I was speaking with Chelsea at Booker with regards to the increase in prices. She was saying that the main factor for the increase was crop size
Apparantly at Booker the yields for 2015 are half a ton per acre instead of the usual two and a half tons, so effectively 20% of the wine. If this is true on a big scale then revenues will obviously be hit dramatically, will these lead to wide scale big price leaps as wineries try to balance the books with such reduced inventory or do wineries plan for this
I would imagine some do and some also might try and supplement their normal contracts and pick up extra fruit if they anticipate early enough. There are so many different wine business models Alan it would be tough to say if in general expect most to raise pricing.
Reality is price for Cali wines have steadily been rising for the last 10 years or so. I’m sure some of it has to do with increased costs. The small winery business model in general is a very tough model to make $$ at. Every business should do what they think is best to be profitable and ensure success. As a consumer we have an ocean of wine to choose from if we don’t like it.
I’m glad some of my favorites have gone up and I’m moving on. I’m diversifying the cellar. Something I should have done years ago.
I think prices will be going up in general. There was a lot of wine made from '12,'13,'14 though '15 is quite light. Remember there are variable costs (grapes, corks, capsules, barrels in regards to quantity you have to order) and fixed costs (wages, rent/mortgage, insurance, etc that stay relatively stable). There will less wine to sell but it will cost less to make it. Wineries will likely try to make more in '16 if possible to make up for the short '15 as well as lower fixed costs. Some may even up white production percentage of the total to release it earlier with the '15 reds.
I know of several small producers who made way more than they can sell without heavy discounting in '13 & '14 and if had done so in '15 would be a a very bad situation with oversupply. I am happy that mother nature is helping to balance their inventory for them. Trained winemakers get beat up by the reality of the business side often.
We will be raising prices when the '15’s release in '17. That is primarily due to the fact that we have held prices the same for 10 vintages. '15 is our 10th vintage so we plan to raise prices slightly and set them for the next 10 years.
Smaller wineries and/or those that sell primary direct have much higher margins they just don’t do the volume. Volume wineries well be hit more by the lack of fruit in the bulk market.
If the economy stays 1% to 3% GDP growth it will be easier to raise prices. If we have another 15-25% correction in the next couple years I doubt many will raise prices significantly. If the dollar remains strong and the euro remains weak it will put downward pressure on import prices.
I’m not buying that…crop size - but that’s what i’d say if I were on the “winery” end of the phone. I believe its a function of the economy. Financial assets are being driven up by Fed monetary policy, market up six years in a row now . Holders of financial assets tend to be wealthier to begin with - buyers of higher end wine, etc. so there’s a wealth effect (i’m in better shape financially so i can afford higher end wine) that makes you less sensitive to increases than you might otherwise be. Watching the increase in number of posts railing against price hikes, I think folks are beginning to push back.
If we get a healthy pullback in the markets i think you’ll see the string of +20% annual prices increases come to a screeching halt.
There has been a major drought in CA for several years. The underground water levels have dropped. The well levels in Paso are way down there. Lou Kapscandy told me a couple of years ago that if the drought continues he would consider pulling every other row of vines out. Seriously.
IMHO Booker is a premium wine, one of the better expressions of Rhone in the US. Many Napa Cabs are in the 150-200 per bottle price range. I think Rhones are trying to catch up. The market will dictate if the price increases are merited.
I would share your thoughts on pullback but the demand still seems strong, when i told Booker i would not continue on the allocation list Chelsea told me that i should consider they have hundreds of people who would love to take my spot so if given up it would be gone immediately. It did not seem like selling out was a concern so while im sure they did not want to raise prices it is not affecting them selling out
No doubt. Fixed cost, variable cost, drought, blah blah blah. I want the best wine for my money, and some Cali producers are jumping the shark in a big way. Interestingly, others have managed to keep prices in the realm of reason. I’ve dropped off several WB “darling” lists for this very reason. So, my thesis: there’s loads of great wine around the world. Wherever I can get the best bang for my buck is where I’ll be spending my money. I suspect many other consumers will do the same. The economics of many other industries are proof of that.
I have price sensitivity and when a wine hits that point (like say Allemand, as we have talked recently), then I stop and pause, and with Allemand, have decided to stop spending on it. However, I do have a core belief that the best wineries, the people who really take the time to think customer and how they treat their customers, that pricing is going to be something they think carefully about. I don’t expect, for example (and if you look at the pricing history, it bears this out) that Mike Officer [Carlisle], Ed Kurtzman [August West/Sandler], Jamie Kutch [Kutch] or Larry Shaffer [Tercero] or going to leap before they look. I offer these as a few examples, there are others I could list, and I am sure you have some, too.
The smart producers, the folks who get it in my opinion, are going to be careful and think about impact and the customer relationships that sustain their business. And for these, those relationships matter, they impact how they run the business. Call me all wet if you like, but it’s true.
Frank when it comes down to it, it is a business and we live in a capitalist society. The law of supply and demand will ultimately determine pricing of any given wine like DRC wines. When you start getting 99 and 100 point scores (for example Booker), and yields are so so, and there are waiting lists to buy (think SQN and Saxum) prices rise.
If prices rise too much the market will dictate whether those prices can be sustained.
These are small, boutique wineries, with very limited production.
What I really enjoy seeing are the wineries growing their businesses, expanding their success. I don’t have a problem with Mike or Jamie raising their price and wanting to make a living. I appreciate and respect these wineries and would be fine going along with them as they wish to expand or raise some additional capital to further the quality and vision that they run off. But, once again, we have the insanity here of the critics, the points being discussed, and this somehow being a validation that Booker or some other operation can raise their price. I am glad I don’t support these wineries and this justification, capitalism or whatever it is we wish to call it.
If you are not wedded to cult Cab you can drink really well for a reasonable amount of money. The Idlewild offer just came out, and the most expensive wine is $32. Sam Bilbro is doing great things with the Italian varieties he works in Mendocino. The wines are delicious. Jamie Kutch’s Sonoma Coast Pinot Noir is a steal at $39. There are tons of delicious wines available in the $40s.
Producers often think this, but forget that a lot of those waitlist people got on when prices were lower. So when they finally get an allocation, at higher prices, many won’t pull the trigger. No doubt enough will to take up the slack from current listers dropping, but that can’t go on forever. To be blunt, at $80-100 for California Syrah, there are so many other choices that it makes no sense, unless you’re married to the Paso Syrah style.
It seems to me that wine prices are driven by the overall economy in the long term, with short term fluctuations for perceived local vintage quality (see 2011 in Nor Cal cabernet). As Mike pointed out earlier in this thread, we’ve had a market expansion for 5+ years. In fact western economies (especially the US) have been expanding fairly steadily for 20 years, with few pretty huge bumps along the way, but with quick recovery. Increasing wealth means increased $$ for discretionary items like wine. There have been some non-linear market changes (eg. when China came into the market a 5-10 years back) as well.
As long as the economy keeps growing (and let’s hope it does!!) wine prices will keep going up. I wouldn’t love the alternative – lower wine prices would do little to offset the pain of a long term economic fall.
So: prices will keep going up. When we hit our next recession (and that will definitely happen – just don’t ask me when!) prices may fall, but that will be temporary.
The good news is that an expanding economy will also mean more wine lovers will have the means to jump off the corporate/urban life and create new products for the rest of us. They generally start at low prices. Luckily we have this board and the rest of the Internet to help us find new stuff to replace last generation’s goodies that have priced us out.
Alan- I didn’t ask the follow up question for more details but I would imagine you can do 3 things with the extra fruit
sometimes it does come from a vineyard that they make a SVD wine. Some of the vineyards in Sonoma are pretty large and I would imagine extra fruit comes available from time to time
If it’s a new vineyard and the fruit is good enough and there is enough qty add a new vineyard to the line up
Lastly, if it’s a new vineyard and not being used for a new SVD it can go to the appellation wine. Many wineries largest production wine is ava designate only so your Sonoma Coast or Napa wine gives you a wide choice to pick up good fruit to ensure you have enough of your base wine.