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Category Archives: Wine news

Big Wine strikes again

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Big Wine

“Who do we want to buy next?”

That E&J Gallo bought J Vineyards, the highly-regarded California sparkling wine producer, last month was shocking, but it did make business sense. Gallo, for all its vastness, doesn’t make high-end bubbly and doesn’t have many successful restaurant wine brands, and J does and is. Plus, J owned 90 acres of prime Sonoma vineyards, making the deal even sweeter for Gallo.

So how to explain this week’s news that The Wine Group, second-biggest to Gallo among U.S. producers and with even less of a critical reputation, bought the fiercely independent and much beloved Benzinger Family Winery? The Wine Group has never shown any desire to make wine not sold in grocery stores, and its two biggest brands are Franzia and Almaden, the five-liter box cash cows.

Call it one more step in the Big Wine-ing of America:

The increasing consolidation in the U.S. wine business, something I wrote about at the beginning of the year. It is getting harder and harder for wineries that make less than one-half million cases to find distributors and space on store shelves. Benziger makes less than 200,000 cases a year, which wouldn’t even make it the biggest producer in Texas, and J sells only about one-third of that. Said the owner of a leading California independent: “My guess is that a winery really needs to be above 200,000 cases to really get the attention of a distributor. But maybe 500,000 is the new 200,000?” A distributor told me: “There are too many labels fighting for too few spots on the shelf or wine list. It’s crazy.”

• Family and independence, two hallmarks of the California wine business since the 1980s, aren’t enough anymore. These are just the latest sales involving long-time family wineries, which saw an opportunity to cash out to avoid succession problems, solve family disputes over winery operations, or to take advantage of Big Wine’s deep pockets. Sale prices weren’t disclosed, but one report said the J deal may have been worth as much as $90 million, which would make the Benziger price well into the hundreds of millions of dollars. Even of the sale price was half of that for each, which is probably more accurate, that’s a winning payout.

• It’s all about the land. Benziger, with sales of less than $10 million, is so small compared to the multi-billion dollar Wine Group that there is almost no way it could affect the parent’s financial performance. This makes the deal even more baffling, unless it was for the 200 or so acres of quality Sonoma vineyards that were part of the sale.

Will Big Wine run their new companies successfully? Certainly, if success is defined by profit. Otherwise, expect the new owners to do what new owners always do, despite best intentions and protests to the contrary — cut costs, eliminate unnecessary products (so say good bye to J’s lovely pinot gris), and “rationalize” operations. Gallo and The Wine Group won’t ruin J and Benziger the way Sears destroyed mail-order clothing retailer Lands’ End, but they won’t be the same wineries they were before the sale. That’s something we’ll have to learn to live with, because consolidation is going to be with us for a very long time.

More about Big Wine:
How to buy wine at the grocery store
Downton Abbey claret — wine merchandising for dummies
Big wine tightened its grip on the U.S. wine market in 2013

Winebits 389: Three-tier, lower alcohol, Prosecco

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Three-tierNevermore! What happens when the state booze cops arrest alcohol vendors at a food and wine event? The event gets canceled, and no one is quite sure what happened. That was the case at one of Sacramento’s most popular festivals, when the 2015 event was canceled after the 2014 arrests. Organizers said wine and beer vendors didn’t want to participate this year, given the threat of arrest. Why were the vendors arrested in 2014? Something to do with what are called tied-house laws, which regulate the relationship between alcohol producers and alcohol retailers and are integral to three-tier. The story is fuzzy about exactly what happened, but tied house enforcement can be capricious and over stupid things — even something as simple as a retailer using a producer logo that he or she got from the producer, and not through the distributor.

Not just for wine writers: The knock against the push for lower alcohol wines is that it is being powered by elitist wine critics (overlooking the fact that the most elitist of us started the high alcohol thing). The latter insist that consumers either don’t care or like high alcohol wines. Hence the welcome that Australian researchers, working with Treasury Wine Estates and a leading British retailer, are trying to develop lower alcohol wines that consumers will like. Said one researcher: “We would love to produce a wine with zero percent alcohol that tastes like 15 percent, but even if we get a quarter of the way, that would be good. Ten percent or 5 percent is also desirable.”

Alternative Prosecco: Apparently, there is a Prosecco shortage, though the Wine Curmudgeon has a difficult time believing this when he sees row after row of Prosecco, the Italian sparkling wine, on grocery store shelves. In which case, several leading Prosecco producers will make Prosecco-style wines from other countries, showing just how un-wine the wine business has become in its quest to confuse us to make money. One of the brands, called Provetto, is from Spain, and sounds about as tasty as its name implies. It will also sell for about the same as a quality bottle of cava, the Spanish sparkling wine, which raises all sorts of questions that would make me too cranky if I answered them.

 

Winebits 388: The world hates expensive wine

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expensive wineThe cyber-ether has been full of vitriol for expensive wine over the past month, so much so that even the Wine Curmudgeon has wondered what’s going on. Some of these posts make me seem like a “bring on the $100 samples” member of the Winestream Media:

Damn you, Napa cabernet: Something called Vox Observatory, which is part of the company that owns the chi-chi Eater food site and the SB Nation sports blogs, posted a video called “Expensive wine is for suckers.” The results? Not only is expensive wine overpriced, but many of the tasters said they liked the way the cheap wine tasted better than they liked the way the expensive wine tasted. One even went so far as to say that she was glad she had cheap wine taste. I wonder: Would Eater have run a similar post, citing the cheap and simple qualities of grocery store tomatoes over $15 organic, heirloom tomatoes? Of course not. This post speaks directly to the cliches the wine business and the Winestream Media reinforce about wine, and how their approach intimidates people who aren’t wine drinkers.

Grocery store cheap wine: The cheapest offers the best value, according to a study done among British supermarkets. Almost two-thirds of the wines sold at Lidl and Aldi, known for their low prices, were called a good value; at least half the wine at six other chains was judged a poor value; and three-quarters of the wine at the bottom grocer was called a poor value. This is an amazing result, and not just because so much wine in grocery stores is so ordinary. It speaks to the concept of premiumization, and that producers and retailers aren’t giving us better wine when we pay more money, but the same wine in better packaging and with more expensive marketing.

The placebo effect: Think your pricey wine tastes better than the cheap wine I drink? That may be because you want it to, says a study in the Journal of Marketing Research. Says the report: “Expectations truly influence neurobiological responses,” and there are even brain scans to prove it. Again, not a surprising result, and especially for those of us who have spent our professional careers trying to educate people on the differences between cheap and expensive wine.

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