Category:Wine trends

Wine premiumization, wine prices, and quality

by Wine Curmudgeon Posted On

Wine premiumization
• The Wine Curmudgeon Wine Sample Index and the wine slowdown

Wine premiumization: Prices keep going up, quality keeps going down, and fewer people are drinking wine. Am I the only one who thinks that’s not a coincidence?

This is how deeply premiumization has upended the wine business: A reader emailed me to say I shouldn’t use the prices I paid for wine in my reviews. Instead, I should use the prices on an industry website, which are typically more than what I pay.

What twisted wine universe do we now live in? Is premiumization so deeply ingrained in the system that cheap wine should not exist, even if it actually does?

Premiumization is the idea that consumers are trading up, that we’re willing to pay more money for a better quality bottle. In theory, this makes perfect sense. Of course I will pay $15 for wine if I know it’s going to be appreciably better than a $10 bottle.

But theory, to paraphrase the economist John Maynard Keynes, is for dead people. The wine business, in its dedication to short-term profit at the expense of long-term growth, is selling us more expensive wine that isn’t appreciably better. It just costs more money, and we’re supposed to accept that as the natural order of things.

I got a sample of an Italian white wine this summer, which came in a flowery bottle with an even more flowery name. My tasting note? “Very nicely done $10 blend (chardonnay, pinot bianco) with a little lemon, minerality, and crispness. For some reason, the suggested retail price is $20, making it one of the most overpriced wines I have ever tasted.”

It’s not just me

A friend of mine, who has been selling quality wine at Dallas’ best retailer for more than 30 years, told me he no longer understands how wine is priced. He cited two examples: Spanish albarino, once $10 and $12 and delicious, is now $18 and $20 and not very albarino-like, while French picpoul, “which should cost $8, costs $16.” These are wines that people in Spain and France drink daily; in the U.S., they’re priced for special occasions.

Or, as a review of a $24 wine on Wine Industry Insight put it recently: “Thin, acidic, and lacking fruit.” How far has wine fallen when $24, which used to be enough to buy something fabulous, now only pays for thin and acidic?

I write all of this in the shadow of the end of the wine boom: Flat sales, more young people who see wine as something for their parents and grandparents, and experts who say drinking will kill us as surely as cigarettes. It’s what Rob McMillan of Silicon Valley Bank calls the new normal – that wine consumption won’t return to what the industry wants. Instead, he writes, “don’t be surprised if young consumers drink less alcohol tomorrow, and those who do drink continue to embrace craft spirits and beer instead of wine.”

Given all of this, shouldn’t it be time for the industry to put an end to the premiumization that gives us $8 worth of wine for $15? If wine is in a fight for its future, shouldn’t it focus on selling well-made and affordable products in response to the competition from craft beer and spirits?

That makes perfect sense

But I long ago stopped expecting that sort of wisdom from wine. In this, I thought I saw the end to wine premiumization several times over the past couple of years, and I’m not the only one who did. But just when you think it has run its course and this foolishness can’t go on forever, it does a Freddy Kreuger. How else to explain when the man who runs Jackson Family Wines wants the federal government to eliminate his competition with a tariff wall?

All of which leads me to wonder how far we are from something that wine economist Mike Veseth has predicted for several years: That wine will become like opera, which was once mass entertainment but is now reserved for a wealthy elite.

That’s a new normal that won’t make anyone happy.

Photo “tokyoWeek1 047” by nate_uri is licensed under CC BY-NC-SA 2.0 

More about wine premiumization:
• “Reasonably priced at $40:” Wine premiumization is out of control
• The premiumization backlash
• Has premiumization damaged wine’s popularity?

Wine Curmudgeon Wine Sample Index: Heavy weather ahead for the wine business?

by Wine Curmudgeon Posted On

wine sample index• Premiumization’s role in the wine slowdown

It’s not scientific, but the Wine Curmudgeon Wine Sample Index indicates that the wine slowdown is here

The wine slowdown, much written about and much discussed, has officially arrived. How do I know this? The Wine Curmudgeon Wine Sample Index.

The wine sample index is my highly anecdotal and decidedly un-mathematical system for gauging the health of the wine business. When business is good, and no one needs a cranky ex-newspaperman to review their wines, I get fewer samples. When business isn’t good, then I get more samples – including bottles from high-end producers who usually dismiss me as not worth their time.

And this spring and early summer, I have received more samples than I’ve gotten since the recession, maybe three or four times the usual amount.

As noted, this is highly anecdotal and decidedly un-mathematical, and I’m not sure the blog’s official statistician would approve. But the pattern has been there since the blog started in 2007. During the recession, I got more wine than I could drink, including $100 bottles. But the samples dried up in the couple of years after the recession ended, when wine sales recovered and premiumization took hold. I don’t write about the kind of wine that has dominated the market since then, so why send me something to review?

But now, apparently, they need me. I’m getting samples from producers who haven’t contacted me in years, and they’re sending wines that cost $25 and more.  Just the other day, in fact, an email me offered a case of wine, only one of which cost less than $24 and five of which cost more than $30. Hasn’t the marketer ever read the blog?

Also intriguing

More samples are coming from people who want me to write about their wines in the hope that my review will generate retailer interest as opposed to sales. They want to use a good review to place the wines in more stores in more parts of the country. That also happens more often when wines sales are slow.

In other words, any port in a storm, and this storm is beginning to look particularly intense. Know that samples are an expensive form of marketing – not just the cost of the bottles, but the cost of shipping, which can run as high as $100 a package. But wine sales are so flat and so many people are so worried that spending all that money to send me samples looks like a better investment than letting the bottles languish on a warehouse shelf.

Will this storm turn into a category 5, Hurricane Wine Recession? The sample index can’t tell me that. One sign of optimism: I still don’t get asked to attend trade tastings, where producers and distributors show off their wines for writers, retailers, and the like. Those invitations ended after the recession, too. So if trade tasting emails start to arrive, then maybe it is time to batten down the hatches.

Tennessee residency law: Did the three-tier system come crashing down yesterday?

by Wine Curmudgeon Posted On

tennessee residency lawSupreme Court overturns Tennessee residency law – does that mean all of three-tier is in trouble?

Did the Fourth of July come a week early for wine drinkers yesterday? That’s when the Supreme Court struck down a Tennessee residency law that limited who could open a liquor store in the state. As such, a host of legal and alcohol experts from around the country have predicted the beginning of the end of the three-tier system – the series of laws that restricts how we buy alcohol in the U.S. – if the court did just that.

I talked to a couple of attorneys who practice liquor law and they weren’t quite ready to pronounce three-tier dead. Said Lou Bright, the former executive counsel of the Texas Alcoholic Beverage Commission, the state’s liquor cops: “There will be lots and lots and lots of screaming and arguing about this in the coming weeks and months and years. You might consider just reporting the facts of the case with a ‘stand by for further screaming.’  ”

Still, the 7-2 decision seemed unequivocal: Since the residency requirement “has little relationship to public health and safety, it is unconstitutional,” Justice Samuel Alito wrote in the majority opinion.

The key phrase in the decision is “relationship to public health and safety,” which has been the bedrock of three-tier since the end of Prohibition. Every part of three-tier rests on the assumption that each state can regulate alcohol as it sees fit, since it’s protecting the public health and safety. Hence, every restriction in how we buy wine, beer, and spirits in the U.S., no matter how foolish or outdated or left over from the days when Al Capone controlled the liquor business, has been defended in court.

Because public health and safety

• Can’t buy wine on the Internet? That’s the various states protecting our health and safety.

• Can’t buy discounted wine where you live? That’s the various states protecting our health and safety.

• Can’t buy wine in a grocery store where you live? That’s the various state’s protecting our health and safety.

• Can’t buy wine directly from the winery where you live? That’s the various states protecting our health and safety.

• Can’t by a wine where you live even though it’s sold in a neighboring state? That’s the various states protecting our health and safely,

And Justice Alito’s majority opinion seems to turn all of that on its head. He invoked the Commerce Clause of the Constitution, which says states can’t favor their residents ahead of anyone else. That has been the law for more than 200 years, though exceptions had often been made for alcohol laws.

In fact, that was the defendant’s argument in asking the court to uphold the residency law, which made it all but impossible for anyone not from Tennessee to open a liquor store. The defendants said that the state, by essentially outlawing out-of-state chains like Total Wine, was protecting the public health and safety. Resident owners, because they were residents, would sell alcohol more responsibly than anyone else.

The court said phooey to that

But did it say phooey to all of three-tier? Robert Lewis, a partner in the Spiritus law firm in Coral Gables, Fla., told me that many analysts may see the beginning of the end of three-tier in the decision. But he is more circumspect. He remembers hearing the same sort of optimism in 2005, when the Supreme Court allowed direct shipping in its landmark Granholm decision. Many, myself included, expected three-tier to come tumbling down 14 years ago. It never did.

“I think the decision made it more difficult for states to use residency laws to regulate alcohol sales as part of three-tier,” Lewis said Wednesday afternoon. “But I’m not so sure it will affect more than residency laws. The idea that it may change other parts of three-tier, I just don’t see that.”

So the Tennessee decision may make it possible for supermarkets to sell spirits in Texas, which they can ‘t do currently because state law says only residents can get a license to sell whiskey, gin, and so forth. But it probably won’t help consumers in Michigan and Connecticut, where state law mandates minimum wine prices and forbids discounts, 20 percent off sales, and the like. And it won’t help consumers in New York, who can’t buy potato chips in a liquor store (perhaps my favorite part of three-tier’s vast and bizarre grip on the country).

And it almost certainly won’t do anything to loosen the stranglehold that distributors have over the wine, beer, and spirits supply chain. That’s the most fundamental tenet of three-tier, that consumers must buy directly from the retailer and restaurant, and that the retailer and restaurant must buy from a distributor. Only the distributor can buy from the producer (with minor exceptions like direct shipping), something that exists in almost no other consumer goods category. And if a wine doesn’t have a distributor in your state, you can’t buy it – something that will become even more common now that the top three distributors control 60 percent of the market.

Imagine not buying being able to buy a computer from Dell because the state is protecting the public health and safety – and then wonder why we have to endure that in wine.

Big Wine is dumping cheap wine brands – first Ruinite and Constellation; is a Yellow Tail sale next?

by Wine Curmudgeon Posted On

yellow tail sale
Will the roo have to find a new job if there is a Yellow Tail sale?

What does a Yellow Tail sale say about the future of cheap wine in the U.S.?

This year’s unprecedented cheap wine sell-off might include an even bigger shocker — a Yellow Tail sale. The $7 Australian supermarket wine is the biggest imported wine in the U.S., but the company acknowledged last week that it had been approached by several prospective buyers. This came after an Aussie financial newspaper reported that the Casellas, the family that owns Yellow Tail, had hired an investment bank to help them sort through the offers.

The Yellow Tail sale news comes on the heels of Banfi ending its 52-year partnership in March with Riunite, the $5 Italian sweet red, plus the Constellation Brands fire sale in April. That’s when it sent most of its $10 wines to E&J Gallo.

Know that almost all of the wine brands in these deals are profitable, and some immensely so. In fact, Yellow Tail is the fifth best-selling brand in the U.S., while Banfi’s marketing agreement with Ruinite helped it sell 2 million cases a year. And Constellation was so eager to rid itself of its cheap wines that it sold them at a tremendous discount and included Black Box, the sixth best seller in the U.S.

Does any of this make any sense? Not really, if this was 1999. But it’s 2019, and the wine business is obsessed with premiumization, and that trumps all. There was an odd and meandering story on wine-searcher.com last week, which asked if popular wine brands could be successful. This seemed, at first glance, like asking if rain was wet. How could something like the 20-million case Barefoot not be successful?

Because, said the article, size doesn’t matter. And, given the perspective of premiumization, that makes perfect financial sense. Whether it’s good business is a post for another day.

Hence, it’s not enough to sell millions of cases of wine anymore, like Yellow Tail, Ruinite, and Black Box. In this, Yellow Tail seems to be a private equity takeover target, just like any other business with cash flow and a well-known brand. The new owners would buy the company with cheap borrowed company, cut costs, strip Yellow Tail of its least profitable assets, goose up the bottom line, and then re-sell it.

Banfi’s CEO admitted it was too difficult to sell cheap wine given premiumization, and that the company would focus on its “premium and luxury offerings.”  In other words, wine for the one percent. What a terrifying thought for those of us love wine and who are part of the 99 percent.

Do consumers need to start worrying about flat sparkling wine?

by Wine Curmudgeon Posted On

flat sparkling wine
Bubbles here, but not everywhere.

Flat sparkling wine seems more common than ever – or is it just my imagination?

Why have so many bottles of sparkling wine – including pricey Champagne – been flat when I’ve opened them? As many as one-half of the bottles I’ve tasted over the past nine months have opened with little more than a sigh, and the bubbles disappeared from the glass after the initial burst of foam.

Yes, this is a small sample size, no more than a couple of dozen bottles. But when I was going through my notes to find a sparkling wine to use for the Mother’s Day post last month, I kept seeing the word “flat” in my notes. One entry even said, “tastes like cava should taste, assuming it was supposed to be flat.”

And I don’t remember a streak like this in the 20-some years I’ve been tasting sparkling wine professionally. And it’s just not cheap bottles or bottles from mass retailers; this has happened with bottles from some prestigious regions and well-known retailers – $40 wine, even, as well as samples, which should be as fresh as can be.

The blog’s official sparkling wine winemaker told me it probably isn’t a production flaw. That’s possible, he said, but the chances are remote. Sparkling techniques have improved tremendously over the past decade, so quality control in the winery isn’t the problem it used to be.

Either I’m having a run of bad luck, he emailed me, or it’s the supply chain – too much sparkling wine sitting on warehouse shelves getting old, or being stored in less than optimal conditions in supermarket supply rooms.

Which is the scary part. Is there so much sparkling wine on the market that it isn’t selling quickly enough to remain fresh? This makes sense, given the slowdown in wine sales over the past couple of years. In addition, the increase in mass-produced bubbly like Barefoot and La Marca means there is not only more product on store shelves, but more product made to begin with. And, as we’ve talked about before, it’s more difficult t0 monitor quality when you’re making 1 million cases than if you’re making 10,000.

So is this my imagination? Or is this a problem, but one that that is going unrecognized because most of us don’t drink enough bubbly to notice it?

Photo “Blanc de blanc” by Marcus Hansson is licensed under CC BY 2.0

TV wine ad survey: Hochtaler box wine – even Canadians miss the point

by Wine Curmudgeon Posted On

Hochtaler box wine uses a “Cabaret” knockoff ad to sell its sweet white wine, which probably isn’t what the film had in mind

Film buffs know the social, cultural, and political significance of “Cabaret,” the 1972 musical starring Liza Minelli, Michael York, and Joel Grey. So why did Canada’s Hochtaler box wine use a “Cabaret”-themed ad to sell its products in the early 1980s?

Hochtaler, writes the blog’s official Canadian correspondent, has long been famous in Canada – call it the Franzia of the Great White North, boxed wine for cat ladies who say “eh.” In this, Hochtaler is local, made with Canadian grapes by a Canadian producer.

“It’s very sweet,” writes our correspondent. “I’m guessing it was a hit with young people new to wine and older wine drinkers who like the name, which sounds European, and how sweet it is.”

Nevertheless, the ad features a nightclub scene with a chanteuse doing her best Liza Minnelli, complete with German accent, top hat, and tails. It hardly seems appropriate for this kind of wine, but the ads were apparently quite popular.

And you can still buy Hochtaler – C$14.95 for a 1.5-liter bottle at your local Ontario provincial store.

Video courtesy of robatsea2009 via YouTube, using a Creative Commons license

More about TV wine ads:
• TV wine ads: Almost 40 years of awful
• TV wine ad survey: Richards Wild Irish Rose
• TV wine ad survey: 1970s Boone’s Farm Wild Mountain

Are the neo-Prohibitionists winning the debate about drinking?

by Wine Curmudgeon Posted On

neo-ProhibitionistsNew data shows neo-Prohibitionists campaign against drinking may be making headway

Are the neo-Prohibitionists winning the debate about drinking? New data, including a study about world alcohol consumption, shows fewer of us are drinking. Does this mean more people believe their argument that all booze is evil?

Worldwide alcohol consumption declined 1.6 percent in 2018, according to a report from IWSR, a London consultancy. And wine, which had increased in consumption globally the past several years, also declined 1.6 percent in 2018. That included leading markets like China, Italy, France, Germany and Spain; the U.S. market was flat.

In addition, reported IWSR, “Low- and no-alcohol brands are showing significant growth in key markets as consumers increasingly seek better-for-you products, and explore ways to reduce their alcohol intake.” Growth of no-alcohol wine is forecast at 13.5 percent, with low-alcohol wine at 5.6 percent. Those are impressive numbers to begin with, even acknowledging the small base, and it’s even more impressive given how few no- and low-alcohol wine products exist today.

Meanwhile, Australians – usually regarded as some of the world’s great drinkers – have cut their alcohol consumption significantly since 2014. No one was more surprised than the CEO of the research institute that did the study, who noted that booze is seen as having “a central role” in Australian life. But no more?

What’s going on here? Know that the IWSR study includes a variety of caveats about why consumption declined, and that it expects drinking to return to growth over the next several years. But when the study identifies Ethiopia as one of the top 10 growth markets in the world, something is much different than we’re used to.

In this, it’s almost certainly the idea that any kind of drinking is bad for us. The IWSR study hints at this, with the growth in no- and low-alcohol products, but so does something else. In the U.S. we’ve always faced a religious backlash against drinking, and it’s the main reason why so much of the country was dry until the 1990s.

But that backlash seems to have ended. A May 2019 Gallup poll found that 79 percent of Americans found drinking morally acceptable; only 19 percent said it was a sin. That makes booze as acceptable as divorce and more acceptable than non-marital sex, says Gallup.

So if more of us are drinking less, and that seems to be the case, then the neo-Prohibitionists’ scare tactics seem to be working. Hopefully, the wine business will eventually take notice and offer a compelling argument in favor of moderation. Its current hear no evil, see no evil, premiumization is the answer to everything policy might work in the short run, but doesn’t offer much for the future of wine drinking in the U.S.

More about the neo-Prohibitionists and drinking:
• Health alert: Does the CDC know how dangerous Starbucks’ pumpkin spice latte is?
• Cigarettes, wine, and cancer
• The federal government’s three drink limit