Tag Archives: wine prices

Holiday wine trends 2012

wine-glass-candy-caneThe one consistent from last year? Consumers are still looking for value, and they ?re still worried about prices. Or, as my pal Gil Kulers, who works for Atlanta ?s Tower Wine and Spirits, one of the largest retailers in the southeast, described it: ?If it ?s a choice between spending $1 more to get a better wine, and not spending the $1, I had a customer who didn ?t want to spend the $1. ?

The good news is that prices remain consumer-friendly, save for some higher end wines and Champagnes. In addition, the retailers I talked to said we ?re looking for value in places that we haven ?t necessarily looked for value in the past. The details are after the jump:

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Winebits 254: Wine prices, French wine, Asimov

? Aussie harvest: I suppose I ?ll have to stop trying to teach journalism to the wine business one of these days, but one more lesson: The wine business in Australia is still in the tank (no pun intended), but a good harvest has increased the supply of grapes. The Aussies have cut the number of acres of vines by six percent, but production still increased three percent in the last harvest. And, given that the wine business is worldwide, more grapes in Australia helps offset shortages elsewhere. Without taking demand into account.

? Changing habits: Simon Kuper in the Financial Times looks at the changing role of wine in French culture, in which they are drinking less but apparently enjoying it more. And, lest anyone forget the paramount role the French play in wine, he writes: ?In drink as in other domains, France still shapes global tastes. Around the world, wine has become the upmarket drinking option ? the opposite of earthy, proletarian or peasant beer. Soon middle-aged male ?wine bores ? will be as much a Chinese affliction as a French one. ?

? ?How to love wine: ? Eric Asimov, one of the few members of the Winestream Media who understands what ?s going on, has a new book. In it, he demonstrates that insight: ?Uncertainty [in wine] means that you can say, ?I don ?t have to tell you precisely what you should taste in this wine or how many points it should score. There is something more ambiguous about this wine and I can ?t really grasp it and I am okay with that. ? ? Would that more people who profess to be wine experts understood that concept.

Winebits 251: Wine prices, Amazon, Champagne fraud

? Never trust the media? Lew Perdue at Wine Industry Insight must have a wonderfully dark sense of humor. On the same day last week, he posted these two links on his daily e-summary: ?U.S. wine producers reporting 'epic' 2012 harvest ? and ?End to cheap wine prices is near. ? Both, obviously, can ?t be true, but there they are. This points to the serious flaw in most of the reporting about the decline in the world grape supply. What is the demand for grapes? If demand is increasing, then prices will rise. But if demand is flat or shrinking, which could well be the case given the recession in Europe and the near-recession in China, then prices won ?t do much at all, regardless of supply. This is basic reporting, and it ?s depressing that so few people writing about the subject bother to do it.

? Amazon ?s direct shipping plan: My pal Dave McIntyre has a very even-handed assessment of Amazon ?s latest foray into the wine business ? an example of good reporting. Dave hits the high points in what Amazon is trying to do, and also notes ? which even I overlooked ? that the plan will benefit mostly smaller and mostly Napa Valley wineries, which do the most direct shipping. This may well be the key to what seems like a very limited and modest effort by Amazon ? pluck the most profitable and easiest part of the direct shipping market, and worry about the rest later.

? Why we need the French: Because any culture that really cares about wine should be appreciated. Can you imagine a U.S. prosecutor calling anyone who perpetrated a wine fraud despicable? Can you even imagine a U.S. prosecutor filing a case like that? But that ?s happened with a $2.6 million fraud case in France, where a Champagne producer tried to pass plonk off as vintage bubbly. So if they want to be a little cranky about wine names, who are we to criticize?

Does cheap wine cost too much money?

The answer may well be yes, according to study conducted by one of the leading wine economists in the country. New York University ?s Karl Storchmann wanted to find out if scores helped better align the price of wine; that is, do good scores boost prices while bad scores lower the price? Instead, Storchmann, Alexander Mitterling, and Aaron Lee discovered just the opposite.

The key is what Storchmann calls noise ? the publicity a good score gives a wine. ?The noise raises the quality perception of the wine, and the noise is larger for bad wine, ? he told me. In the study, cheap wine is defined as ?bad ? because it ?s less expensive than ?good ? wine, and better quality wine should cost more.

What happens, says the study, is that a high score for one cheap wine influences the perception of the entire brand, as well as for different vintages ? possibly raising the price of every wine in the brand. That means that if Winery X ?s 2011 merlot gets a 92, that score gives consumers the idea that the rest of X ?s wines, whether chardonnay or zinfandel or whether 2009 or 2010, are equally as good. Which isn ?t necessarily the case.

In a perfect world, all wines of the same quality would cost the same. That they don ?t is part of an economic theory called price dispersion, and applies to everything from computers to canned tuna. In this, reviews seem to play a significant role. Research in 2004 found that positive reviews in the New York Times increased a book ?s sales by almost two-thirds, while negative reviews cut sales by about one-third.

It would seem logical that this would carry over to wine, given how common scores and reviews are ? and how important they ?re supposed to be. Since we don’t know what a wine is like before we taste it, we rely on other people’s opinions to guide us, and ratings and scores come from the experts. So a 78, which is a bad score, should stop anyone from buying a wine. That’s the theory that Storchmann, the managing editor of the Journal of Wine Economics, was working with.

But, as regular visitors here know, wine is far from logical, and just the opposite seems to happen, says the study: “[The] largest spillover is in the low-quality bracket, resulting in significant overpricing of mediocre wines.”

Even more intriguing about the spillover effect: Assume a $6 wine gets a good score, which then allows the winery to raise the price by $2 for every wine in the brand — a 33 percent increase for what could be a dozen or more wines over several vintages. Compare that to a $100 wine getting a good score and raising the price $10. Who will come out ahead?

This explains a lot about the wine business that I ?ve never been able to understand, like why so many of the multi-nationals that make cheap wine care so much about scores. And market them so obsessively. Or why so many smaller wineries are equally obsessed with getting a good score. It ?s that damned spillover effect.

It also reinforces, once again, why scores are useless, and may well do more harm than good.

Having said all that, there is an important caveat. The wines and scores used in the study, some 41,000 of them for U.S. wine, appeared in the Wine Spectator between 1984 and 2008, so quality in the study is measured by the Spectator ratings. You can draw your own conclusions from that.

Winebits 250: Wine names, wine prices, Buena Vista

? U.S.-based chateaus? The cyber-ether is abuzz because the French don ?t want to allow U.S. wines that say chateau on the label to be sold in Europe. The dispute is part of negotiations to revise a 2005 treaty between the European Union and the U.S. that defined wine and food terms, so that we can ?t call a hard cheese made in the U.S. Parmigiano Reggiano and the Europeans can't call ham produced in Italy Smithfield. As part of the 2005 treaty, some U.S. wineries that used terms like chateau and Champagne were grandfathered in for products sold in the U.S. We ?re asking the EU, as part of negotiations to revise the treaty, to end the foreign ban on the term chateau, so a winery like Chateau St. Jean won ?t have to change its name to be sold in Europe. I can ?t do justice to the topic here, save to say that it ?s a lot more complicated than many people are portraying it. This story, from Britan ?s Independent, clears things up a little.

? Wine price panic: The Europeans, facing several drought-stricken grape harvests, are in a tither about increasing wine prices, and wine in Britain is already up three percent from last year. The Wine Curmudgeon has some advice, based on our experience this year with the U.S. wine price panic. Take a deep breath. Take a sip of wine. Take another sip. Everything will be OK. Retailers always say stuff like that. Spain is in the middle of a massive recession, with almost 25 percent unemployment, and the jobless rate is almost 12 percent in Italy, which is also in recession. That means there is much less domestic demand for wine, which will undercut the supply shortage and mitigate price pressure. Really. Why else would I use economic-speak?

? Buena Vista changes: One of the oldest wineries in
California is updating its image and its brands, part of its acquisition
by wine tycoon Jean-Charles Boisset. The 155-year-old Buena Vista
has restored and updated its champagne cellar, which was damaged in a
1989 earthquake. Wine is being made on the property for the first time
in some 50 years, and it is carrying the Sonoma label. Even though Buena
Vista is located in the state ?s second-best known wine region, its
previous owners had stopped making wine with the Sonoma appellation.

Winebits 248: Climate change, grape supply, and grape supply

? So long, Napa: W. Blake Gray interviews perhaps the world ?s leading wine and climate change expert, who predicts that California ?s premier grape growing region could no longer be that by 2050. Gregory Jones of Southern Oregon University told Gray that if if global warming projections are accurate, Napa will be too hot to grow fine wine grapes. Wrote Gray: ?[Jones ?] says only in the U.S. does he face resistance to the concept of climate change, although he said in many cases wineries deny global warming publicly while admitting their concerns to him privately. ?

? Yet another bumper harvest: The 2012 California wine grape crop could reach 3.7 million tons, the second-largest ever, according to an estimate from a growers ? group. So much for that grape shortage, eh? That would be a 10 percent increase over 2011 and 13 percent over 2010. If true, and given the near-record number of imported grapes coming into the U.S., wine prices should remain flat again next year.

? So long, China: Remember how the Chinese were driving fine wine prices through the roof? Remember how all the top wine producers and the Winestream Media were falling all over themselves to cater to the Chinese? That ?s just so 2010. Reuters reports that the biggest Chinese political scandal in decades, which has roiled the country and even threatened to delay a planned change of government, has knocked the top off the Chinese wine boom. Hong Kong Bordeaux wine sales, where many wealthy and apparently corrupt Chinese, buy their wine, are down 25 percent in value and 6 percent in volume.

Winebits 243: Wine economics

We seem to have a theme this week, no?

? Consumers want to pay less: And no less than the guy who runs influential importer Frederick Wildman says so. Richard Cacciato told Shanken News Daily that, after the recession, ?[w]e saw a radical change in purchasing patterns almost overnight. ? Labels that were being sold for $75-$80 were repositioned down to $50-$60. For wines retailing at more than $20, we found ways to bring them in under $20. That created a perceived value in these products. ? Cacciato also says the recession forced Wildman, hardly known as an importer of cheap wine, to restructure its business to allow it to focus more on grocery stores and mass market retailers like Costco. If Wildman is doing this, what does it say about the increasing importance of grocery stores in the wine business?

? Why does it cost that much? Tim McNally looks at why a bottle of wine costs what it costs, and discovers that it may not have as much to do with the actual expense as we think. ?Wineries are trapped in pricing given the types of grapes they are working with, and where they are located. A great bottle of Napa Valley Oakville Cabernet Sauvignon may be perfectly acceptable to you in the $75 range, but move just a few miles north to Alexander Valley in Sonoma and that won ?t fly. ? We also hear about Tim ?s brief foray into the banking business, which sounds like it was a lot of fun.

? Bring on the sweet wine: California winemakers who want to sweeten their product can ?t add sugar; it ?s against the law. Instead, they add grape juice, and that mostly comes from the Thompson seedless table grape. And guess what prices for Thompsons are doing as the 2012 harvest begins? Going sky high, reports the Western Farm Press, with prices as much as 23 percent higher than 2011. Some of this is being caused by what looks to be a smaller Thompson crop, but it also points to increased demand as wineries ramp up production of sweet wine.