What is the actual clearing price for Napa Cab?

[cherylfoil]

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!”

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.

[Joshua_Kates]

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!”

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!

[John_Morris]

LOL I’m an idiot. The guy I responded to is the OP, so clearly he knows what he meant.

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.

[CJ_Beazley]

LOL I’m an idiot. The guy I responded to is the OP, so clearly he knows what he meant.

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.