5 or 6 years ago I was in Beijing for work and Grange seemed to one of the high end choices available widely.
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I actually mean retail, but that probably has a relation to auction pricing. There are four US retailers selling late 90s vintage bottles of Grange for $399.
I don’t have records of it, but I’m pretty sure you couldn’t buy in stock bottles of Grange in the US for nearly those prices 3-4 years ago.
HA! Funny enough, $400ish has been the market price for a bit on Grange. Some vintages are more, some vintages are less, but $400 is basically the fair market price.
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This.
From my vantage point I didn’t see a lot of demand for Grange at the $500-$600+. Even at $400 you’re not in a crowded market.
There is also this dynamic possibly at play for wineries…
2019: 6 bottles sold at $175 = $1050 + $40 shipping = $1090
2024: 3 bottles sold at $325 = $975 + $90 shipping = $1065
A lot of wines have seen their bottle prices rise like the example above. If prices had not gone up so much, the same number of bottles might have been sold now as then, since the dollar volume is about the same. But some very steep price hikes are reducing bottle sales.
I’ve always felt a large number of direct wine buyers have a mental “budget” of what they want to spend each year. Most will respond to rapidly rising prices by spending the same amount of money while reducing bottle purchases.
So what happens is Winery XYZ sees half their previous number of bottles sold direct, receives the same revenue but has half their bottles still in inventory after it goes on sale. That inventory in the warehouse is costing $5+ per bottle per year.
And the cost of each bottle is rising while this is all happening. This is not considered by many wineries.
If the production cost in the $325 scenario has risen 33% since 2019 and used to be $90 and is now $120, but only half of the release sells, the cost per bottle SOLD is actually $240, not $120. Which means margins on sold wine craters. Whereas if the offer price only rose in line with costs, more bottles would have sold and the margin per bottle sold would be superior.
GAAP accounting is troublesome in high-end wine. It’s all about cash flow profits, especially at the margin. That’s how I’ve always approached it. When the SHTF, like it did in 2008-09, extra wine in inventory sells at 10-20 cents on the dollar. This is why Two Buck Chuck did so well between 2008-2010. Unsold wine in inventory is a terrible risk for a winery that relies on direct sales.
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There’s an imaginary line in the sand for a bottle cost where I as a consumer say it is no longer worth buying these wines above X current release price.
This holds especially true if I can go find aged releases at auction for less than new releases.
This has pushed me to find wine outside of my regular buying patterns, like Aussie Shiraz or Italian BdM and Chianti.
It’s hard to see the sharp rise in bottle costs.
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Jeff, the “imaginary line” is more complicated when ultra-rare wine is sold only in 3-packs, assuming the price has risen substantially. If someone is allocated 6, they can drop to 3. When they are allocated 3 (which is often the case with hard to get SVDs), they either have to buy 3 or drop to 0. Which for some wineries can happen seemingly out of the blue.
$175… bought 3
$225… bought 3
$275… bought 3
$300… dropped.
The winery thinks the problem was crossing $300. In reality that is just when the floor fell out.
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I find myself in the situation where with wine lists I get to a point where I’ve reached the max I ‘need’ after buying each year. SQN is one of these for me, I love the wine but at the rate I drink them I don’t really need to be buying more each year.
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This thread was begun May 8.
I take as a good point the fact that many on this board have positioned themselves to be more immune than average to economic slowdowns.
I do think we have entered a slowdown (impacting everyone differently) in May.
If it were clearly not the case I don’t think people would bother to keep responding to this thread.
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Right on cue, good time to drop this nugget. BTW, this was one of the more complete, and thorough articles I’ve read in a long time on W-S News.
I propose that any and all US wineries can sell directly to any licensed establishment in America. It would seriously fix the issues, and help lower prices (well, hopefully) at the end of the chain.
There is zero reason not to allow wineries to sell to licensed establishments. ZERO.
https://www.wine-searcher.com/m/2024/07/us-distributors-awash-with-wine
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Umm…you do realize this is Wine Berserkers, right? Threads continue forever despite any reason.
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Interesting to read Roy. Wine is law of diminishing returns in the US luxury space, as the owner you need to sell as much as you can at your asking price at whatever mix you have determined viable for your business X% DTC, X% Wholesale as soon after relase as possible as the clock is ticking.
IF you don’t sell out the cost of doing that business gets more expensive every month and at 90 days or so discounting starts to come into play, generally thru wholesale with higher distributor allowances and supplier funded samples with an ask buy a bit more and to sell it on-premise, but that DA applies to all cases purchased by wholesaler. The winery owner knows this is the last financially positive outcome option as another vintage is coming and carrying costs and interest are starting to weigh on owner and the distributor.
The next call goes to wholesalers to quietly move thru it with companies like Garagiste or Full Pull who offer Mystery or Redacted, or thru Costco that doesn’t report Nielsen or WSPRO that would alert your DTC customers to how much more they spent per bottle than they could now at one of these customers.
More financial transparency by luxury wineries can help the situation with consumers of what actually goes into bottle, but many of the hikes that came into play in 2020/2021 due to myriad of factors from materials shortages to consumers will pay more have not been drawn back, where they have with spirits, because that became the new OPEX model for wineries vs. a blip on radar of wine.
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This is interesting. Spirits prices have come back down? I’m curious because most prices of consumer goods (other than gasoline, which is its own beast) haven’t.
I can’t speak for primary market, but secondary market prices have come way back down. Depending on the brand, you are talking 25-40%.
When things like Pappy Van Winkle come crashing back down to earth, that’s a problem.
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How much lower?
Are people here concerned about rising prices, or falling?
We are 594 posts in, I think people are very interested in the topic.
Pappy 15 was trading around $2500 a bottle for a while. Now it’s down around $1600/$1700.
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Which consumer goods are you referring to? My weekly grocery bill has dropped by 10-15% over what it was back in say January. I’m buying the same stuff.
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I’d say that many on this board have positioned themselves to be more immune than average to actual economic data.
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y’all should merge this with the “only boomers are drinking wine” thread and other related threads about diminished demand/consumption
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Got it. Yeah, that’s kind of apples to oranges. Pricing dynamics are totally different.
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