Tag Archives: wine prices

Winebits 284: Wine prices, wine bottles, soft drinks

? Too many grapes? During the wine price panic a couple of years ago, the wise guys kept mumbling that there weren ?t enough wine grapes planted in California, and that, psst, I ?ve got a deal for you if you want to buy some vineyard land. That wasn ?t necessarily the case then, and it ?s probably not today, either. The president of one of the biggest grape grower trade groups says the number of acres in production could be 25 percent higher than the official figures. If true, this would explain why prices never took off, even after the so-called short harvests in 2010 and 2011. And it would also explain why production rebounded so quickly to a record in 2012. And, for those of us who care about wine prices, it also means they aren ?t going up any time soon.

? Do we really need glass? No less than the pre-eminent British wine writer Jancis Robinson asks this question, wondering ?why we need a material as heavy, fragile and resources-hungry as glass for everyday wine, wine that is consumed within months of being bottled. ? Why not juice boxes and pouches? Good questions all, but ones that overlook the role of tradition in the wine business. Screwcaps are not new, and are cheaper and more efficient than corks. But most wine is still closed with corks, and for no other reason than that ?s the way it has always been done.

? Rot those teeth: The Wine Curmudgeon does not drink soft drinks, dating from my days as a young reporter who wrote a story and learned that Coke, Pepsi, and the rest are among the most nutritionally bankrupt foods on the planet. So I was not surprised to see this study, which claims that diet soft drinks rot teeth like cocaine and meth. The story that describes the study doesn ?t go into much detail about how it was conducted, and I ?m curious why only a handful of women were studied, but it does make great reading and something to point out to those who tell me I drink too much wine. And why my teeth are in such good shape.

Winebits 282: Wine prices edition

? Is cheap wine profitable? Jamie Goode, the respected and award-winning British wine writer, argues that cheap wine will never make anyone any money. He compares it to the cell phone business, noting that if one carrier offered cheaper rates instead of what he calls the almost cartel-like pricing structure in use, then ?all profitability will be sucked out of the market. ? That ?s the opposite of the wine business, he writes, so no one must be making any money with cheap wine. His reasoning, though intriguing, misses a couple of points. Wine is not the cell phone business, which is limited by spectrum availability (as one comment to the post points out) and that lack of spectrum raises prices and margins. In addition, Goode overlooks the elasticity of cell phones vs. wine. We ?need ? cell phones; we don ?t need wine. Hence, there is little incentive for cheap cell phone plans. Finally, I think Goode doesn ?t understand the incredible marketing skill of U.S. producers like The Wine Group, which can create demand for cheap wine like Cupcake and still make money.

? Restaurant pricing: Says Chris Nuttall-Smith at Toronto ?s Globe and Mail: ?There is perhaps nothing more galling than flipping open a restaurant ?s wine list to find a $15 bottle that you know and love listed for more than $50. That ?s been happening to me a lot lately; where many Canadian restaurateurs are loath to price their chefs ? cooking at levels that would make it profitable, they show no such restraint with wine prices. It ?s in-your-face enough to make some diners want to stick with Diet Coke. ? The Wine Curmudgeon couldn ?t have said it better. Is it any wonder that restaurant wine sales have never really recovered from the recession?

? When are wine sales illegal? When you ?re in a state that forbids them. Like Wisconsin, which enforces a 1939 law that sets minimum prices for many retail goods. The story does a good job of explaining why Wisconsin wine prices can be 20 to 30 percent higher than in neighboring states, and how the World Market chain had to correct its Wisconsin advertising and sales offer to comply with state law. Note to Wisconsin residents: Drive across the border to Illinois. Wine is much cheaper there, and maybe even worth the price of the gas for the trip.

Wine prices in 2013, one final time

Two more pieces of news worth noting about prices, and then we can probably let this rest until next year. If you missed the first two posts explaining why prices aren ?t going anywhere in 2013 ? and how could you? — they ?re here and here.

First, from Shanken News Daily, the cyber-news service run by the company that owns the Wine Spectator: ?Price promotion remains necessary at all tiers. ? Which means that, even if the shelf price remains the same (or goes up), the consumer won ?t necessarily pay more thanks to special deals and in-store promotions like case and six-bottle discounts, grocery store club card pricing, and constant sales.

The story also noted that wine drinkers are more aware of price and apparently buy accordingly. It quoted a buyer at at high-end Los Angeles shop who said he ?s selling lots of $20 to $40 wine, but that ?many of those purchases are wines that previously retailed for much more but dropped price during the recession.”

Second, that cava sales in Spain fell 6.3 percent in 2012, which was good news given that 2011 ?s decline was 9 percent. That ?s because Spain is suffering 26 percent unemployment thanks to an on-going recession and the Euro crisis. That translates into weak domestic demand, which means cava producers have to sell their wine elsewhere for whatever they can get for it or dump it down the drain. Which has also happened — exports rose 6 oercent.

That ?s the law of supply and demand at work, however painful, and why cava will remain cheap outside of Spain. Which, actually, should help hold down price from competitors like Italian and less expensive California bubbly, something that ?s also part of the law of supply and demand.

The wine business does not exist in a vacuum any more. What affects prices in one part of the world affects them in another part, no matter how inconvenient that may be.

Winebits 268: Wine prices, cult wines, grape names

? So much for the price hikes: The Wine Curmudgeon mentions this not to beat a dead horse, but because he was once again passed over as a person of knowledge, insight and authority in the wine business. Apparently, getting this pricing thing right is not nearly as important as knowing toasty and oaky. But the 2012 California grape harvest was the biggest ever, and prices will do what prices do in those situations. Furthermore, the continuing Euro crisis will lower the cost of European wine. Or, to quote someone who knows about this (and who is on the list), ?All in all, it looks like the business is in balance but we'll see some early price reductions. ?

? Greatest quote ever? The Artisan Family of Wines blog on cult wines: ?To win a few snobs with money to burn, we ?ve alienated a large part of our potential market, to our harm and their loss. ? Hmmm. Sounds like something I should use in The Cheap Wine book (Q&A explaining how Kickstarter works; Kickstarter link; What the book is). The entire post is worth reading, and I would quote more, but then I would end up quoting the entire post.

? New grape names: Cornell University has announced the names of its newest grapes, a white called Aromella and a red named Arandell. They were the winners of a contest that attracted some 7,000 entries. The former got its name because it is an aromatic, muscat white, while the latter is a combination of "arandano," the Spanish word for blueberry, and the "ell" from Cornell.

Update: Wine prices in 2013

Wine prices 2013

Try wine for free? Doesn't get much cheaper than that

Still lots of confusion about what wine prices are going to do this year, even after the authoritative Silicon Valley Bank report that pretty much summed everything up: Wine businesses expect to increase bottle prices in 2013, although SVB believes that will prove difficult. ?

Which is what I ?m hearing. One distributor said his bosses told him to raise prices whenever possible.The catch, of course, is the word possible.

I don ?t think the wine industry has adjusted to the way the business has changed since the recession started. Producers and distributors, looking at their costs, want it to be 2006, when they could do pretty much anything they wanted with prices.

But, in the new reality, that isn ?t possible. The best example is the  financial discomfort that the company that makes YellowTail is experiencing. It ?s still selling tankers and tankers of wine, but it ?s losing money because the Australian dollar is so strong. The obvious solution would to be raise prices, but the company hasn ?t done that. And why not? Because it ?s likely terrified that consumers would switch to Barefoot or Cupcake or whatever, and then it would be in even worse shape.

In fact, consumers are more price resistant than ever before. A clerk at a Dallas World Market practically snorted when I asked if her customers were paying more for wine. They ?re still looking for value, she said, and are just as stingy as they were during the recession. (She also said a couple of things about scores and wine writers, but this is a family blog.)

The other thing that has changed dramatically since 2006 is that the biggest producers are even bigger, and have that much more pricing power. This has been difficult for many in the business to see, given wine ?s traditional Mom and Pop nature.

But companies like Constellation and E&J Gallo dwarf even YellowTail. And, when you ?re that big, says Michigan State ?s Phil Howard, who has written the definitive big wine producer study, you can do all sorts of things, including better volume discounts for the distributors and retailers who are your best customers.

Case in point: The neck hanger at the top of this post, courtesy of Treasury Wine Estates (which owns Rosemount). Even if no one asks for their money back, the cost of this kind of program is prohibitive for all but the biggest multi-nationals. Remember what I wrote about Big Wine and marketing? Prescient, wasn't I?

Understanding these changes also helps identify those wines that could increase in price. They have limited availability, are usually made by smaller producers, and are in higher consumer demand. But that ?s a small portion of the wine world ? some higher-end Napa Valley reds, well-regarded French wine, and the like. But even that ?s no guarantee, as the Champagne pricing crisis demonstrates. When consumers have a choice, they ?re voting cheap.

Winebits 265: 2013 wine prices edition

Because everyone wants to know what wine prices are going to do this year:

? Limited price hikes: From no less an authority than Rob McMillan at Silicon Valley Bank in his annual state of the wine industry report: ?Wine businesses expect to increase bottle prices in 2013, although SVB believes that will prove difficult. ? The report doesn ?t say so specifically, but the reasons for this could lie in two other findings ? that mergers and acquisitions of vineyards and wineries will continue at a record pace, which means increased economies of scale to keep prices in check, and ?massive ? bulk imports, especially for the cheapest wine, as producers look globally to keep costs down.

? So what do we call it now? Trader Joe ?s is raising the price of Two-buck Chuck in its California stores, the first increase since the brand was introduced 11 years ago — It will go from $1.99 to $2.49. Before everyone panics, though, note that the wine costs $2.49 to $3.79 in the rest of the country, and that the rate of inflation since then would have pushed the cost of the wine to $2.54 ? so you ?re still saving a nickel.

? No more 5 wine? The average price of wine in a British shop has crossed that threshold, but not necessarily because of rising wine costs. Since 2002, reports thedrinksbusiness.com, 80 percent of the increase has come from higher taxes. The British government is trying desperately to crack down on binge drinking, and this appears to be one of the most effective methods. By compairson, the average cost of wine in the U.S. is around $6 — less than 4.

Wine prices in 2013

They ?re not going anywhere, no matter what you may read elsewhere. Some higher-end wines, like Napa reds, red and white Burgundy, and classified Bordeaux, may be able to take increases. Though, interestingly, Champagne is in a quandary over cutting prices.

But the cost of the wine that most of us drink will stay more or less the same.

The pricing scare started last year, when the second of two ?short ? vintages in California led to over-the-top predictions about increases and the infamous Time magazine headline: “Panic! Wine Prices Due to Rise.”

Those increases, save for some special cases, never happened.The two ?short ? vintages ? wine industry-ese for a smaller grape crop ? were still huge, the third and fourth biggest ever. In addition, as wine economist Mike Veseth noted (and he was one of the few who did), the wine business is now global. Higher prices for California grapes don ?t necessarily mean higher wine prices; the biggest producers, who make most of the wine, can buy cheaper grapes elsewhere ? and did.

That pattern, said the people in the retail, distribution and production sides of the wine business that I talked to, will continue this year. The 2012 harvest in California could the biggest ever, alleviating any shortage concerns in this country. And while bad weather decimated production in France, Italy and Spain, anyone who has bothered to look at U.S. wine consumption would see that Europe accounts for only 20 percent or so of the U.S. market.

Or that the euro crisis decreased demand in Europe, weakening the impact of the shortages there and making European wine less expensive in dollar terms. Or that the Europeans have been over-producing for years. Or that there are still plenty of grapes available in New Zealand, South Africa and Australia.

The other factor, which is just beginning to be understood, is that consumers are drinking more wine that is cheaper to make and can be sourced from anywhere in the world. Sweet red, for instance, can be made with almost any grape (even white ones) and doesn ?t need an appellation like Napa Valley or Bordeaux.

Finally, and no one seems to have grasped this yet — save for Veseth, who recently wrote a telling post about Big Wine and low price production. Big wine companies now dominate production in a way they never have, accounting for as much as 80 percent of the wine sold in the U.S. This means they can control prices in a way that we haven ?t seen before. If they want to absorb higher prices to keep market share, they can afford to do it.

That ?s why Beringer white zinfandel (made by multi-national Treasury Estates) was on sale at a Dallas Kroger for $5 over the holidays. Or that E&J Gallo ?s Apothic was selling for $8, almost half off its suggested retail price, And, I was told, both retailer and producer made money on those deals.