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

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.

  • Jason

    Um….Dearie was fired because his team massive overbought Moscato in the 2011 vintage. As to your “masstige” claim, to my knowledge, they were looking to build or buy a “masstige” brand since they didn’t have any of their own!

  • http://profile.typepad.com/jeffsiegel Jeff Siegel

    Sadly, I don’t make this stuff up, Jason: “I think he was the appropriate person to kick the company off as a public company,” Mr Rayner said, adding that Mr Dearie’s strategy of focusing on luxury and mass-market prestige, or “masstige” brands, was appropriate.” It’s in the link at the analyst quote.

  • http://www.fermentationwineblog.com Tom Wark

    EXCELLENT!!!!

  • https://wineliferadio.com Keith Miller

    You say : “Want to make money in the wine business? Treat the consumer fairly, and the consumer will reward you”.
    In this case it is Treasury who needs to treat the Retailer and or Restaurant fairly so they want to purchase the wine from them. And the Retailers etc.. that are buying over priced wines and putting them on the shelves….shame on them!!!
    Business people need to train the wine buyers… they are responsible for taking care of the Wine Consumer.. Cheers, Keith Miller aka Wine Life Radio

  • http://www.foursistersranch.com Serena Friedman

    So let’s look at Paso Robles wines: affordable. High quality. Premium
    but at reasonable prices…..Napa South…., many smaller vineyards
    and wineries passionate about what they grow and produce for the
    Consumer .. Here there are grape growers and wine producers
    with an attitude of down to earth friendliness. Give Paso
    wines a chance and come on over to visit. Serena
    Four Sisters. Ranch

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