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Wine prices up, wine quality down in 2016?

winetrends
wine prices

“$12? Didn’t that wine cost $10 last year?”

Don’t expect good news for wine prices or wine quality in 2016, and it’s more than my curmudgeonly cynicism saying so. The wine industry’s best price forecaster expects price increases next year, while a wine blogger who has been spot on about decreasing quality over the last couple of years sees more of the same.

Wine prices, says Rob McMillan of Silicon Valley Bank, will go up slightly next year, citing what looks to be a reduced harvest in California over the past three blockbusters, low gasoline prices, and producer optimism that they can raise prices. In addition, says McMillan, the numbers so far this year suggest that prices have been increasing, even though overall sales have been modest.

Interestingly, he doesn’t use the word premiumization to describe what’s going on, given that McMillan was one of the first people to identify the trend, that U.S. wine drinkers are trading up to more expensive wine. In fact, he seems almost surprised that prices will go up, given that “the the world’s economies are still struggling and our own [economy] isn’t setting any record.”

McMillan doesn’t define slightly, but my guess is that we’ll see as much as a dollar or so on a $15 bottle of wine, not that it will be that obvious. Those $9.99 wines will go up to $10.99, but there will various discounts, like case and club membership, to soften the blow. Plus, we’ll see even more new wines in the $12 to $15 category, as producers entice wine drinkers to spend a couple of bucks more for the same kind of wine they bought before.

As to quality, let me quote my pal Steve McIntosh at Winethropology. “The wine world is going to hell in a handbasket,” he emailed me, citing this post, in which he details (and it’s excruciating) how California winemakers are bastardizing wines that cost as much as $20 so they taste the way a focus group thinks they should taste.

In this, his post dovetails with what I’ve tasted over the past year, as producers focus on manipulation to push wines in the focus group direction and paying less attention to grape quality and varietal character in the process. This has been the case not just for wines from California, but from France, Spain, and Italy. A distributor friend, who has been in the business for 20 years, said he has seen wine quality go backwards, toward where it was in the late 1980s and early 1990s. In fact, so many wines have been so poorly made that I’m thinking about posting negative reviews, something I never thought would be necessary. But these wines are so dishonest that someone needs to call them on it.

I expect a wine to taste like wine, and not what Steve calls cough syrup. But apparently that’s too much to hope for these days.

Update: Wine prices in 2015

winerant

wine pricesAt the beginning of the year, I wrote: “[T]he producer strategy for wine prices in 2015: Stealth increases — introducing new brands as well as new varietals and blends within existing brands to get us to trade up to a $15 bottle from $10, or to an $18 bottle from $15.”

The new brands bit was correct, but I missed on the stealth thing. Price increases this year, thanks to producers, distributors, and retailers eager to raise prices, have been anything but stealthy. They’ve been, plain and simple, price hikes like we haven’t seen in a decade. How about two Dallas-area grocery stores charging $16 and $18 for two French wines that cost $10 a year ago? Or a new Italian brand, priced at $12, that isn’t any better than the $8 Italian wine cluttering grocery store shelves? Or, and the saddest, a long-time Wine Curmudgeon California favorite that raised prices a little but also used much cheaper grapes to squeeze as much margin out of its product as possible?

Everyone I have talked to in the wine business has said the same thing: Get used to it.

• Forget the stronger dollar, which should make European wines cheaper. Producers are keeping the difference, and neither distributor or retailer is passing on any savings.

• Forget the past three record California harvests, which means none of this is about a phony grape shortage. In fact (and, as Steve McIntosh predicted in January), all those cheaper grapes are being used to cut costs, so that wine quality is suffering. I’ve tasted more crappy $12 and $15 wine this summer, bitter and unripe, than I have in years, and they’ve apparently been made with grapes usually used to make much cheaper wine.

• Forget the idea that consumers won’t spend money on something they don’t know. I tasted a $16 Spanish white, made with verdejo from the Rueda region, that tasted like pinot grigio, and I was the only one who thought it might not sell. I don’t know if arrogance is the right word, but I’m talking to a lot of producers who assume consumers will pay what they’re told to pay because the wine is so special. Special, of course, not having all that much to do with quality but with marketing.

Yes, producers can charge as much as they want for their wine. But there’s a difference between short-term gain and long-term profits, which is how the best businesses are run. When you run your business for short-term gain, you shouldn’t be surprised that wine sales have been flat for several years, or that consumers are more willing to try something besides wine, or that more than one expert is bemoaning wine’s future.

Just don’t say the Wine Curmudgeon didn’t warn you.

Winebits 404: Restaurant wine, distributors, direct shipping

winenews

restaurant wine One person’s inexpensive: One more example of how restaurants are out of touch with their customers when it comes to restaurant wine prices. This new Dallas restaurant is boasting about its reasonably-priced list, because, said a restaurant official, “We have a low mark up on our wines, so we’re priced fantastic.” That would be a wine list with most wines supposedly costing less than $100 (no website for the restaurant yet, so I couldn’t check). What would the official have said if there had been really expensive wines on the list? Is it any wonder, unless there’s a special reason to go, that the Wine Curmudgeon has all but abandoned Dallas’ restaurants? Besides, it’s more fun eating at home.

Bigger and bigger: It’s not just wine companies that are getting bigger, but distributors as well. Wine Industry Insight reports that the 10 biggest distributors in the country control more than two-thirds of the wholesale business, which makes the group more or less as dominant as Big Wine. Why does that matter to consumers? Because, thanks to three-tier, every wine sold to a retailer or a restaurant in the U.S. has to pass through a distributor, which tacks on as much as 25 percent to the cost of the bottle for their effort. Fewer and bigger distributors means less competition, which means that percentage won’t get any smaller any time soon.

Best practices: Want to know how to help your wine survive shipment, whether it comes directly from the winery or from an online or local retailer? This list, from Entrepreneur magazine, hits the highlights nicely, emphasizing how little wine likes heat, vibrations, and being left on a delivery truck all day. One overlooked point: Give the wine, particularly the pricier bottles, a chance to recover from the trip. The bottles need to rest after being bumped across the country, and letting them sit in a cool, dark room for a week or so isn’t a bad idea.

 

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