with manly names that are sweet but are passed off as dry, costing from $12 to $18. Third, “collector wine” at $20 and more, labeled as better than anything else and priced that way – even if neither is true.

• Most of the Winestream Media don’t care about any of this, and so don’t write about it. Instead, we get point scores – all remarkably in the high 80s or low 90s – for what seems to be every wine, regardless of quality or price.

• Producers will intensify their focus on premiumization next year, which means two things: First, new, higher-priced brands, and two, price increases for established brands. There has been much more of the former than the latter since the end of the recession, and it could mark as sea change in the wine business if producers can make price increases stick.

More about wine prices and wine value:
Has all the value gone out of California wine
Restaurant wine prices 2018
What is value in wine?

American Airlines wine – is it really worth $9 a glass?

Add American Airlines wine to the joys of post-modern airline service

american airlines wine

I don’t much care for the new logo, either.

Dear American Airlines:

Charging $30 to check a bag requires chutzpah. Making your seats smaller to cram in more people so they can pay $30 to check a bag is chutzpah taken to the next level of chutzpah. But you know what may be worse? Paying $9 a glass for American Airlines wine.

It’s one thing to pay $9 for a glass of wine in a restaurant, even if it’s marked up four times and it wasn’t that much of a wine to begin with. At least it’s in a restaurant, where there’s food and a table and someone waiting on you and a glass for the wine and maybe even a comfortable chair. Which, of course, is the exact opposite of post-modern airline service.

Your three $9 wines – a red blend, a rose, and a sauvignon blanc – are apparently private label. I couldn’t find the wines listed for sale anywhere, including Wine-searcher and CellarTracker. Hence, the wine likely costs you about $2 a glass – a markup to delight even the most markup-conscious restaurateur.

And none of this takes into account the quality of American Airlines wine. There were a scattering of reviews on Vivino; the rose write-up (3 stars out of 5, which translates to a 60- to 70-point wine for those who care about that sort of thing) didn’t fill me with confidence: “However, the finish has a lot of steel/metallic elements … quite abrasive.” Yummy, huh?

The other thing that’s annoying? You serve real beer, including Fat Tire and Goose Island. What did the beer drinkers do to deserve that? Do you think they’re better than wine drinkers? Or smarter in some way?

And yes, I understand you can do this. In our “unregulated, nuts to the customer because we’re an oligopoly and there’s nothing you can do about it post-modern airline world,” you can charge as much as you want, be it for baggage, fares, meals, or wine. But that doesn’t mean I have to like it or drink it. Bring me a Fat Tire, please.

So understand my job is to tell my readers about overpriced wine.  I can’t do anything about $30 to check a bag, but I can do something about this.

Yours in the battle against overpriced wine,
The Wine Curmudgeon

More about wine prices 2018

wine prices 2018

In what reality is $30 wine affordable?

Wine prices 2018: Are too high prices unsustainable? Is a bubble forming?

Twice in the last week, completely unbidden, a retailer and an importer complained to me about too high wine prices. No one was more surprised than I was.

After all, the Wine Curmudgeon is supposed to care about this, not people who make their living selling wine at what I consider too high prices. But the wine world is so upside down in the second decade of the 21st century that even this is possible.

So yes, a small sample size. But I’ve been doing this a long time, and those things just don’t happen. It’s a man biting a dog story – it happens so infrequently that it’s news when it does, even with a small sample size.

Specifically, the two men were complaining about too high red Bordeaux prices, the wine from France, and how they have screwed up the marketplace. Their point: When the most prestigious are priced too high – $800 for a bottle of Cheval Blanc, anyone? – that raises the price for every other red Bordeaux, regardless of quality (the economic theory of substitutes). Plus, it also props up the prices of prestigious red wines elsewhere in the world, as well as less prestigious wines.

You and I see this every day when we buy an ordinary bottle of red French wine. Or, rather, when we don’t buy one because the prices are too high. I paid $18 for a delightful red blend from the Languedoc, Chateau La Roque, which should not have cost $18. It’s from a minor region and made with grenache, not cabernet sauvigon. But the substitute theory prices it at $18 because “better” wines cost $25 and $30. It’s the same reason all those syrupy, over-ripe California reds cost $18. It’s not the land cost or the quality of the grapes, but the substitute theory.

So what does it mean that the importer and the retailer complained to me about this? Is it an indication that a bubble may be forming and this kind of pricing is unsustainable? There seems to be evidence for this. A highly respected economist who studies the wine business has told me twice this summer that U.S. sales are flat and he is not optimistic about the future. And then there is the Wine Curmudgeon sample index – not very scientific but which seems to make more sense every year. This spring, for example, a PR flack pitched me “affordable” $40 wine – a Twilight Zone version of reality that only someone in the wine business could believe.

So we wait and see. And hope for the best.

More about wine prices 2018
July update: Wine prices in 2018
Restaurant wine prices 2018
Expensive wine prices in the real world

July update: Wine prices in 2018

Wine prices in 2018Wine prices in 2018 aren’t necessarily going up, while premiumization may be taking a huge hit

Is premiumization – the idea that we’ll buy expensive wine just because it’s more expensive – wearing out its welcome? That may be the case after looking at what’s going on with wine prices in 2018.

In fact, higher wine prices in 2018 (as well as next year) don’t seem nearly as certain as they did six months ago. That’s when I wrote: “Look for wine prices 2018 to head upward, and not just because of premiumization.” No one is happier than I am that I might be wrong.

What has happened to change all of this?

• Continuing flat wine sales. Every time I see the numbers, I’m reminded of the Wine.com study that says everything that needs to be said: “With little to no organic industry growth, it’s all about battling competitors for market share. Brands swap from one wholesaler to another, and wineries and wholesalers have been consolidating through [mergers]. But these moves are largely just shuffling the deck, rather than growing the total pie, and do very little for the long-term health of our industry.”

• Trouble for Big Wine. How about this bombshell from Constellation Brands, the second-biggest wine company in the world? Its growth in volume for the previous 52 weeks through July was higher than its growth in dollars – the exact opposite of premiumization. Is this a sign consumers are cutting back? Note, too, that neither of the increases was impressive, and the dollar increase was a whopping 0.6 percent.

• Surprising consumer reluctance to spend money on more expensive wine. I see this every time I shop for wine, whether grocery store, wine shop or liquor store. Consider this the other day, from a Dallas Aldi. A man was buying six bottles of the chain’s knockoff, $8 Prosecco, and not the $12 La Marca you can get at the Walmart down the street. Meanwhile, the woman in line in front of me had organic chicken, a couple of organic dairy products, and three bottles of $3 Winking Owl. What does it say that she was spending a substantial premium for food but doing the opposite for wine? Yes, a small sample size, but I see it over and over.

Something is going on, and despite other pressures – inflation, the weak euro – consumers are holding the line on their wine purchases. Will the industry recognize this and adjust accordingly with lower prices?