What is the actual clearing price for Napa Cab?

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What is the 'true' clearing price for premium Napa Cabernet Sauvignon?

Poll ended at May 9th, 2021, 5:45 pm

< $30
6
11%
$30-$40
8
15%
$40-$60
12
22%
$60-$80
14
26%
$80-$120
10
19%
> $120
4
7%
 
Total votes: 54

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What is the actual clearing price for Napa Cab?

#1 Post by G. D y e r »

What is the true clearing price for premium Napa Cabernet Sauvignon?

On one hand, many (most) new producers are pricing at the 3 figure point, according to Vinography (see viewtopic.php?f=1&t=179825). The established premium brands certainly are near or above $100 per bottle, with the cult brands being several multiples above the 3 figure threshold.

On the other hand, there are private labels like those sold by WineAccess and negociant wines like those of de Negoce that are generally under $40 per bottle, and sometimes in the $15-$30 range. I really don't have the impression that any other domestic region has such a robust industry built around premium bulk wine, though presumably bulk wine from other regions finds a home in grocery store wines and the like.

I don't for a minute believe that the negotiants and private labels are, in general, simply selling the equal quality excess from the flagship wines. But I do believe that in many cases the viticulture, vineyards and elevage are 'high end'.

My impression thus is that Napa Cab is approached with a cartel paradigm, where the supply for 'branded' wines is carefully manipulated. The high quality 'leftovers' are basically sold at cost. Presumably it is more profitable to sell a small production flagship at a premium and recoup expenses on the seconds by bulk sales rather than marketing a second label.

So here is the thought experiment: if Napa producers were more focused on small to moderate volume premium wines rather than elite tete de cuvees, what would the long-term profitable price point be?
Greg

In that way, he is like cornerback Darrelle Revis, deserving of his own island, Mangold Island, if you will. “That would be a rusty, filthy island where people wear ripped jeans and stay in hotel rooms that are half price,” tight end Dustin Keller said. “But they would serve wine, and only the finest for Nick Mangold.”

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Re: What is the actual clearing price for Napa Cab?

#2 Post by Tom R W »

Two ton/acre yield produces about 1400 bottles of wine per acre. At $500,000 an acre, 20% down payment, just one’s interest payment on the land is approximately $20/bottle. Not to mention any of the other expenses- production costs, wine maker fees, etc.
I have a hard time thinking an owner could have any profit at $60/btl on a newly purchased, smaller vineyard of prime Napa real estate.
A different story if the land is already paid for or a larger operation.
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Re: What is the actual clearing price for Napa Cab?

#3 Post by Jmigliano »

G. D y e r wrote: May 2nd, 2021, 5:45 pm What is the true clearing price for premium Napa Cabernet Sauvignon?

On one hand, many (most) new producers are pricing at the 3 figure point, according to Vinography (see viewtopic.php?f=1&t=179825). The established premium brands certainly are near or above $100 per bottle, with the cult brands being several multiples above the 3 figure threshold.

On the other hand, there are private labels like those sold by WineAccess and negociant wines like those of de Negoce that are generally under $40 per bottle, and sometimes in the $15-$30 range. I really don't have the impression that any other domestic region has such a robust industry built around premium bulk wine, though presumably bulk wine from other regions finds a home in grocery store wines and the like.

I don't for a minute believe that the negotiants and private labels are, in general, simply selling the equal quality excess from the flagship wines. But I do believe that in many cases the viticulture, vineyards and elevage are 'high end'.

My impression thus is that Napa Cab is approached with a cartel paradigm, where the supply for 'branded' wines is carefully manipulated. The high quality 'leftovers' are basically sold at cost. Presumably it is more profitable to sell a small production flagship at a premium and recoup expenses on the seconds by bulk sales rather than marketing a second label.

So here is the thought experiment: if Napa producers were more focused on small to moderate volume premium wines rather than elite tete de cuvees, what would the long-term profitable price point be?
BS. Roy Piper did a pretty good breakdown on Vimeo of the finances of a winery, bottle price etc.
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Re: What is the actual clearing price for Napa Cab?

#4 Post by Scott Brunson »

Jmigliano wrote: May 2nd, 2021, 9:11 pm
G. D y e r wrote: May 2nd, 2021, 5:45 pm What is the true clearing price for premium Napa Cabernet Sauvignon?

On one hand, many (most) new producers are pricing at the 3 figure point, according to Vinography (see viewtopic.php?f=1&t=179825). The established premium brands certainly are near or above $100 per bottle, with the cult brands being several multiples above the 3 figure threshold.

On the other hand, there are private labels like those sold by WineAccess and negociant wines like those of de Negoce that are generally under $40 per bottle, and sometimes in the $15-$30 range. I really don't have the impression that any other domestic region has such a robust industry built around premium bulk wine, though presumably bulk wine from other regions finds a home in grocery store wines and the like.

I don't for a minute believe that the negotiants and private labels are, in general, simply selling the equal quality excess from the flagship wines. But I do believe that in many cases the viticulture, vineyards and elevage are 'high end'.

My impression thus is that Napa Cab is approached with a cartel paradigm, where the supply for 'branded' wines is carefully manipulated. The high quality 'leftovers' are basically sold at cost. Presumably it is more profitable to sell a small production flagship at a premium and recoup expenses on the seconds by bulk sales rather than marketing a second label.

So here is the thought experiment: if Napa producers were more focused on small to moderate volume premium wines rather than elite tete de cuvees, what would the long-term profitable price point be?
BS. Roy Piper did a pretty good breakdown on Vimeo of the finances of a winery, bottle price etc.
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Re: What is the actual clearing price for Napa Cab?

#5 Post by Doug Schulman »

Roy has broken that down here too. There's no way anything near top quality is sold for $40-$50/bottle unless it is being sold at a loss, which I think is very rare for actual high quality Napa Cab. Don't get me wrong; there are values out there with negociant labels, but let's not pretend they are as good as the most established names. If most of the Napa bulk juice/wine were not from Napa, it would sell for much less money.

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Re: What is the actual clearing price for Napa Cab?

#6 Post by CJ Beazley »

Doug Schulman wrote: May 3rd, 2021, 5:21 am Roy has broken that down here too. There's no way anything near top quality is sold for $40-$50/bottle unless it is being sold at a loss, which I think is very rare for actual high quality Napa Cab. Don't get me wrong; there are values out there with negociant labels, but let's not pretend they are as good as the most established names. If most of the Napa bulk juice/wine were not from Napa, it would sell for much less money.
Adam Lee discussed it one time, he said something like ‘people rarely figure in fork lift tires when assessing wine cost’.
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Re: What is the actual clearing price for Napa Cab?

#7 Post by R M Kriete »

CJ Beazley wrote: May 3rd, 2021, 5:25 am
Doug Schulman wrote: May 3rd, 2021, 5:21 am Roy has broken that down here too. There's no way anything near top quality is sold for $40-$50/bottle unless it is being sold at a loss, which I think is very rare for actual high quality Napa Cab. Don't get me wrong; there are values out there with negociant labels, but let's not pretend they are as good as the most established names. If most of the Napa bulk juice/wine were not from Napa, it would sell for much less money.
Adam Lee discussed it one time, he said something like ‘people rarely figure in fork lift tires when assessing wine cost’.
Personally, I hate the taste of new fork lift tires in my Cab. All I can taste is the rubber.

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Re: What is the actual clearing price for Napa Cab?

#8 Post by joejolesch »

R M Kriete wrote: May 3rd, 2021, 6:14 am [quote="CJ Beazley" post_id=3255622 time=<a href="tel:1620044759">1620044759</a> user_id=13337]
[quote="Doug Schulman" post_id=3255621 time=<a href="tel:1620044475">1620044475</a> user_id=6604]
Roy has broken that down here too. There's no way anything near top quality is sold for $40-$50/bottle unless it is being sold at a loss, which I think is very rare for actual high quality Napa Cab. Don't get me wrong; there are values out there with negociant labels, but let's not pretend they are as good as the most established names. If most of the Napa bulk juice/wine were not from Napa, it would sell for much less money.
Adam Lee discussed it one time, he said something like ‘people rarely figure in fork lift tires when assessing wine cost’.
[/quote]

Personally, I hate the taste of new fork lift tires in my Cab. All I can taste is the rubber.
[/quote]

That’s called tireroir. Some people seek it out.
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Re: What is the actual clearing price for Napa Cab?

#9 Post by R M Kriete »

joejolesch wrote: May 3rd, 2021, 6:56 am
R M Kriete wrote: May 3rd, 2021, 6:14 am [quote="CJ Beazley" post_id=3255622 time=<a href="tel:1620044759">1620044759</a> user_id=13337]
[quote="Doug Schulman" post_id=3255621 time=<a href="tel:1620044475">1620044475</a> user_id=6604]
Roy has broken that down here too. There's no way anything near top quality is sold for $40-$50/bottle unless it is being sold at a loss, which I think is very rare for actual high quality Napa Cab. Don't get me wrong; there are values out there with negociant labels, but let's not pretend they are as good as the most established names. If most of the Napa bulk juice/wine were not from Napa, it would sell for much less money.
Adam Lee discussed it one time, he said something like ‘people rarely figure in fork lift tires when assessing wine cost’.
Personally, I hate the taste of new fork lift tires in my Cab. All I can taste is the rubber.
[/quote]

That’s called tireroir. Some people seek it out.
[/quote]

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Re: What is the actual clearing price for Napa Cab?

#10 Post by Marcus Goodfellow »

Tom R W wrote: May 2nd, 2021, 6:57 pm Two ton/acre yield produces about 1400 bottles of wine per acre. At $500,000 an acre, 20% down payment, just one’s interest payment on the land is approximately $20/bottle. Not to mention any of the other expenses- production costs, wine maker fees, etc.
I have a hard time thinking an owner could have any profit at $60/btl on a newly purchased, smaller vineyard of prime Napa real estate.
A different story if the land is already paid for or a larger operation.
A general truism for the industry is that you invest in the vineyard and recoup that money when you sell it.

Annual production should cover costs, salaries, and have a net profit on the cost of operation but not cost of the vineyard.

Not my idea. But it makes some sense, in that vineyards are long term opportunities and rarely drop in value. For regions able to brand themselves as well as Napa, anyone owning vineyard property prior to the shift will do extremely well financially.

That said, it’s agriculture and the annual profitability is fraught with dangers of all manner. Not for the faint of heart or for those wishing to see a comfortable and regular return.

And a pair of forklift tires cost $1500. Adam Lee is a very savvy individual.
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Re: What is the actual clearing price for Napa Cab?

#11 Post by Marc Hauser »

You might dig into something like this for ideas on answers to this question: https://www.mossadams.com/getmedia/2773 ... t-2017.pdf (it looks like the 2021 report isn't out yet)

As was mentioned above in a way, a lot of it also depends upon what you mean by "Napa". Are you including "Napa County" Cab in that? Or just AVA sub-designates? The latter generally costing a lot more per ton.
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Re: What is the actual clearing price for Napa Cab?

#12 Post by G. D y e r »

All of the info posted above is helpful, but it is generally focused on cost of goods (COG), rather than what the market actually supports.

I have no doubt there are newer Napa producers pricing their first vintage in the three figure per bottle price based on COG. That may include capital and financing costs for vineyards, or for outsourcing production by purchasing premium fruit, using custom crush, hiring a consulting winemaker, etc.

But the question as originally posed is really about what the market supports, not what it costs to produce a bottle. There is some relationship to COG since land and fruit costs are related to the sell price . . . . but they are not the same thing.
Greg

In that way, he is like cornerback Darrelle Revis, deserving of his own island, Mangold Island, if you will. “That would be a rusty, filthy island where people wear ripped jeans and stay in hotel rooms that are half price,” tight end Dustin Keller said. “But they would serve wine, and only the finest for Nick Mangold.”

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Re: What is the actual clearing price for Napa Cab?

#13 Post by G. D y e r »

Jmigliano wrote: May 2nd, 2021, 9:11 pm
G. D y e r wrote: May 2nd, 2021, 5:45 pm What is the true clearing price for premium Napa Cabernet Sauvignon?

On one hand, many (most) new producers are pricing at the 3 figure point, according to Vinography (see viewtopic.php?f=1&t=179825). The established premium brands certainly are near or above $100 per bottle, with the cult brands being several multiples above the 3 figure threshold.

On the other hand, there are private labels like those sold by WineAccess and negociant wines like those of de Negoce that are generally under $40 per bottle, and sometimes in the $15-$30 range. I really don't have the impression that any other domestic region has such a robust industry built around premium bulk wine, though presumably bulk wine from other regions finds a home in grocery store wines and the like.

I don't for a minute believe that the negotiants and private labels are, in general, simply selling the equal quality excess from the flagship wines. But I do believe that in many cases the viticulture, vineyards and elevage are 'high end'.

My impression thus is that Napa Cab is approached with a cartel paradigm, where the supply for 'branded' wines is carefully manipulated. The high quality 'leftovers' are basically sold at cost. Presumably it is more profitable to sell a small production flagship at a premium and recoup expenses on the seconds by bulk sales rather than marketing a second label.

So here is the thought experiment: if Napa producers were more focused on small to moderate volume premium wines rather than elite tete de cuvees, what would the long-term profitable price point be?
BS. Roy Piper did a pretty good breakdown on Vimeo of the finances of a winery, bottle price etc.
Which part of my statement do you disagree with?

As I just noted, most responses are focused on COG, but the question I'm posing is also about what the market supports.
Greg

In that way, he is like cornerback Darrelle Revis, deserving of his own island, Mangold Island, if you will. “That would be a rusty, filthy island where people wear ripped jeans and stay in hotel rooms that are half price,” tight end Dustin Keller said. “But they would serve wine, and only the finest for Nick Mangold.”

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Re: What is the actual clearing price for Napa Cab?

#14 Post by Doug Schulman »

joejolesch wrote: May 3rd, 2021, 6:56 am
R M Kriete wrote: May 3rd, 2021, 6:14 am [quote="CJ Beazley" post_id=3255622 time=<a href="tel:1620044759">1620044759</a> user_id=13337]
[quote="Doug Schulman" post_id=3255621 time=<a href="tel:1620044475">1620044475</a> user_id=6604]
Roy has broken that down here too. There's no way anything near top quality is sold for $40-$50/bottle unless it is being sold at a loss, which I think is very rare for actual high quality Napa Cab. Don't get me wrong; there are values out there with negociant labels, but let's not pretend they are as good as the most established names. If most of the Napa bulk juice/wine were not from Napa, it would sell for much less money.
Adam Lee discussed it one time, he said something like ‘people rarely figure in fork lift tires when assessing wine cost’.
Personally, I hate the taste of new fork lift tires in my Cab. All I can taste is the rubber.
[/quote]

That’s called tireroir. Some people seek it out.
[/quote]

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Re: What is the actual clearing price for Napa Cab?

#15 Post by Andrew K. »

G. D y e r wrote: May 3rd, 2021, 8:59 am But the question as originally posed is really about what the market supports, not what it costs to produce a bottle. There is some relationship to COG since land and fruit costs are related to the sell price . . . . but they are not the same thing.
On the contrary, I think the OP question was precisely regarding the true cost to produce as opposed to the ever increasing market price.

The problem I believe is the improper use of the term clearing price.
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Re: What is the actual clearing price for Napa Cab?

#16 Post by CJ Beazley »

Andrew K. wrote: May 3rd, 2021, 9:28 am
G. D y e r wrote: May 3rd, 2021, 8:59 am But the question as originally posed is really about what the market supports, not what it costs to produce a bottle. There is some relationship to COG since land and fruit costs are related to the sell price . . . . but they are not the same thing.
On the contrary, I think the OP question was precisely regarding the true cost to produce as opposed to the ever increasing market price.

The problem I believe is the improper use of the term clearing price.
“par value”?
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Re: What is the actual clearing price for Napa Cab?

#17 Post by Andrew K. »

CJ Beazley wrote: May 3rd, 2021, 9:55 am
Andrew K. wrote: May 3rd, 2021, 9:28 am
G. D y e r wrote: May 3rd, 2021, 8:59 am But the question as originally posed is really about what the market supports, not what it costs to produce a bottle. There is some relationship to COG since land and fruit costs are related to the sell price . . . . but they are not the same thing.
On the contrary, I think the OP question was precisely regarding the true cost to produce as opposed to the ever increasing market price.

The problem I believe is the improper use of the term clearing price.
“par value”?
LOL I'm an idiot. The guy I responded to is the OP, so clearly he knows what he meant. pileon

So he used the term correctly but now I really don't understand what he was asking as the text sure made it sound like he was asking about the opposite.
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Re: What is the actual clearing price for Napa Cab?

#18 Post by Rodrigo B »

A few people noted Roy Piper's video which does a phenomenal job at breaking down a wineries costs. Linking it here since no one else included it in: viewtopic.php?t=123600
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Re: What is the actual clearing price for Napa Cab?

#19 Post by cherylfoil »

G. D y e r wrote: May 2nd, 2021, 5:45 pm On the other hand, there are private labels like those sold by WineAccess and negociant wines like those of de Negoce that are generally under $40 per bottle, and sometimes in the $15-$30 range.

The bulk juice market in Napa is wildly unprofitable. Wine is almost always sold at a loss (according to GAAP, at least.)

It's very complicated, as others have noted, to fully spec out what it costs to have a winery. (As I know too well. It is cap ex season for winery improvements. Painful.) But, a custom crush premier brand is very easy:

1 ton cab = 42 cases cab at the high end (assuming some wine isn't selected for the final blend. Common for the best projects.)

$18,000 for one ton of good cab
$5,000 per ton at a custom crush facility in Napa
2 new french oak barrels at $1,250 each
$2,000 per ton misc (yeast, extra labor, barrel rack, etc.)
$50 per case bottling for premium glass and cork
Pay a consulting winemaker $100k to make 1,000 cases

That's $67 cost of goods per bottle right there, $36 of which is juice. Wine is typically sold at 40%-50% SRP to distributors. That's how we get back to the old rule that $18,000/ton grapes should be sold for no less than $180 SRP in bottle. Else you couldn't even afford to do national sales travel. On top of that, the very best brands may use even less than 42/case per ton in a single vineyard blend and either have a second label, make a cheaper blend, or bulk it.

So, why is wine being sold so heavily through the big third party websites right now?

1) Distribution was a very hard market last year, both for distributors and restaurants
2) if you can't convert your inventory back into cash, you can't bottle and can't afford the upcoming grape bills
3) Backlogged inventory is tough to dig out from under, especially in a product category where you are supposed to be "sold out" all the time

It will be interesting to see what large third party retail sites do to the wine industry over time if they continue to grow at the rate they are. It is a low margin sales channel. Sometimes at a loss.
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Re: What is the actual clearing price for Napa Cab?

#20 Post by G. D y e r »

Andrew K. wrote: May 3rd, 2021, 12:12 pm LOL I'm an idiot. The guy I responded to is the OP, so clearly he knows what he meant. pileon

So he used the term correctly but now I really don't understand what he was asking as the text sure made it sound like he was asking about the opposite.
Mea culpa, yes, I posed the question as intended, but the subsequent 'problem statement' in my post muddied the waters by mentioning profitability and the like.

To reframe, much of what I am getting at is there is a huge spread in price between branded premium Napa Cabernet and private or negotiant labels with apparent pedigree. They are not the same wines, but how does one make sense of a 5x - 10x multiplicative factor in price? Particularly when in the comment immediately prior to this one, the economics of the cost of goods support bottle prices well above $100.

Is it COVID disruption plus a highly yield, high quality vintage? (Certainly it is part of it.)
Is legit high end bulk wine the natural outcome of producing very limited elite cuvees--like literally one has to dispose of half the wine at a loss to make a compelling $300 bottle? (Averages out to ~$160/bottle.)
Are the negotiants and private labels over-embellishing without violating their NDAs? (Most likely . . . . yes.)
Greg

In that way, he is like cornerback Darrelle Revis, deserving of his own island, Mangold Island, if you will. “That would be a rusty, filthy island where people wear ripped jeans and stay in hotel rooms that are half price,” tight end Dustin Keller said. “But they would serve wine, and only the finest for Nick Mangold.”

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Re: What is the actual clearing price for Napa Cab?

#21 Post by cherylfoil »

G. D y e r wrote: May 3rd, 2021, 10:04 pm
To reframe, much of what I am getting at is there is a huge spread in price between branded premium Napa Cabernet and private or negotiant labels with apparent pedigree. They are not the same wines, but how does one make sense of a 5x - 10x multiplicative factor in price? Particularly when in the comment immediately prior to this one, the economics of the cost of goods support bottle prices well above $100.

Is it COVID disruption plus a highly yield, high quality vintage? (Certainly it is part of it.)
Is legit high end bulk wine the natural outcome of producing very limited elite cuvees--like literally one has to dispose of half the wine at a loss to make a compelling $300 bottle? (Averages out to ~$160/bottle.)
Are the negotiants and private labels over-embellishing without violating their NDAs? (Most likely . . . . yes.)
I think all of those things are at play, but I don't think disposing of half of the wine is the normal outcome. A lot of folks just produce several wines, like Bordeaux second labels, or have some other way to sell bulk wine or shiners.

But compelling doesn't just mean it's great, it also implies consistency in quality and style. It's fine for private labels / one-offs to vary, but if I thought the latest vintage SQN was light and delicate, I'd be in the car on my way to a COVID test the very next morning. It is hard to build a brand, period, but it's even more so when you only get one time per year to make new product. It can take decades. Wine is inherently inconsistent to produce, which is beautiful for our soul and terrible for our lizard brains. People pay more for consistency, whether it's the French Laundry or Olive Garden. All compounded by the facts that wine is expensive to taste, annoying or impossible to return, annoying or impossible to purchase in certain states, changes over time, is ruined by heat and cold, and top of it all, once a vintage is sold out, it's obnoxious or expensive to find more of it. Unlike beanie babies, can't make any more of it. On top of that, some folks wait 5-25 years to even pop their first bottle of a given vintage. Or, so I've heard.

Beyond that and the obvious stuff like conspicuous consumption, high quality wine doesn't really endure the brutal price and quality competition of most goods. First of all, your competitors can't scale to eat your lunch, like the iPhone can. And there is nowhere near the price pressure to beat the Toyota Camry (yet, I guess). "Tested in a 25 year cellaring trial at six different temperatures!" "Reliability 9/10!" "2oz pour generates as much owner satisfaction as 6 oz of the leading brand!" [wow.gif]

Maybe it's something simpler. If I lived in one of the cradles of winemaking civilization back in 4000 BC, I'd probably value grape juice shoved into a dirty clay jar for months 100x more from the person I trust. Maybe we've just been working our way down from there and still have a bit to go.
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Re: What is the actual clearing price for Napa Cab?

#22 Post by Joshua Kates »

cherylfoil wrote: May 5th, 2021, 6:07 am
G. D y e r wrote: May 3rd, 2021, 10:04 pm
To reframe, much of what I am getting at is there is a huge spread in price between branded premium Napa Cabernet and private or negotiant labels with apparent pedigree. They are not the same wines, but how does one make sense of a 5x - 10x multiplicative factor in price? Particularly when in the comment immediately prior to this one, the economics of the cost of goods support bottle prices well above $100.

Is it COVID disruption plus a highly yield, high quality vintage? (Certainly it is part of it.)
Is legit high end bulk wine the natural outcome of producing very limited elite cuvees--like literally one has to dispose of half the wine at a loss to make a compelling $300 bottle? (Averages out to ~$160/bottle.)
Are the negotiants and private labels over-embellishing without violating their NDAs? (Most likely . . . . yes.)
I think all of those things are at play, but I don't think disposing of half of the wine is the normal outcome. A lot of folks just produce several wines, like Bordeaux second labels, or have some other way to sell bulk wine or shiners.

But compelling doesn't just mean it's great, it also implies consistency in quality and style. It's fine for private labels / one-offs to vary, but if I thought the latest vintage SQN was light and delicate, I'd be in the car on my way to a COVID test the very next morning. It is hard to build a brand, period, but it's even more so when you only get one time per year to make new product. It can take decades. Wine is inherently inconsistent to produce, which is beautiful for our soul and terrible for our lizard brains. People pay more for consistency, whether it's the French Laundry or Olive Garden. All compounded by the facts that wine is expensive to taste, annoying or impossible to return, annoying or impossible to purchase in certain states, changes over time, is ruined by heat and cold, and top of it all, once a vintage is sold out, it's obnoxious or expensive to find more of it. Unlike beanie babies, can't make any more of it. On top of that, some folks wait 5-25 years to even pop their first bottle of a given vintage. Or, so I've heard.

Beyond that and the obvious stuff like conspicuous consumption, high quality wine doesn't really endure the brutal price and quality competition of most goods. First of all, your competitors can't scale to eat your lunch, like the iPhone can. And there is nowhere near the price pressure to beat the Toyota Camry (yet, I guess). "Tested in a 25 year cellaring trial at six different temperatures!" "Reliability 9/10!" "2oz pour generates as much owner satisfaction as 6 oz of the leading brand!" [wow.gif]

Maybe it's something simpler. If I lived in one of the cradles of winemaking civilization back in 4000 BC, I'd probably value grape juice shoved into a dirty clay jar for months 100x more from the person I trust. Maybe we've just been working our way down from there and still have a bit to go.

Thanks so much; your last two posts were great: illuminating and fun to read!
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Re: What is the actual clearing price for Napa Cab?

#23 Post by John Morris »

G. D y e r wrote: May 3rd, 2021, 10:04 pm
Andrew K. wrote: May 3rd, 2021, 12:12 pm LOL I'm an idiot. The guy I responded to is the OP, so clearly he knows what he meant. pileon

So he used the term correctly but now I really don't understand what he was asking as the text sure made it sound like he was asking about the opposite.
Mea culpa, yes, I posed the question as intended, but the subsequent 'problem statement' in my post muddied the waters by mentioning profitability and the like.

To reframe, much of what I am getting at is there is a huge spread in price between branded premium Napa Cabernet and private or negotiant labels with apparent pedigree. They are not the same wines, but how does one make sense of a 5x - 10x multiplicative factor in price? Particularly when in the comment immediately prior to this one, the economics of the cost of goods support bottle prices well above $100.

Is it COVID disruption plus a highly yield, high quality vintage? (Certainly it is part of it.)
Is legit high end bulk wine the natural outcome of producing very limited elite cuvees--like literally one has to dispose of half the wine at a loss to make a compelling $300 bottle? (Averages out to ~$160/bottle.)
Are the negotiants and private labels over-embellishing without violating their NDAs? (Most likely . . . . yes.)
I don't think the question makes any more sense than asking what the clearing price is of an airline seat. You can have six seats across the same row on the same flight each sold at a different price. (American Airlines pioneered the pricing models to do that back in the 80s.) Would anyone ask what the clearing price was? No, analysts look at some kind of average revenue per seat, factoring miles, I suppose.

Wine isn't any different. Producers allocate their juice between the top prestige labels where they can command the greatest price; branded second labels that command a premium; "surplus" high quality juice they sell off with the suggestion that it's the same as some fancy branded wine; and lesser lots that aren't really premium.

So, what segment are you asking about? Or are you asking for an overall average (weighted by volume, perhaps)? I'm not sure any of these would be significant, even if you could calculate it.
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Re: What is the actual clearing price for Napa Cab?

#24 Post by CJ Beazley »

John Morris wrote: May 5th, 2021, 8:40 am
G. D y e r wrote: May 3rd, 2021, 10:04 pm
Andrew K. wrote: May 3rd, 2021, 12:12 pm LOL I'm an idiot. The guy I responded to is the OP, so clearly he knows what he meant. pileon

So he used the term correctly but now I really don't understand what he was asking as the text sure made it sound like he was asking about the opposite.
Mea culpa, yes, I posed the question as intended, but the subsequent 'problem statement' in my post muddied the waters by mentioning profitability and the like.

To reframe, much of what I am getting at is there is a huge spread in price between branded premium Napa Cabernet and private or negotiant labels with apparent pedigree. They are not the same wines, but how does one make sense of a 5x - 10x multiplicative factor in price? Particularly when in the comment immediately prior to this one, the economics of the cost of goods support bottle prices well above $100.

Is it COVID disruption plus a highly yield, high quality vintage? (Certainly it is part of it.)
Is legit high end bulk wine the natural outcome of producing very limited elite cuvees--like literally one has to dispose of half the wine at a loss to make a compelling $300 bottle? (Averages out to ~$160/bottle.)
Are the negotiants and private labels over-embellishing without violating their NDAs? (Most likely . . . . yes.)
I don't think the question makes any more sense than asking what the clearing price is of an airline seat. You can have six seats across the same row on the same flight each sold at a different price. (American Airlines pioneered the pricing models to do that back in the 80s.) Would anyone ask what the clearing price was? No, analysts look at some kind of average revenue per seat, factoring miles, I suppose.

Wine isn't any different. Producers allocate their juice between the top prestige labels where they can command the greatest price; branded second labels that command a premium; "surplus" high quality juice they sell off with the suggestion that it's the same as some fancy branded wine; and lesser lots that aren't really premium.

So, what segment are you asking about? Or are you asking for an overall average (weighted by volume, perhaps)? I'm not sure any of these would be significant, even if you could calculate it.
Same, I’ve often said ‘ultimately in the final analysis it “costs” me zero for some guy to go walk around the golf course for four hours’ which people blanche at, but it’s true, BUT there’s so obviously bigger questions/issues.
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