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October 4 2009
There is something quixotic about falling in love. Since time immemorial couples have captured it and drunk its nectar yielding a heady absence of rational thought coupled with a passionate sensibility that anything is possible. For many, love is impossibly addictive—always seeking the freshness of feeling that comes from giving yourself over to something that is bigger than you. For others, the drunken song that empowers but renders us helpless grows into something stronger, deeper, and lasting.
In many respects, wine enthusiasm isn’t much different than falling in love – it’s elusive, it’s mystifying and it can cause a life-long chase for the alchemy that occurs when je ne sais quoi meets up with time, circumstance and effort.
I was a 2nd round judge for the winemaker promotion portion of the recently wrapped up Oregon Cuisinternship program. The eventual winner of the contest, as selected by Lynn Penner-Ash, the hostess for the one-week internship, from Penner-Ash winery, probably saw the same thing that I did. David Katz and his girlfriend Virginia, from Los Angeles, did an amazing trick – they managed to capture a sense of love, of passion, a feeling that anything is possible and they married it with wine. For that, they earned the one week harvest internship at the winery with Lynn.
I caught up with David and asked him to elaborate on his interest in wine. Katz noted, “Every time I have been to a vineyard, I always leave having learned a great deal. I love the idea of having to take a risk on something that you had to work very hard on in order for it to succeed. All the elements have to come together in just the right way to yield that amazing bottle of wine.”
True words, David, true words. And, he unwittingly also described the process of sustaining love over a period of time.
Congrats to David and Virginia. May they continue to find wisdom in the glass and nourish that drunken song that comes with being in love, for the long haul.
October 1 2009
These days, winery success stories happen about as frequently as a DRC tasting at Safeway. Yet, there are success stories to be found in the far-reaching corners of the wine business. For example, private-label wines are hot and according to one insider, business is “booming.”
It’s an acknowledged reality that terroir or land-driven wineries with an established brand will come through this economic climate a little frayed, but alive, with some earned wisdom moving forward. Wines that emphasize brand before the land coupled with good distribution will be just fine and probably stronger. And, labels that are value-driven and hitting the right price points are doing extremely well and growing.
If a winery doesn’t fall into any of the above buckets, well, it seems the times are tough.
While the mainstream media has a gallows humor based fascination with the “death” of the high-end, what they haven’t discussed is where exactly the growth is coming from in the “value” and “trading down” equation. Yes, I understand that under $20 wines are selling, and $8-$12 dollar wines are selling even better, but what kinds of wine are moving?
Based on interviews with Dana Fehler from Adler Fels and Lisa Giglio with Sonoma Wine Company, it seems private-label wines, an infrequently observed niche in the wine business, are driving much of the “value” segment.
Most casual wine lovers understand the stratification of independent winery versus corporate owned winery, and even the negociant model, but the tale of the tape rarely reaches into the private-label business, a segment so benign that it doesn’t even rankle the wine purists—those that frown upon corporate ownership of wineries and brand development.
Yup, private-labeling is an area of the industry that moves along in quietude outside of the brand and land fray.
Adler Fels Winery and other wine companies that predominantly create private label wine for retailers are seeing tremendous growth in their business. Some reports indicate business is up 25% or more in this sector. According to Dana Fehler, the Sales & Marketing Manager at Adler Fels, “Business is booming.”
Head to a Trader Joe’s or a Cost Plus with a discerning eye and you’ll notice it as well.
On a recent trip to Trader Joe’s I counted at least seven different Trader Joe’s branded wines in addition to a raft of private labels not seen anywhere else at retail.
A recent interview at RJ’s Wine Blog with Doug Bell, one of two wine buyers for Whole Foods, indicates the organic grocery store chain has in between 90-100 private label brands in their store at any given time.
Fehler notes, “Many major grocery chains across the nation have come to us this year asking for multiple private labels to compete with major national brands across all categories.”
Every third-grader knows Newton’s Law of Motion – for every action, there is an equal and opposite reaction. With the trending we’re seeing in the wine business – increasing wine consumption, sales velocity at lower price points, increasing amounts of wine on the bulk market, and the 3-tier system shutting down on taking new brands, the equal and opposite reaction is growth by those that can capitalize on the equation—large retailers.
The deductive reality is that women buy the majority of wine, the majority of wine is purchased at places other than a wine shop and large retailers are continuing to try and capitalize on earning a greater share of the consumer wallet with rising wine consumption. Voila! Private labels. And, a significant benefit to private label wine is the margins are better for the retailers because they “clear” the wine into a state, paying a distributor a fraction of the cost instead of traditional mark-up, and consumers can’t price shop the wines because they aren’t sold elsewhere – and that equals more profit.
So what does this all mean for a wine consumer? I’m not sure it means anything on a granular, immediate level—these ebbs and tides happen in cycles. However, at a very high level the trends are interesting:
1) The wine industry is unwittingly feeding competition between the private label wines, driven mostly from the bulk market, against corporate wines at the same point of sale – big box retailers. It’s like Dad putting two brothers into the ring to box each other, knowing that he’ll benefit from the prize money either way.
2) “Clearing” wines into a state by a large retailer is hardly ever discussed, but frequently occurs. This “2.5” tier model certainly allows programs like winery-to-retailer direct-to-trade to gain larger mindshare, if not a bigger foothold, as smaller retailers look to continue to differentiate and compete against the big box retailers.
3) Smaller wineries with their own vineyards, caught with existing inventory, are likely reducing the size of their production, declassifying wine and selling it on the bulk market, particularly because a 2nd label of their own creation (to maintain “brand” and price integrity of the main label) will still have a difficult time earning distribution and nobody wants to get caught holding the bag twice.
4) Quality wine, already notable in large chunks of the under $20 wine section, will seemingly get better and better as higher-quality finished wine finds its way into the secondary market.
5) Several of these new to newish private labels are one 94 point score (or a rumor about origin) away from creating a buying frenzy
Perhaps the biggest factor that I see is the notion that smaller wineries will reduce the size of their production trying to right-size with demand for ’09 and beyond.
The obvious signs point to luxury wines getting rarer and rarer in quantity. Are 2000 case wineries destined to become 1000 case wineries? 1000 cases will become 500 cases?
Can it be an eventuality that the divides in the wine market will continue to grow stronger and sharper? The division between enthusiast and the elite will grow wider? Wines of secondary provenance will continue to be the introduction and, perhaps, the placeholder for most wine enthusiasts while the luxury wine market becomes more unobtainable, based not on price because of the illusion of quantity, but rather strictly based on quantity?
It’s sport to predict when and whether the high-end of the wine market will come back. Of course, consumers will come back to it, eventually. We always do. In my mind, that’s not the question. The question is: What will we come back to?
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