Pali-zation, or Signs of the times
I’m being re-sent a lot of wines that were first sent to me 3, 6, 9 months ago. Over the years, this has happened occasionally, but not too often. Now, it’s routine. This tells me something significant: many wineries have been completely unable to deplete inventories of existing stock, even when they get good scores. That is unprecedented in my 20 years of reviewing wine. It’s one of those canary in the coal mine situations. The question is, Is there a time lag between now and recovery, or are things getting worse?
There was a report yesterday from Reuters about how a little Santa Barbara-based winery, Pali, has so much wine left over they can’t sell, they’re basically dumping their $40-$60 bottles of Pinot Noir for $19. I’ve given great scores to Pali, especially for their 2007 single-vineyard Pinots, which are great wines by any standard. But Pali is caught in the crunch of this severe recession: although their wines are terrific, they can’t sell them. Hence the price slash.
Anecdotally, the same thing is happening to other wineries. I think I earlier mentioned a Petite Sirah I gave a score in the low 90s. It retailed officially for $14, which means you can probably find it for even less than that. Turns out (according to the brand’s owner), he obtained the wine, in bulk, from a producer who simply couldn’t sell it for the asking price of (as I recall) $30 or $40. So the original producer preferred to dump it, rather than lower the price and “dilute” the image of his own brand.
This sort of thing has always happened in wine. It’s just happening a lot more these days. The chief beneficiary is, of course, the consumer. As tough as it is for the Palis of this world, it’s great for the average wine buyer, who’s getting some of the best values in decades. The conventional wisdom now is that the recession has consumers drinking as much as they ever did, but spending less on what they buy. That is likely to be one of the lasting impacts of the economic slowdown — a broad swathe of the consumer market has niched downward. Retailers are taking notice: giant Walgreens just announced they’re adding beer and wine to their stores. The company’s CEO explained the unusual move this way: “We’ve adjusted our retail model to respond to what we believe will be lasting changes in consumer behavior.” Lasting changes. That means Walgreens believes people are going to be in a lower-spending mode for at least as far as the eye can see. That translates into more bad news for wineries like Pali.
The Reuters article I referred to above also contained this quote from Robert Smiley, a wine business guru at U.C. Davis’s School of Management. “[S]ome of the cult wines will even make deals with you.” Deals with cults! Who knew? No one knows exactly what the financial status of the cults is, except their bankers, but I’ve been reached out to by elements in Napa Valley in a concerted way that has never happened before, which tells me that some of them, who used to feel invulnerable, now realize they’re as vulnerable as the next Pali.
There’s one more factor to consider in the future of very expensive wines, a factor that’s more psychological than objective, and that’s the attitude of Millennials, who obviously are the longterm future of the wine industry. From what I can tell from the blogosphere, they’re far less impressed by “cults” and “names” than their parents were. That could represent a real tipping point. If the famous cult wines end up like the Republican Party, largely the shrinking domain of older white men, they’ll find themselves an ever-smaller and less relevant minority. Pali-zation will reduce them to cannibalizing each other.