Tag Archives: wine prices

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?

Five things the Wine Curmudgeon learned from last week’s wine premiumization post

wine premiumizationMost importantly: Consumers dislike wine premiumization, no matter what the wine business wants us to believe

Last week’s wine premiumization analysis kicked up more than a little dust in the cyber-ether – it was the most visited post on the blog in almost 2 ½ years. The comments and emails covered the spectrum, from people blaming me for wine’s problems (and that there wouldn’t be any if not for people like me) to those who offered their take on premiumization (pro and con) to those who thought I was spot on.

In all of this, I learned five things after writing the wine premiumization post:

1. Consumers dislike premiumization, no matter how much the industry insists otherwise. I wasn’t sure about this until I saw the reaction to the post, since all the data suggests we’re paying more for wine. So if we’re paying more, then we’re happy, right? But since fewer of us are buying wine, and those of us who still buy wine are buying less, how happy can we be?

2. Talking about wine prices is even more taboo today than it was when I started writing about wine in the late 1990s. There was a sense then that pricing was not to be questioned. Because, wine. I’ve never understood this, and my emphasis on cost vs. value has always annoyed people in the wine business. It annoys them even more today – and some are way past annoyance.

3. The economics of the post-modern wine business stink for almost everyone who isn’t Big Wine. I sympathize with those producers, and have agonized over their plight many times. But overpriced wine is overpriced wine, regardless of the reason why. Is any bottle of wine really worth $80 or $100? Or, as hard as it is to believe, thousands of dollars?

4. I taste thousands of wines a year, at all prices and from all over the world. My friends also taste thousands of wines a year, and we talk about what we taste. So how am I not qualified to say that wine quality is not what it was before the recession? One friend, a well-known wine judge and critic, will start his pinot noir rant without one nudge from me. Yes, technically the wines are OK — not oxidized, not tainted with VA and so forth — but are they interesting to drink? Are they fun to drink? Unfortunately, not nearly as many of them as in the past.

5. Wine writing, even in the second decade of the 21st century, is still expected to be positive and to sell wine. I had hoped the Internet would change that. I was wrong.

Photo courtesy of IWA wine blog using a Creative Commons license

Wine premiumization, wine prices, and quality

Wine premiumization
The Wine Curmudgeon Wine Sample Index and the wine slowdown

Wine premiumization: Prices keep going up, quality keeps going down, and fewer people are drinking wine. Am I the only one who thinks that’s not a coincidence?

This is how deeply premiumization has upended the wine business: A reader emailed me to say I shouldn’t use the prices I paid for wine in my reviews. Instead, I should use the prices on an industry website, which are typically more than what I pay.

What twisted wine universe do we now live in? Is premiumization so deeply ingrained in the system that cheap wine should not exist, even if it actually does?

Premiumization is the idea that consumers are trading up, that we’re willing to pay more money for a better quality bottle. In theory, this makes perfect sense. Of course I will pay $15 for wine if I know it’s going to be appreciably better than a $10 bottle.

But theory, to paraphrase the economist John Maynard Keynes, is for dead people. The wine business, in its dedication to short-term profit at the expense of long-term growth, is selling us more expensive wine that isn’t appreciably better. It just costs more money, and we’re supposed to accept that as the natural order of things.

I got a sample of an Italian white wine this summer, which came in a flowery bottle with an even more flowery name. My tasting note? “Very nicely done $10 blend (chardonnay, pinot bianco) with a little lemon, minerality, and crispness. For some reason, the suggested retail price is $20, making it one of the most overpriced wines I have ever tasted.”

It’s not just me

A friend of mine, who has been selling quality wine at Dallas’ best retailer for more than 30 years, told me he no longer understands how wine is priced. He cited two examples: Spanish albarino, once $10 and $12 and delicious, is now $18 and $20 and not very albarino-like, while French picpoul, “which should cost $8, costs $16.” These are wines that people in Spain and France drink daily; in the U.S., they’re priced for special occasions.

Or, as a review of a $24 wine on Wine Industry Insight put it recently: “Thin, acidic, and lacking fruit.” How far has wine fallen when $24, which used to be enough to buy something fabulous, now only pays for thin and acidic?

I write all of this in the shadow of the end of the wine boom: Flat sales, more young people who see wine as something for their parents and grandparents, and experts who say drinking will kill us as surely as cigarettes. It’s what Rob McMillan of Silicon Valley Bank calls the new normal – that wine consumption won’t return to what the industry wants. Instead, he writes, “don’t be surprised if young consumers drink less alcohol tomorrow, and those who do drink continue to embrace craft spirits and beer instead of wine.”

Given all of this, shouldn’t it be time for the industry to put an end to the premiumization that gives us $8 worth of wine for $15? If wine is in a fight for its future, shouldn’t it focus on selling well-made and affordable products in response to the competition from craft beer and spirits?

That makes perfect sense

But I long ago stopped expecting that sort of wisdom from wine. In this, I thought I saw the end to wine premiumization several times over the past couple of years, and I’m not the only one who did. But just when you think it has run its course and this foolishness can’t go on forever, it does a Freddy Kreuger. How else to explain when the man who runs Jackson Family Wines wants the federal government to eliminate his competition with a tariff wall?

All of which leads me to wonder how far we are from something that wine economist Mike Veseth has predicted for several years: That wine will become like opera, which was once mass entertainment but is now reserved for a wealthy elite.

That’s a new normal that won’t make anyone happy.

Photo “tokyoWeek1 047” by nate_uri is licensed under CC BY-NC-SA 2.0 

More about wine premiumization:
“Reasonably priced at $40:” Wine premiumization is out of control
The premiumization backlash
Has premiumization damaged wine’s popularity?

Winebits 597: Bumble wine bar, pinotage, wine prices

bumble wine bar

Swipe right for a date at the Bumble wine bar.

This week’s wine news: On-line dating site Bumble is opening a wine bar, plus pinotage and its lack of respect and wine keeps getting more expensive

Wine for two: Internet dating site Bumble has solved your first date problems – the Bumble wine bar, called Bumble Brew. The bar will open in Manhattan’s trendy SoHo neighborhood in the fall, featuring 15 wines by the glass from $12 to $16 – not a bad price given the rents in that part of New York City. The Wine Curmudgeon wishes Bumble the best of luck, since its main users are 18- to 29-year-olds, the demographic that shows the least interest in wine. Maybe Bumble can rekindle interest in wine among younger consumers, doing something the wine business doesn’t seem to care much about.

Poor, poor pinotage: Pinotage is a red grape grown almost exclusively in South Africa, and it gets very little respect in most of the rest of the world. Greg Sherwood, writing in South Africa’s Wine Mag, says pinotage “and its rightful place at the vinous fine wine table is still subject to a lot of debate and conjecture by international wine buyers but perhaps less so now by end-consumers.” In other words, why do wine drinkers in South Africa enjoy the stuff, while most of the rest of the world goes out of its way to avoid it? Sherwood discusses the grape’s past, when pinotage wines smelled – charitably – like burnt rubber or hot road tar. He says winemakers have solved those problems, and the grape can now produce high-quality wine. The article isn’t the best written, but it’s worth reading to anyone who has ever tasted pinotage and wondered what was going on.

Pricier and pricier: Don Kavanagh, writing on Wine-Searcher.com, says expensive wine keeps getting more expensive, and that means all wine is getting more expensive. This apparently comes as a great shock to Kavanagh, even though he’s writing for the website that has helped fuel those higher prices with its gushing odes to expensive wine. Still, his point is well taken, and especially for regular visitors to the blog: “[B]ut a look at the big picture shows one incontrovertible truth about wine prices: the only way is up.”

Winebits 596: Tariffs, wine writing, wine prices

Wine pricingThis week’s wine news: The booze business has discovered it doesn’t want tariffs, either, plus wine writing’s unique demographics and expensive wine doesn’t guarantee quality

No tariffs, please: The Wine Curmudgeon is not the only one who understands that tariffs are a mug’s game. Most of the booze business’ leading trade groups, including the Wine Institute, have asked the federal government to drop plans to tax European Union products. The story, from Shanken News Daily, is a bit convoluted, but the gist is that even people who never agree about anything else agree about this: “Entry level, everyday products are going to be affected just as much as high-end imported products,” said the CEO of the group that represents wine and spirits wholesalers.

An exclusive club: Tom Natan, writing on the First Vine blog, discovers one of the wine business’ underlying truths, “the uniform racial makeup of the wine writing world. … at least the part I experience at meetings and conferences — seems to be populated almost exclusively by White people like me.” He parses some intriguing numbers, including that almost one-quarter of U.S. business owners and bosses are women, but that only 4 percent of wine and spirits businesses are owned or run by women. And only one-fifth of those 4 percent are women of color. This is in marked contrast to food writing, he writes, which is much more diverse. Natan looks for reasons why this is true, but misses something else: Does this lack of diversity explain why the wine business is so obsessed with expensive wines – the kind that are preferred by its older, wealthier demographics?

Not so fast, expensive wine: Dan Berger, writing in the Santa Rosa Pres-Democrat (in the heart of wine country, no less), warns us that “wine buyers willingly accept being fed a diet of misinformation — or no information at all. They continue to buy wines based on marketers’ fictions, accepting lies or faux facts, and believing high prices indicate high quality.” And, just to be sure we understand, Berger asks: “Can you imagine buying a car without first gaining specific details about its specifications, and without taking a test-drive? How about buying furniture off the web that doesn’t give measurements or the material from which it was made?” But, and as been mentioned here many times, wine drinkers do that regularly, because we assume that wine is different than cars or furniture.

Land, Kendall Jackson, land: The biggest factor in California wine prices

California wine prices

Jackson Family Estates doesn’t want to make $10 wine, but there it is.

Real estate, not foreign tariffs, determines California wine prices

Consider two wines: Both white Rhone-style blends, both from respected wineries, both speaking to varietal character and terroir, both well-made and enjoyable. One costs $24; the other costs $12. So what’s the difference?

Vineyard land prices in California. The $24 wine is Eberle’s Cotes de Robles Blanc from Paso Robles, where land goes for $30,000 to $35,000 an acre. The $12 wine is McPherson’s Les Copains White from Texas’ High Plains, where land goes for less than $5,000 an acre. Otherwise, save for a fancier screwcap on the Eberle, the wines are the same – mostly the same grapes, the same style, and the same flavors (some lime and stone fruit, very clean and crisp).

We’ve spent a lot of time on the blog over the past couple of weeks discussing the Jackson Family Estates proposal to raise a tariff wall to keep cheap imports out of the U.S. What we haven’t discussed is the role that the cost of California land plays in all of this.

More than anything, that’s why California wine prices are as high as they are. The land – even in the less famous regions like Paso Robles – can be some of the most expensive in the world. Equally as important, a lot of vineyard land in Europe — even quality land — was paid for decades ago, so the price of a bottle may not include the cost of the loan to buy the land. In some parts of California, the cost of the mortgage is the difference between a $50 and $60 bottle of wine.

And the more demand for California wine that there is, the more money people will pay for California vineyards. And higher land prices in California mean more expensive grapes and more expensive grapes mean more expensive wine. It’s that simple.

That’s because all else is mostly equal: The cost of labor, the cost of the bottle, the cost of shipping, and it doesn’t matter whether you’re in Texas, California, or France. In fact, California might have a slight edge in some production costs, since it’s the center of the U.S. wine business. So, in the end, the price of the land in determines California wine prices.

Jackson Family, like other big California producers, likes high land prices. High prices make the company more valuable. So when it says it can’t afford to make $10 wine, it’s being honest – but it’s also crying crocodile tears. It has decided premiumization is the future of wine, and it doesn’t want to make $10 wine. Smaller producers, faced with the same land price constraints, aren’t nearly as sanguine. Many have told me they see their wines being squeezed out of the market by companies like Jackson Family, who can work on smaller profit margins on an $18 bottle and undercut the smaller producers.

The irony? There’s plenty of cheap land in California to make $10 wine, which is where Barefoot, Two-buck Chuck, and much of the state’s cheap wine comes from. It’s in the Central Valley, where a ton of grapes can cost as little as $300, one-sixteenth of the price in Napa. And, in another irony, premiumization has made this land even cheaper – so cheap, in fact, that some farmers are replacing grape vines with almonds, which offer higher profits.

In other words, Jackson Family Estates could do what E&J Gallo (Barefoot), The Wine Group (Franzia), and Bronco (Two-buck Chuck) do – use Central Valley grapes to make $10 wine. But it’s easier to ask for a tariff wall and punish U.S. wine drinkers. Which should demonstrate exactly where Jackson’s interests lie, and it’s not with the wine drinkers.

Top U.S. wine executive: Let’s make wine so expensive no one will be able to afford it

tax wine

“Buy California wine — or else!”

No, that’s not a Wine Curmudgeon joke – it’s a proposal by the man whose company makes Kendall Jackson chardonnay

No, this isn’t a Wine Curmudgeon April Fool’s post. It’s as true as it is unbelievable: A top U.S. wine executive wants to tax wine so that most of us can’t afford to buy it.

Rick Tigner, the CEO of Jackson Family Wines (home to  the legendary Kendall Jackson chardonnay), told a wine industry meeting last week that California can no longer afford to produce cheap wine. Hence, the federal government should tax wine imports because “we need a better, higher pricing structure.” In other words, $10 European, Australian, New Zealand, and South American wine should cost as much as California wine — because, of course, California wine.

Yes, that was my reaction, too. Wine consumption is flat and young people don’t seem particularly interested in it. So the man who runs one of the most important wine companies in the country wants to make wine even more expensive? That makes tremendous economic sense, doesn’t it? Let’s price wine out of the reach of most consumers, and our business will be even more successful.

The story was so incredulous that I almost called the reporter who wrote it to ask him if something had happened during Tigner’s speech. Was Tigner struck by a bolt of lighting? Was there an invasion of body snatchers? Does he have one of those evil soap opera twins?

I wasn’t the only one who was dumbfounded. A European wine analyst told me she was surprised a leading wine company official would say something like that. A Napa wine marketer said it was just one more example of California arrogance — because, of course, California.

Tigner overlooked two things (besides the most basic laws of supply and demand):

First, 95 percent of U.S. consumers won’t pay more than $20 for a bottle of wine – perhaps my favorite wine statistic, courtesy of the Wine Market Council. So who is going to buy all the expensive wine that tariffs will give us?

Second, Tigner can complain that other countries tax California wine unfairly as much as he wants, but that’s irrelevant. U.S. wine exports measured by cases (mostly from California) are insignificant – barely more than 10 percent of what we produce each year. That’s because we drink almost all the wine made here, so there isn’t much left to sell to the French (assuming they would want it). In fact, U.S. wine exports are so trivial that two of our biggest markets are Nigeria and the Dominican Republic, countries not usually associated with wine culture.

So, no, taxing my $10 Gascon white blends, Spanish cava, and Italian red blends won’t save the California wine industry from itself. The only ones who can do that are part of the California wine industry, which tells us everything we need to know about how that will turn out.