Perhaps this belongs in politics, but can someone explain to me how CA continues to operate in a bubble completely divorced from economic reality? Perhaps I’m just in a pissy mood because it’s Monday, but how is it that every year, domestic wine prices raise 5-10% regardless of what the broader economy is doing? I’m down to 20 lists from over 100, but as fall offers come rolling in, I see more culling in my future…
You were on 100 lists? HFS!
How many did you buy from?
Dan, I was a little overzealous when I first got into the hobby. I dropped about half after testing them for a couple few years - the last 30 or so I’ve dropped due to price inflation that has been out of touch with reality since the 2008 financial meltdown. It IS different this time - at least, for my generation.
I like your enthusiasm, Jody, and on a smaller scale am whittling down my lists now as well, from 15-20 to a current 9 and struggling to get down to 5 or so, but I really like all those I have left.
To your original point, I have been strict in dropping a list once the bottle prices exceed $70 or so (with the sole exception of Ridge Monte Bello) so I leave it in the hands of the wineries to keep my business and am always scouting for new wineries and varietals.
It’s expensive to live and do business out here. I haven’t lowered my prices due to the economy. For the most part they have increased to help make up for the drop in gross sales. I guess you’ll just have to keep culling. Believe me when I say, It’s not personal, it’s business.
Price of fruit going higher?
What’s great here is that each producer gets to pick their own elasticity of supply. And if prices keep going up, they’re basically saying that they originally made a mistake offering the wine too cheaply (there are other branding possibilities, opening new markets from the demand side, etc, but let’s stick with this).
So, instead of being pissed that the wine now is too expensive, be happy that you were on 100 lists and bought a ton of stuff when it was reasonably cheaper. This works for me in Burgundy (where the stuff was basically free from the early '90s to the very early '00s and then exploded.)
btw, I didn’t even know there were 100 lists to get on! At my max in Calif, I was on Aubert, Peter Michael, Rivers Marie, Dalla Valle, Araujo, Colgin, Harlan, Togni, Bryant, Kistler, so a total of 10, and tried to get on Marcassin, Screaming Eagle and SQN, so the max I could have imagined was 13. 100? wow.
If you speak of the wine I think you speak of, there are market pressures you could not even imagine playing a huge factor.
I was actually thinking on the drive to work this mornign that the prices I am paying have dropped. I don’t recall having as many sub $30 CA bottles in my cellar as I do now. But I guess that is not from wineries dropping prices so much as it is me finding wineries selling at lower price points.
Also not sure if you like the 11s but if so wait for the blow outs to start. Talking to the CA guy at my LWS, the wineries and distributors are all nervous about how many of the 11s are not moving. Maybe that won’t impact the lists you are on but there shoudl be some retail prices reductions coming up in the near future.
Silicon Valley Bank writes an interesting blog (actually Rob McMillian of SVB) on wine economic issues. Here’s a recent blog post about some of the pressures facing wineries: http://svbwine.blogspot.com/2012/08/how-much-do-wineries-really-make.html
Adam Lee
Siduri Wines
Peter, the ‘mailing list’ as supply channel has exploded in the last 10 years. I wasn’t trying to be crass by mentioning the 100 number, I was just citing my sample size for context. To your point of select wineries trying to find their market value, I think you are spot on. When wineries jump from $100 to $125 to $250 in nice, clean increments, they are clearly trying to find their market price and/or jump up to a higher demographic. These price increases have no relation to market pressure or cost.
To Adam (great read), Brian and Mike’s point - I’m not ITB, I don’t do business in CA and I don’t understand the market pressures wineries currently face. That said, as mentioned in the SVB post, almost all wineries are privately held, so I doubt the margins cited in the article are typical of the wineries we talk about on these boards. Even if one were to assume the 3.9% gross margin is true for these wineries, one would have to assume that all COGS are moving year over year in concert with wine pricing. That is hard for me to believe given the number of suppliers a winery buys from - but what do I know. (btw, I thought Beckstoffer’s model for pricing grapes was 100x Retail bottle price? In that model, isn’t a winery deciding what they want to pay for their grapes?)
I know there is an ocean of fine wine out there - it just pains me to let go of so many old favorites. If I was able to taste oceans of wine before buying, this would be a non-issue, but my reality is that I have to buy wine, sometimes for a couple of years to taste and know a producer.
As it’s now Tuesday, at least my mood has lightened. Thanks for entertaining my rant - I’m off to do some fall list-cutting. Thankfully, I’ve discovered scotch/bourbon this year, and that this wonderful place even has a dedicated beer and spirits forum!
Russ Bevan says he can’t afford to sell a wine for less than $195.
Well, I see three things happening in Napa…
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Score inflation seems to be sending a signal that prices at the very high end can go higher. When you go from 94pts scores and suddenly you are getting 97-100pts, many wineries look around and see wines like Shafer HSS and Harlan and say “Why not me too!” What they don’t seem to grasp is that getting a fresh 98pts is NOT the same as scoring 95-100 for a decade or two. I suspect some wineries making huge price leaps may be in for a bit of s surprise. And even if they do well for a year or two, they better pray they don’t go back to 94pts down the line, because the point chasers will move on to the next thing, leaving some wineries unable to lower their price and scoring lower. Just my opinion.
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The scarcity of great fruit. Many top vineyards are raising their prices for fruit… because they can. Las Piedras fruit was $10,000 per ton in 2010 and now is $17,500 just four years later. This will be passed on to buyers. Also, top vineyards that sourced many wineries previously are starting to be sold to people who want to make estate wine, thus making less great fruit available and starting a scramble for whats left. This is getting more acute every year. And it is happening at every price level, even for average fruit in Napa. I don’t know anyone paying less than $5000 per ton for Cab in Napa now. Thus, $50 bottles are the new $35.
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The economy. The stock market is up the 5th straight year. Unemployment is down to 6.3%. Housing is going silly again in many places. But so are costs of things like glass and corks. Also, custom crush facilities are raising their costs as space to make quality wine is lower than the amount of people who wish to make wine. I believe where my wine is made, the cost to custom crush there is going up 50% for 2014. Ouch.
Everyone is looking out to the greatness of the 2012 and 2013 vintages. Everyone made outstanding wines in those years and thus everyone thinks they will sell it all. I see things a little differently. 2012 had production up 50% from 2011 and 2013 was 25-50% above 2012. So there will be a LOT of great wine to choose from. Parker will probably anoint 15 perfect scores or more in 2012 and double that in 2013. 90pt Spectator wines will be all over the place. If the economy sinks in any way the next 12-24 months, you might see a flight to value within each category and suddenly people find the are not selling their 96-point, $200 wine with 500 cases as easily as they thought they would.
We will see.
Roy - Interesting points and predictions. I have heard opinions that the quality of 2012 will suffer due to the increase in quantity. This is the first time I have seen the percentage increase for 2013 - wow! I wonder how the quality of the 2013’s can surpass 2012?
Wine is a luxury item and there is only so much quality vineyard land out there - seems inevitable that prices will continue to escalate even though many of us will have to let go of some favorites. Most wages just haven’t kept pace with prices, although it seems there is plenty of big money out there to continue the trend.
There is so much great wine out there these days in comparison to twenty years ago that in many cases the differences between a $35 or $40 bottle of wine isn’t that significant than from a $100 a wine. I usually go to two large tastings a month where the wines in this price range are typically featured and the differences are slight.
Scott, there is a lot of wrong information out there about yields. But the history in Napa and Bordeaux all seem to show that there is no correlation between quality and quantity in excellent vintages.
Great vineyards are not great because they are 2 tons per acre vs 4 tons per acre. Old vineyards with wide planting densities produce less per acre because of missing vines and inefficient use of land. New, modern vineyards planted 6X4 should be producing 4 tons per acre for Cab (2.5-3 tons per acre for Pinot due to smaller clusters). I find that if you under-crop valley floor vineyards below 3.5 tons per acre, the green flavors hold on longer and you must ripen to higher and higher brix. So under-cropping hurts quality AND yield. Old vineyards are a different animal. But there are not actually that many old vineyards in Napa. My block of Georges III vineyard that I source from in Rutherford is 24 years old and averages 2.75 tons per acre almost every year, regardless of vintage. But rows are planted 7 feet apart. If it were planted 6 feet apart, the extra rows in each acre would bring that to 3.25 tpa. If it was the ultra modern 5 feet between rows, that would become 3.85 tpa.
2011 was a year that had very low yields (-50%) and generally mediocre quality for Cab. 2012 was bigger yields and made better wine. 2013 was even bigger and made even better wine. 2012 is the best vintage since 2007 (another year of good yields) but the difference is that it was a year of thinner skins. Thus, perhaps there was a bit of over-cropping but by the time people figured that out, it was well past veraison and simply too late. Most people did larger tank bleeds to (saignee) to try to get the juice to skins ratio right, but many did not. Thus, the power and body of 2012 is not as big as 2013. But it is still really good. Classical, even. 2012 reminds me a whole lot of what young 1995 and 2001s tasted like. 2013 is like 2002 but even more good.
You’re sure it’s not a conspiracy so immense?
According to the article, gross margin is more like 50%. The 3.9% is net, pre tax. All the same, in normal industries, that pretty much means a lot of bankruptcies (everybody is not making average) and consolidation as players try to beat margins by going after scale. Since most wineries are private, I’m guessing that normal free market forces are held back somewhat because many are pursuing an interest/dream instead of just a business venture.
Roy,
I know that you said that 2013 was a larger yield than 2012…but from what the Grape Crush Report/Grape Acreage Report states that isn’t the case. In 2013 there was 66,022 tons of Cab Sauv out of 19471 acres. In 2012 there was 71,517 out of 19424 acres. So 2012 was 3.68188 tons per acre and 2013 was 2.290786 tons per acre.
I realize that might be splitting hairs (and I have the Pinots yields if you’d like to see those…for Sonoma, Monterey, and SLO/SB counties)…but honestly I am not fully convinced that there is no correlation between yields and quality. I mention that because I have been disappointed generally at how 1997 Napa Cabs have aged, often finding a hole in the middle. In that vintage, yields were 4.753 tons per acre…so I wonder if that has led to my feeling about these wines.
Would love to hear your thoughts.
Adam Lee
Siduri Wines
can someone explain to me how CA continues to operate in a bubble completely divorced from economic reality?
You should probably investigate buying Bordeaux instead of CA. Or perhaps Burgundy. Or perhaps wine from Toro that’s hitting the market at $1000+ a bottle. Would you pay $100 for Carignan from the Languedoc? I know a few. Of course, you might prefer something Italian, say Quintarelli?
Mailing lists are basically a US thing so I figure if people complain about mailing list prices, they haven’t looked more broadly. Because crazy pricing is not a US thing at all. The French do it better than anyone but in every wine-producing country, people have heard about the prices the French are getting for Bordeaux and Burgundy and Champagne and all of those people are thinking, “My wine is better. If those bastards can do it, so can I!”
As to the first part of that reasoning, they are often correct. As to the second part, they’re usually wrong.