California’s recent grape harvest was of average quality and quantity – but it wasn’t business as usual. At the last minute, a surprising number of vintners dropped their contracts for grapes intended to go into their higher quality wines fearing that the market for those wines had disappeared. Overall, vintners slashed production of wines priced $30 and higher rather than risk adding to the stockpile of 2006 and 2007 wines still sitting in their warehouses or, worse, continuing the extraordinary discounting that has been the rule for the last year, according to vintners and wine industry representatives.
No worries the fruit is going to waste, however. Opportunistic producers such as Jim Clendenen of Au Bon Climat snapped up all the grapes they could find to expand production of wines priced $20 and under. Clendenen went on a buying spree as soon as he saw there was a surfeit of Pinot Noir grapes on the market.
Great snippet, Mary. This is going to be intensely interesting. I was just talking with a friend the other day about how there is sort of a dearth of serious Pinot at less than $30 … I think that’s a product of the SVD trend. It seemed for a while that every new Pinot that came on the market was at $45 or $50. Perhaps a long-term upside of the downturn will be that blends and “less-sexy” non-SVD wines will get more play … But I think that’s good all around. I just hope we don’t see a shakeout of wineries … hopefully the worst is behind us.
This is interesting. I’ve seen several private label Cabernets reportedly sourced from unnamed but “well known” sources. Cameron Hughes wines and Gary’s Wine Marketplace Go Figure brands are two that come to mind. In reading the info the sellers put out about the wines, it sounds like several are excess production that is sold off to drive cash flow, but also (IMO) disposed of on the bulk market to lower the volume of the premium wines they are purported to go in to.
If this is the case, I’d love to find some PN from that mechanism
just my view from the stands - not sure how off base I am…
J,
I too know some folks who bought wine (in this case pinot) in the bulk market and will use it in their lower-end programs. But in talking to them, they said that they only bought from known sources where they knew the farming and winery techniques involved in making the wine.
The reason for this is that they feared that some producers would not farm to as rigid a standard nor be as concerned about quality in the winery, if they knew that any wine was to be bulked off.
I suppose that, in circumstances like Mary’s note described - that is, where the winery is caught off-guard and at the last minute by cancelled contracts, bulk wine is a good chance for QPR but if a producer knows or is inclined to believe that this is the eventual market for its wine, I understand a buyer’s concern.
Best, Jim
Holy cow. This conversation reminded me of a conversation I had with Matt Turrentine (Turrentine Wine Brokerage) at lunch about two years ago. I asked him how pinot was doing, and he said that although they were getting a good supply of bulk wine and grapes, it was selling as fast as it came in, they couldn’t keep it in stock. So I got curious today and looked at their list. Massive amounts of pinot for sale. 2006, 2007, 2008 and 2009.
(Anyone interested can view the selections by clicking on the link above.)
Edited to add: Link to their 2009 Fall Newsletter
Pinot prices have plummeted (love those p’s, they’re so fun) from $16-$20 a few years ago (not quoted in the newsletter; that’s from memory) to $12-$15 for coastal / $7-$8 for interior. I’m guessing with tons of bulk to move, from four vintages, that prices will continue to drop for a while.
Jim, did you mean ‘vineyard’? Because the article is talking about the wineries who have cancelled contracts for high-end pinot, dropping vineyards at the last minute. So the wineries were not exactly surprised … just asshats to their growers. Given that there are usually penalties in contracts for this, when wineries would rather pay a penalty than buy high-priced pinot it’s proof (damn, another ‘p’ ) that a trend is already under way.
(As an aside to our non-industry readers, bulk brokers also buy grapes and process wine–not all bulk wine comes directly from a winery. In fact most of it comes from vineyards who were unable to sell their fruit.)
Bully pulpit notes:
What I find interesting is the dichotomy between the facts–reportage in wine news, features in food and wine publications like Zester, existing unsold inventory and dropping prices–and some of the discussions and comments I see on this board from both retailers and consumers. Not shaking a stick at anybody in particular, btw–but it just amazes me that whenever someone says high-end wines are NOT moving, there are always defenders. This particular critic darling is too moving, or the winery is holding back it’s inventory for one reason or another, etc. etc.
The fact is, people, high-end wine is NOT moving. I’ve talked with CA distributors who are dismayed at the soft market for their high-end wines. Retailers see good movement on SOME high-end wines, but they only ORDER wines they know they still have demand for. When distributors can’t move the wine to retailers, they order less from wineries (assuring their customers that they are still selling out of their inventory, thus justifying high-end pricing). The wineries end up stockpiling the wine (assuring their customers they are doing this by choice, of course) and the wineries in turn renogiate prices, buy less fruit, and at an extreme, drop contracts. Why are wineries actually dropping contracts for high-end pinot, instead of renegotiating with quality buyers? Not because they anticipate an industry trend–the wine industry has too much inertia to be that proactive–it’s because they already have too much unsold back inventory.
What does this mean for the consumer? If you continue to pay high-end prices, you’re a chump.
Granted, I believe a lot of artisan pinots are certainly worth $40-$60, based on the caretaking of the vineyard and winemaking. But over $80? No way. If you just have to have your Veblun moment, at least ask the winery for a deeper discount or free shipping. Or ask your local retailer to special order a case for you–the winery or distributor pays shipping to the retailer and the retailer will likely give you a low markup; between those two savings you can frequently get the wine for less than you would directly from the winery.
Can I raise my hand and ask another question here.
What Cammeron is doing, is, IMVHO, great. But, if there is an ocean of bulk wine, or good/great wine out there - why isn’t it being repackaged into bag in a box formats?
I for one would happily spend 30-50 bucks on a 3L bag (vs. 19.99 for Black Box etc) - if I could enjoy it for 90 day (or hell, 45!) one glass at a time.
In fact, someone find me a barrel of wine like this, in this format, and I’ll personally move it in Chicago for you.
By the way, all and sundry are more than welcome in Cellar Rats, in fact I would love to see more participation! (I’ll post a separate note to that effect.) We, well I, asked Todd to start this forum when he founded the board so that producers could have a place to discuss the nuts and bolts of production, and production issues, without being chased and hounded for being shills and detractors. Not that that’s ever happened anywhere … else …
Back to bag/box options, it certainly looks as though the pricing is there. I’m not sure the bag/box technology is at a point yet where it pencils out for small and mid-size family op wineries to use it for relatively small runs. Most of the big producers have their own in-house production lines, and I’m sure that unless they’re running at or close to market saturation for their brand they’re already expanding.
Plus, there’s the issue of brand dilution … once you produce something like that, who would buy your $30 wine when they know you offer a bag of really good plonk for $6? And for small/mid-size producers, there’s also the issue of price markup … by the time it passes through the 3-tier, even in your home state, the markups would price even a 3L bag higher than the other similar shelf options, which are all million-case productions with incredible purchasing leverage and economies of scale. And probably all owned by Gallo.
Nevertheless, consumers can always hope. You can always order your own bulk wine from Turrentine for $8 a gallon and put it in this …
Back to bag/box options, it certainly looks as though the pricing is there. I’m not sure the bag/box technology is at a point yet where it pencils out for small and mid-size family op wineries to use it for relatively small runs. Most of the big producers have their own in-house production lines, and I’m sure that unless they’re running at or close to market saturation for their brand they’re already expanding.
Plus, there’s the issue of brand dilution … once you produce something like that, who would buy your $30 wine when they know you offer a bag of really good plonk for $6? And for small/mid-size producers, there’s also the issue of price markup … by the time it passes through the 3-tier, even in your home state, the markups would price even a 3L bag higher than the other similar shelf options, which are all million-case productions with incredible purchasing leverage and economies of scale. And probably all owned by Gallo.
Wouldn’t a cooperative approach help? Make a new label (I have no clue how hard that is, but tales of ATF approval abound) and try to dissect it from your main brand.
Aren’t there mobile bottling runs available with B.I.B. options Mary?
So I am guessing the biggest deterrent for wineries is the brand positioning issue. A co-op is a good idea. Would it make enough money for the participants to make the extra time and effort worthwhile? I don’t know, but I’m sure some enterprising individual can pencil it out. It would be interesting to ask the distributor the link is about how the program has worked for them.
I’m even more naive than the other Chris, but I’m reading with fascination. Thanks for the insight.
As to your last comments, considering the desperate circumstances (either now or perhaps in the near future) it seems that anything that gets cash flow through the door - even at a loss - would be beneficial. Kind of a slow the bleeding in the short run. It might just be survival mode for the near future for many. I want to see all the great growers and producers survive!
I anticipated the current market years ago, and started adding heroin to the wine at that time. Now people have to find the wine or go through d.t.'s etc. Btw for all you itb people, the technique is proprietary and trademarked, so don’t even think about it.
Brings a lot of questions to mind. The term average quality and quantity was used in the beginning of the write up to define the vintage.
If certain vintners don’t mind dumping growers in average years. Should they expect any fruit during good years or lean years?
Should we expect US wine prices to rationalize based on vintage? I personally buy into vintages not winemakers, fwiw.
What is the market for low priced Brand X (second or third label) US wines. How do they do against major label wines with advertising.
Will we really buy more wine just because it’s less expensive. Seems to me that supply and demand right now is perhaps out of whack and maybe more lower quality fruit should be dropped. Is CA grappa the answer? Think Bdx!
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