February 2 2010
No offense to Jon Bonné, wine writer for the San Francisco Chronicle, but the reader comments elicited by his recent Chronicle blog post entitled, “Why California Wines Aren’t Selling” are far more interesting and insightful than his rehash of Jon Fredrikson’s address at the Unified Symposium.
No offense to Jon Fredrikson either but his presentation, by most accounts, seems to be a recitation of what anybody who has read the news in the last year already knows – the upper-end of the domestic wine price spectrum is challenged.
I caveat the “no offense” part in regards to Mssrs. Bonné and Fredrikson because my point here isn’t an indictment on their work specifically – they happen to be the tableau; instead, I want to highlight what was a lengthy list of comments across a wide range of loosely related points that neatly typifies exactly what is going on in the mind of the consumer as it relates to the state of domestic wine sales.
Simply, when the source “food for thought” runs 640 words (as Jon Bonné‘s post did) and the responses run over 10,000 words, you better believe there is some wisdom to glean.
Net-net – there is a problem that all California wineries should pay heed to. The comments, for the most part, are a referendum on California wine (and value) with enough mentions of price, Chile and Argentina to make a California winery bean counter see red … for a long, long time.
Below are selected excerpts from the (at the time of posting) 175 comments – every attempt has been made to provide whole comments within their intended context and as they were presented chronologically. I have, however, cleaned up syntax and spelling errors as appropriate.
The comments stand by themselves so I have added no additional comment to the obvious.
The Wisdom of the Crowd
“Heavy competition from Chile and Argentina, offering many good wines that represent very good value. I like to support local industry, but the prices of decent Napa and Sonoma wines went into orbit long ago.”
“Prices (were) absurd even before the Great Recession. For example, Stag’s Leap single vineyard offerings were maybe worth (purchasing) at $40 a bottle, the price they were in the 90s. At $70 to $90 dollars today, (they’re) pretty easy to pass up. The wine didn’t get twice as good over the last 10 years.”
“With globalization and the exchange of knowledge in winemaking you are now able to get great wine from abroad (that scores around 90 points by the Wine Spectator) for less than $20. Why buy a comparable Californian wine for $40? I usually support local business, but when the price difference is so outrageous I’m sticking to getting a bang for my buck.”
“There is some subtle psychological resistance, perhaps even unconscious, that will not allow us to align ourselves with the wealthy … Napa and Sonoma types. It just doesn’t sit (or smell) right.”
“It’s pretty well established that there is not a strong correlation between price and quality in wine. If consumers learn this and buy wine with their palates rather than their egos, producers and consumers might end up better off.”
“There’s also a partial backlash against conspicuous consumption. I have friends at a winery that make (a) $45 Napa Cab that can go toe to toe with $80 Cab, but the winery has awful PR and never submits to wine writers, so unless people have tasted it, they are guaranteed to have never heard of it. They say customers who ‘graduated’ to more well known, more expensive wines are coming back to their winery to pick up the wine because they love it at the price, and are no longer trying to impress friends with expensive allocated wines. Instead, they’re trying to impress friends by finding well-priced obscure things that aren’t name dropper wines.”
“(California) wines are still the same quality as before, but we are getting better and better Argentinean / Chilean / Aus / NZ / Spanish wines at a better price point. Why pay more when you can get the same quality at a lower price?”
“There are plenty of good wines at $20 that can compete against wines that are in the range of $60 – $80…”
“It really shouldn’t have taken an industry conference for those in the wine biz to wake up and smell the must. As others point out, there are plenty of fabulous bottles from France, Spain, NZ, Argentina, and Chile to be had right now – for a lot less money than more expensive, lower quality California wines. And, many of those non-California wines even bring – horrors! – the joys of terroir with them.”
“No mention of the elephant in the room? Oregon and Washington wines are providing some very stiff competition. It is easier to do that when all the factors of production are less expensive in these other states.”
“We needed Fredrikson to tell us what we already knew 12-18 months ago? Any winery that is shocked at this news has been asleep for a while.”
“The problem with GOOD expensive wines is that they have to compete with mediocre expensive wines. Some wineries seem to almost declare themselves as high-end by just slapping on a fancy label and charging a high price. That worked in 2005, but not so much today.”
“I can get better deals on Chilean, Argentinean, French, South American and Australian wines …”
“Why are California wines not selling? It’s because you can get much better deals and interesting wines and much lower costs in anything that is NOT a California wine. They have simply priced themselves into redundancy.”
“There are simply too many tasty wines for the consumer to choose from today, this drives prices down. Except for some very famous French wineries, there are all competing for the consumer. Grapes can be grown almost anywhere, and the secret of making wine is no longer a secret. Result = huge supply worldwide. Think cotton t-shirts – they are all about the same, just some people who seek status will pay $50 for a designer t-shirt.”
“If you go to Costco and you can’t find a good wine for under $20 you are not trying. It does not have to be CA wine to be good, as we all know. Look to Argentina, Chile, Australia, New Zealand, Spain, Portugal, some Italian and, yes, even France for decent value under $20.”
“$13.99 - $15.99 is a great price point to get unique wine with quality and complexity to threaten the wines at $20 + that California is selling. The everyday values are Southern Hemisphere and unpretentious – hello Australia and Argentina.”
“If it is over $15 then make sure you are drinking someone else’s bottle. Do you say, ‘damn it’s only a grape so why so expensive,’ or do you say, ‘damn it’s only money and you can’t take it with you…’ What would Buddha say?”
“… Screw you JCrew farmer man. I’ll get my wine from France or Spain or Chile and get better character and flavor for half the price.”
“The California wine industry is in denial? HA! Of what? California built the Chilean, Australian and NZ wine industries. Our tax dollars paid for it – all straight out of UC Davis. Visit any winery in Argentina, Chile, etc. and ask how many have attended UC Davis – I guarantee you, you will meet someone EVERY time.”
“Mr. Fredrikson’s analytical work must always be looked at with a sharper set of eyes. The wine industry has scant in depth research and tends to paint each year’s data with broad strokes. Gallo has in-depth research, maybe the best in the industry, and knows what is happening, where, why, when, etc. and moves to capture opportunities. Few others do much besides go to gatherings, drink heartily and be amazed at everything. Read the article carefully and you will find that you learned little to nothing about the world of wine as a business which needs to show profits if it is to survive.”
“It took decades for people to realize that, ‘Wow, it’s not that bad’ is not the same as, ‘Wow, this is great.”
“The vast availability of very drinkable, inexpensive Australian, and Chilean wines is the reason I don’t buy much California wine. I would guess that for most people this decision is mostly economic, too. If California wines were more affordable fewer people would buy imports. The difference of course is that an acre of wine growing land in Australia or Chile is a fraction of the $50K an acre in Napa. California wines are more expensive because the cost of growing and processing grapes is higher than other countries. It’s a shame because California wines are as good or better than many imports. In tough economic times though, price means more than brand loyalty.”
“California wines didn’t just become unaffordable – they also became (for the most part) extremely unpleasant to drink. Way too much alcohol, tons of oak, massive fruit overwhelming any subtly or structure. I stopped buy CA wines a long time ago and focus on inexpensive Europeans – Italy most, but a fair amount of France, Spain and up-and-comers like Austria and Hungary. I’ve seen stories in the ag(riculture) press about CA winemakers that are getting the message, toning down the booze and fruit and actually trying to make structured, food-friendly wines again. If this takes off and prices come down, I’ll come home.”
“(California) wines seem to be extremely expensive compared to wines from places like Chile, South Africa, New Zealand, and Argentina. Even Italian and Spanish wines are usually a better value. Unfortunate. There are some great (California) wines, but, whew, they are not cheap!”
“A lot of the problem is many California wineries use ‘snob appeal’ as their marketing, then jack the price above reality. Why pay $60 bucks for a bottle of wine from a vineyard with attitude when you can get as good a wine from Europe, Washington, or Australia now for 1/3 the price and none of the B.S.?”
Posted in, Wine: A Business Doing Pleasure. Permalink | Comments (7) |
I have a small high end Pinot Noir winery Project in the Russian River Valley. We only sell direct, and each bottle retails for $39, $42 or $44. our costs (without any salaried personnel, is about 65% of the retail price. When you discount for Club members and cases etc it’s even less.
We love what we do, but there is sure not any money reward in it.. (Us two owners have day jobs!)
I have to laugh when the person complaining about the doubling of price in 10 yrs… that’s just about even after you factor in inflation.
These comments seem more like class warfare related complaints than anything else.
Of course Sonoma County Pinot Noir is a great deal compared to equivalent quality Napa Cabs.
I’m not from CA and I really don’t drink a lot of CA wine (I live in WA and can get plenty of good juice for under $25 and some great juice for under $50).
What strikes me about all the comments and the seeming reaction from the CA industry is denial. If the people say they are buying less $80 Cabs and the numbers say they’re buying less $80 Cabs then something has to give. One can bitch about the lack of profit margin for several reasons (property value, taxes, etc) but reality says that unless the industry evolves, it will die.
Josh @nectarwine
A few points.
—The CA wine industry is not going to die.
—The percentage of CA wine that sells for $80 is tiny.
—The percentage of Napa Cab that sells for $80 is higher but is still not the majority.
—When I see folks like Phelps and Shafer and Spottswoode cut the prices on their very good wine, then I will know that the “industry” is in trouble. Until then, it is some wineries, not the industry that is in trouble.
—Many wineries made very big profits in the early part of the decade. If they just break even now, they are still richer than most farmers in this world.
—I worry about small, new wineries more than any others because they have fewer established marketing channels and thus are having a harder time selling out.
—Still, when a winery has a discount sale to its customers, I don’t see that it is doing anything any different from Macy’s or Best Buy or all those companies that dump extra inventory at their outlet stores.
—Wine is an agricultural commodity. It has cycles just like all other commodities.
—None of us, except the uber-wealthy drink $50 and up wine on a regular basis.
—The sales of wine have dropped far less on a percentage basis than the sales of cars or houses.
Finally, it will be a good thing if prices stablize or even come down a little. Sure, there will be some who get squeezed in that process, but, bottom line, this is capitalism, and when you have thousands of competitors all chasing the same consumer, someone is inevitably going to get squeezed.
I too feel that many of the “high-end” Californian’s are far too over-priced. Just take a trip to Opus one day! Where I feel they do shine is in some of the Bordeaux blends, like HDV Belle Cousine. It’s one of the best I’ve had in the last year. There’s some other great boutique wineries to speak of, but the notable big names are far too fruity, lack in depth and complexity, and again are much too over-priced. Hopefully this makes some of the big guys wake up and look into some more old-world wine making techniques, where the terroir and the grapes makes the biggest contributions to a wine.
Rama, while I agree with you in part regarding too fruity CA wines, there are scores of people like me who feel the same about Burgundy. If I could find a red burgundy under $40 that was drinkable, I’d be all over it. I’m still looking…
I completely agree when you said, “There are plenty of good wines at $20 that can compete against wines that are in the range of $60 – $80…”. Some of the best wines I have ever had have been in the $20 range. In fact (and most people will disagree), my favorite wine can be purchased for $9 (on sale). And I’m not a cheap person by any means.
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Out of all those comments, very few hit on what is really driving the cost of California wine through the roof. There is a lot of belly-aching as to why they can’t make a good $10-$15 dollar wine. Everyone glosses over what is really driving costs up.
They way I see it, there are two factors. One is the cost of production is much, much higher. Land is way, way more expensive, along with labor and materials. Add to the issue of irrigation, and water isn’t cheap either, and you begin to understand why California wine is more expensive as compared to international wines. Second, the cost of living is higher. Taxes, including personal, corporate, and ad valorem, are some of the highest in the nation. Then, to exacerbate the problem, the state raised taxes recently, further increasing the costs of production, and widening the gap. Farmer Bill growing grapes for ABC winery has to charge more so he’s not eating ramen noodles and bologna for dinner at night. It’s a vicious cycle that doesn’t have a simple solution.
Trust me, if I knew I could make as much money in the wine industry, with comparable costs of living as Austin, TX, I’d move out there in a heartbeat. The fact that my rent would double, or possibly triple, for the same place I’m living in now prevents me from doing so.