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Category Archives: Wine trends

Are we facing a cheap wine crisis?

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cheap wine crisis

“What happened to all that great $10 wine I used to drink?”

What if most cheap wine tasted mostly the same — the reds with sweet fruit and almost no tannins, and the whites a jumble of fruit and sugar, and maybe (or maybe not) a little crispness?

That prospect — terrifying as it is to those of us who care about quality wine we can afford to buy — is not as impossible as it sounds. The quality of too many of the cheap wines I’ve tasted this year, combined with a number of interviews with wine business executives, suggests the possibility of a $10 wine world dominated by just that kind of wine.

In 2013, reports Nielsen, wine priced $10 to $15 more than doubled the sales growth of wine from $6 to $10, and the average price of a bottle increased to $8. Contrast that with sales during the recession, when just the opposite happened. As Rob McMillan of Silicon Valley Bank told me, “I see this as reflective of the economy. There are improving sales conditions compared to last year… [Wineries see] improved opportunity in future years as consumers trade up again. I know the last part won’t make you happy, but the worst segment today is right below $10.”

We’re not there yet, but here are three reasons why we could eventually face a cheap wine crisis:

• Cheap wine production is dominated by the handful of biggest wine companies, whose reason for being all but guarantees that kind of technically correct but simple wine. Just three brands — Barefoot, Two-buck Chuck, and Yellow Tail — account for 8 1/2 percent of all the wine sold in the U.S. each year. Trinchero Family Estates, whose labels include Menage a’ Trois and Sutter Home, has five percent of the U.S market, according to the 2014 Wine Business Monthly top 30 wine companies ranking. How many of us have even heard of Trinchero?

• The biggest companies, thanks to economies of scale and sales volume, can be profitable selling an $8 bottle where smaller companies can’t. Constellation Brands, after all, is a $4.9 billion company. So the smaller producers, who often make the most interesting cheap wine, have to find a more profitable price niche. Increasingly, as McMillan noted, that’s $15 and up.

Increasing consolidation among distributors. This means fewer and bigger distributors, who prefer to work with the biggest producers. So even if a smaller company can make money with cheap wine, it may not be able to find a distributor to sell its wines to retailers. And, if it can’t find a distributor, it can’t sell its wines through retailers and restaurants because of the restrictions imposed by the three-tier system that governs U.S. wine sales.

Not encouraging news, certainly. But many people were predicting the end of quality $10 wine in 2007, and we know what happened then — the beginning of the golden age of cheap wine.

Image courtesy of The Economist’s More Intelligent Life blog, using a Creative Commons license

“Our panel of experts:” Irony and non-winery wine clubs

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wine club expertsThird-party wine clubs — those that aren’t part of wineries — have always made the Wine Curmudgeon smile. How about the the website that rates wine clubs, and that also rates the wine clubs that the site operates? Or the wine club that offers “first-class” cabernet sauvignon from Spain, a concept that makes as much sense as coming here to find cult wine recommendations from Napa Valley.

Typically, most third-party wine clubs don’t tell you the wines you’re going to get or how they pick the wines you’re going to get. They trade on the group’s name, but are otherwise separate; hence a  newspaper wine club is a marketing tool that has nothing to do with the newspaper’s wine reporting. Mostly, there’s flowery language — “small-batch wines of real flair and value,” which means absolutely nothing when you try to parse it — and lots of promises about how good the wines are. Plus tasting notes, because all wine needs tasting notes, doesn’t it?

Which makes me wonder: Most of us wouldn’t buy shoes this way, sight unseen and trusting to someone else’s judgement. So why would we buy wine this way?

My newest smile is Global Wine Company, which runs the New York Times and Washington Post wine clubs plus those for retailer Williams-Sonoma, More and Food & Wine magazines, and celebrity chef Michael Mina. Check out the people who run the company — accountants and bankers, and a woman who helped make the PowerBar famous. There is no mention of the “panel of experts” who pick the wines, and about the only wine-related information I could find was this: “GWC handles all global wine sourcing, state compliance, and customer fulfillment, which enable partners to expand their brands into wine and drive recurring revenue.”

Mmmm, drive recurring revenue. How yummy does that sound?

Update: How much should an everyday wine cost?

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Update: How much should an everyday wine cost?How much should an everyday wine cost? Between $5 and $12, according to the poll that ran on the blog and that you can find at the bottom of this post. Thanks to everyone who participated. Several thoughts about the results:

• The $5 to $12 range, of course, is completely at odds with the wine industry’s view of how much everyday wine should cost — $12 to $18. That range came in second, but it wasn’t particularly close. Yes, this was not a scientific effort with margins of error, and yes, the results were almost certainly skewed because it was hosted by someone whose reason for being is cheap wine. But I was still surprised. I thought $12 to $18 would win, because that’s what the experts keep telling me wine drinkers want. But sometimes even I forget wine drinkers are usually smarter than the experts.

• Ultra-cheap wine, less than $5, finished fourth, barely ahead of expensive wine. This was also surprising, given how much of this wine is sold each year — some 5 million cases annually for just Two-buck Chuck, the $2.99 (or whatever) wine sold by Trader Joe’s. Either $5 fans didn’t do the poll, or many consumers see Two-buck Chuck and its ilk as something to keep in the fridge when they want a glass, but not necessarily something to open when they want a bottle of wine with dinner.

• Fewer than 2 percent of the votes were cast for expensive wine. Which also surprised me. I guess I need to remember why I do this and why so many people read what I do.

• The comments were almost as much fun as the poll, thoughtful and well-written (you can find them at the link at the top of the post). How about the guy who makes his own wine so he doesn’t have to pay for it? Or the several intelligent discussions about wine quality and price? Which is another reminder that the wine business misses an opportunity when it underestimates the intelligence of its customers.

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