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Wine prices in 2016

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wine prices in 2016Wine prices in 2016 won’t necessarily be higher or lower; instead, they’ll be more confusing. That’s because more retailers will move to tier pricing, where each wine has two or three or even four prices, making it that much more difficult for consumers to figure out what’s going on.

This approach, which grocery stores have used successfully for the past five or six years, features a combination of sale prices, club prices, and quantity discounts, and it will become more common for a couple of reasons. First, the big chains like it — for example, BevMo, with 155 stores on the West Coast and in Arizona, offers a regular price; a cheaper, club price; and sales prices. Spec’s, with 160 stores in Texas, has cash, credit, club discounts, and sales prices. And World Market, once a bastion of fairly priced cheap wine, now has so many prices — as the photo shows — I’ve stopped shopping there. The Matua, for example, is $10 or $11 elsewhere for one bottle.

Second, it makes price comparison that much more difficult, and retailers don’t like price comparisons. Showrooming, where shoppers check prices on-line before they go into a store, makes retailers crazy. But if you’re not sure what the price in the store really is, showrooming becomes less effective. Third, tier pricing makes it seem like the product is cheaper than it is. If a bottle of wine is $12.99 list, $10.99 with your club card, and $8.99 if you buy six bottles, you’re more likely to focus on the $8.99 price, even though most of us will never buy six bottles at one time.

Fourth, no one is sure where prices will go in 2016, and tier pricing allows retailers to hedge their bets. Christian Miller of Full Glass Research in Portland, who studies wine pricing, says he expects prices to be flat between $8 and $15 even if some retailers want to raise them. That’s because the biggest distributors and retailers will keep suppliers and producers from raising prices, since the former can still make money on the smaller margins — and higher sales — that come with lower prices.

There is also evidence, says John Gillespie of the Wine Opinions research group, that the $10 to $15 range is still the most attractive price for wine drinkers, regardless of all the talk about premiumization. If that’s the case, then retailers will want to keep prices steady.

In addition, there are a couple of wild cards for wine prices in 2016:

• Several retailers I talked to, including one of the biggest in the country, said price resistance seems to be holding at $25 and up, and some high-end producers who raised prices last year were discounting their wines at the end of 2015 to get rid of excess inventory.

• Will the strong dollar, which should make imported wine cheaper, do that, or will importers and distributors keep the difference for themselves? If they do, then retailers will have more leeway on pricing for domestic wine.

• The California drought, which cut yields for some varietals in some areas in 2015. No one is quite sure what this means to pricing, either this year or next. If higher prices for grapes, thanks to the drought, force wine prices up, will consumers trade down instead of paying more?

Is $15 wine the new $8 wine?

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$15

“Why does this $15 wine taste a lot like that $8 pinot grigio I bought last week?”

Is $10 wine the new $100 wine?” was one of the best-read posts on the blog at the beginning of the recession, explaining why cash-strapped consumers were trading down — and that they were shocked to find that wine quality at $10 was much better than they had been led to believe. Today, as we deal with a glut of overpriced and poorly-made wine, often by reputable producers, it’s my sad duty to ask: Is $15 wine is the new $8 wine?

Over the past 18 months, I’ve tasted so much junk at $15 that even I’m surprised, and I’m the one who included a section in the cheap wine book that said that the $12 to $18 range — “the province of ‘Big Wine’ marketing — offered the least value. But what I’ve tasted since the end of 2014 has been even worse than that, $8 of value dressed up in a $15 bottle.

How has this happened?

• A determined effort by producers, mostly big but also smaller, and in regions like Lodi and the less well known parts of France, to separate what they make from the so-called “cheap wine” that we’re not supposed to be drinking. They’ve done this by creating new products with flashy labels that are made the same way as their old wines and at more or less the same cost, but retail for more money. This way, they’re creating the impression that the new wine is worth the extra money, when it’s mostly the emperor’s new clothes. Or, as a boss at Treasury Wine Estates calls it, “masstige.”

• Wretched grapes. Those of us of a certain age remember when wine was made with unripe and poor quality grapes. Unripe grapes gave the wines a green, almost crab apple quality, and poor quality grapes left the wines thin and bitter. Those grapes, which seemed to be long gone, are back and particularly in whites. I’ve tasted $15 chardonnays and pinot gris that were practically gaggable, the sort of wine you spit out and wonder what the producer was thinking.

• The increase in grocery store wine sales. This means we’re buying more wine on our own, without help from knowledgeable retailers. And that means we have to depend on the front and back labels more than is good for us. And if the front label is cute and the back says smooth and chocolate, we’re sunk, and end up paying more for the wine than it’s worth.

There is a cynicism at work here that’s more depressing than anything else, and something that wine — even when it did these sorts of things — never really enjoyed doing. But those days seem to be over.

Winebits 411: Wine prices, Chinese wine, red blends

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wine pricesExpensive wine prices: Or, as S. Irene Virbila wrote in the Los Angeles Times, a look at old Kermit Lynch newsletters finds a “…breathtaking change in wine prices over the years. Over the course of three decades or more, prices go up, of course. But 10 times in some cases?” Lynch is the celebrated importer whose name on a French wine label is reason to buy it regardless of varietal or region, and Virblia has tracked price changes for several of his wines since the early 1980s with depressing results. Given that cheap wine prices have not increased 10 times over 30 years (maybe doubled, at most) and that the cost of wine production has remained remarkably stable over that time, this speaks to the increased demand for high-end wines since then, and especially for wines with pedigrees from experts like Lynch.

So long, China: Remember when China was going to save the French wine business? Not now, says the Reuters news service. “Now wine is being sold below cost, some is going bad sitting for long periods in poorly maintained warehouses and decent Bordeaux wines are going for 15 yuan [US$2.50] a bottle.” Not that the Wine Curmudgeon warned the French about this, that raising prices to gouge the inexperienced Chinese had dangerous long-term consequences — but what do I know? The Chinese market has been hit by what passes for a recession there as well as the government’s continuing crackdown on corruption, in which wine bribes play a huge part. By the way, those “decent” Bordeaux wines that are selling for $2.50 in China cost 10 times that much in the U.S.

Red blends take over: The popularity of red blends — which means, in most cases, sweet red wine — continues to rise, reports Nielsen. They accounted for more than 13 percent of the $13 billion that consumers spent on table wine during the 52 weeks ended Sept. 12, 2015, up from 11 percent in 2011. How important is that change? As I have written before, it’s almost unprecedented, with red blends the third biggest seller in the U.S. behind chardonnay and cabernet sauvignon in U.S. grocery and super stores. Interestingly, the Nielsen report doesn’t use the word sweet to describe the red blends, since so many producers don’t identify the wines as such. But we know what’s going on, don’t we?

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