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Tag Archives: Treasury Wine Estates

Winebits 417: U.S. wine sales, cold beer, Big Wine

winenews

wine salesBarely any growth: U.S. wine sales continued to plateau in 2015, reports Impact Databank — up just .02 percent for the year based on the number of cases, following a 1 percent gain in 2014. The rest of the news is even worse, says the report: The “estimated volume increase represents the smallest rise in [22 years]. And after steadily increasing from 1994-2011, per-capita wine consumption is projected to decline for the fourth consecutive year, as Americans bypass wine in favor of spirits, RTDs and cider.” RTD is an industry term for ready to drink, like flavored beers and spirits. The Wine Curmudgeon, noting the wine industry’s obsession with raising prices and trading up over the past couple of years, isn’t surprised. What’s the most basic rule of economics? If prices increase, demand decreases. But which, obviously, seems to be OK with the wine business.

No cold beer in Indiana: An early candidate for the 2016 three-tier Curmudgie is the federal appeals court that ruled that Indiana is allowed to forbid grocery and convenience stores from selling cold beer while allowing liquor stores to do so. The Indianapolis Star said that the 7th U.S. Circuit Court of Appeals said there were legitimate differences between selling beer in a liquor store and selling it in a grocery and convenience stores, a point of law which I’m sure I would understand if I were a lawyer. As a wine writer, it’s baffling, and only points to the foolishness of three-tier.

Big Wine winespeak: The Wine Curmudgeon enjoys noting the public utterances of those in the wine business, particularly when they demonstrate how little so many of them seem to care about wine quality. Because what does quality have to do with profit? The most recent comes from the woman who runs Treasury Wine Estates’ operations in the Americas, in which she used “masstige” twice, said that a marketing deal with the Texas Rangers baseball team would help sell New Zealand sauvignon blanc, and explained why young men will buy wine if it has a convict on the label. Is it any wonder I get so cranky so easily?

The Treasury debacle, masstige wines, and what the consumer is trying to teach the wine business

winerant

Treasury debacleThe Wine Curmudgeon, despite his brilliance as a writer, is a lousy businessman. How else to explain that former Treasury Wine Estate CEO David Dearie earned A$2.4 million (about US$2.25 million) for running his company into the ground, while I have been giving away, for free, the wisdom that could have helped Treasury avoid this year’s 53 percent drop in profit?

One more time, for those who still aren’t paying attention: The U.S. consumer buys wine on price. The challenge for wine companies, whether multi-nationals like Treasury, Napa cult wineries, or the thousands of other producers around the word, is to add value so that the consumer gets more than their $10 worth. Some do it with cute labels and marketing; some do it with points and high scores; and the best do it by giving us $12 or $15 worth of wine for our $10. (Go here for almost seven years worth of examples of how the best do it.)

Treasury did none of those. Instead, it looks like it did the absolute worst possible thing — it charged us $12 or $15 or $18 for $10 wines, a technique called masstige that was part of its business plan. I spend some time on this in the Cheap Wine Book, though I didn’t realize what masstige was when I wrote it. Rather, I noted that wines that cost between $12 and $18 seem to offer the least value, “probably because producers don’t improve the quality of the wine as much as they increase the price and gussy up the label.”

Think of masstige as a cross between mass market products like Two-buck Chuck and Barefoot and luxury labels like high-end Champagne. Masstige is apparently very common in cosmetics, where the added value comes from the prestige a product provides because it costs more money. This approach may still work in cosmetics, where the value difference between Revlon and Clinique remains well established even though the products are quite similar based on what’s in the jar. But in wine, the idea that expensive is always better (as noted here and elsewhere many times since 2008) is something that the consumer has rejected.

Interestingly, I’m not the only one who has realized this. An analyst, discussing Treasury’s problems, said “the underlying problem in the U.S. is not inventory, it’s the health of the brands, because of underinvestment in marketing.” Which, as mentioned above, is one of the three ways for producers to add value.

Want to make money in the wine business? Treat the consumer fairly, and the consumer will reward you. That’s the lesson the recession taught, and it’s really not any more complicated than that. Which is probably why I never thought I needed to charge for the advice.

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