Winebits 350: Three-tier, wine prices, wine marketing
by Wine Curmudgeon Posted On
? No love for three-tier: The Wine Curmudgeon has much respect for the Wine Folly website, which does great work educating wine drinkers. Its recent post on the dreaded three-tier system was no exception, detailing what it was and how it worked with quality graphics and clear writing. I don’t know that it gave enough credit to Prohibition in three-tier’s formation, but it did discuss its beginnings in the late 19th century, which I didn’t know. And it did impressive work tying the cost of wine to the inefficiencies of the system. My only complaint: That it forecast the coming demise of three-tier, based on direct shipping, the Internet, and flash sites. It’s not that I don’t want three-tier to go away, but it overlooks three things — three-tier’s constitutional protections, which the Wine Curmudgeon has lamented many times, the system’s immense clout through campaign cash, and that direct to consumer sales account for less than five percent of wine sales in the U.S. That’s hardly eroding the system.
? “A giant sinkhole”: W. Blake Gray writes about the media’s immense joy in forecasting rising wine prices, which seems to happen every six months or so whether it’s true or not. The most recent example came after the Napa earthquake, even though the region produces just a tiny fraction of the world’s wine. Gray writes: “People just don’t have a sense of how enormous and international the wine business is — that if Napa Valley or Mendoza, Argentina or Barossa Valley, Australia fell into a giant sinkhole tomorrow, we would all be the poorer for it, but overall world wine prices would still not be much affected.” He also notes that many media types figure only rich people drink wine, and so deserve higher prices. I’m not so sure about the second; many of the media types who still get paychecks in this post-print world aren’t exactly paupers. My hunch is that it’s mostly crummy reporting. When a Washington Post writer proclaims that wine prices are skyrocketing when they’re not, and the Post is supposed to be one of the world’s best newspapers, it’s no surprise that everyone else misses the point, too.
? It’s not about the marketing: Producers in the French wine region of Bordeaux are running around in a panic because sales are down, and this report discusses how it will try to solve the problem through better marketing — some ?3m worth (about US$3.8). The Wine Curmudgeon, out of his great respect and admiration for Bordeaux wine, has a cheaper and simpler solution: Stop overcharging for your wine. It’s one thing to sell the best wines for hundreds and thousands of dollars a bottle, but when the everyday stuff costs $15 or $20 — and isn’t any better than $10 wine from California, Spain, or Italy — you’re not going to sell it, no matter how much you spend on marketing. One retailer, when I asked him why this was happening, attributed it to Bordelais greed. “If they can get it from the Chinese, they figure they can get it from the rest of us,” he said. Obviously, that isn’t the case any more.
I disagree with her when she claims “The 3 Tier System is purposefully inefficient.”
I have a writer friend who gets samples sent from producers on a regular basis. Sometimes it is a single bottle, sometimes a two-pack, three-pack even a six-pack or 12-pack. In each case, there is packaging. About half the time, it???s polystyrene foam that she can???t recycle. Now imagine tens of thousands of people getting their wine shipped to their houses. At a time when industries are trying to figure out ways to cut packaging and to create smaller carbon footprints, the packaging plus the fuel cost of shipping individual or small packages of bottles becomes staggering.
I know some people will say that we already get a lot of products delivered to our doorsteps this way. But a bottle of wine isn???t like a mattress or a painting that gets shipped once. It???s a consumable product that is replenished regularly. The current wholesale distribution system offers vast economies of scale with transport both to central (and temperature-controlled) distribution centers and to retail stores. A consumer can drive to a central location ??? a retail store ??? that has lots of options. And if she special-orders a wine which is at the warehouse, it???s delivered with a load of other wines, not as a single bottle, specially wrapped, in a single truck. But arguably, if that wine isn???t at the warehouse, she should still be able to order it from a winery or online store.