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Saxum and Failla: a tale of two pricing strategies


I feel a sense of personal affinity for Justin Smith, the founder/winemaker of Saxum Vineyards, and for Ehren Jordan, the founder/winemaker of Failla Wines.

When I wrote my first book [2005], A Wine Journey along the Russian River, Ehren kindly was one of my chief sources of information about the Fort Ross-Seaview area (now an official AVA) of the Far Sonoma Coast. I’ve been tasting his wines since the 2006 vintage, before he and Failla were well-known, and loving them from the get-go: of more than 50 I’ve reviewed, I gave less than 90 points to only two of them. Ehren, of course, is very famous now, having received all sort of awards and honors from wine writers, and he is very generous in sending me all of his new releases every year for review, which isn’t something he does for many writers.

Justin Smith, on the other hand, has a full chapter in my 2008 book, New Classic Winemakers of California: Conversations with Steve Heimoff. I’d been reviewing his wines since the 2002 vintage, and very early on recognized their greatness, so when I wrote the book, I knew Justin had to be in it. Since then, Justin, like Ehren Jordan, has become famous, and Saxum is one of the top wines in terms of prestige, if not the top wine, from Paso Robles. Justin sometimes sends me his wines, if I beg him pretty-please, but not always: he prefers to have reviewers visit and taste with him, a la Screaming Eagle or Alban, which I completely understand.

When I began reviewing both Saxum’s and Failla’s wines, they were priced more or less in the $30s and $40s, not cheap, but not really expensive. Today, that’s completely shifted. Ehren, at Failla, is well known for being reluctant to take price increases, despite his fame and the accolades the wines get: his fantastic 2010 Hirsch Vineyard Pinot Noir is “only” $65, while his 2010 Estate Chardonnay, which I scored at 99 points, costs $44. Those are bargains for what you get.

Justin, on the other hand, has chosen another route. I don’t know what the suggested retail prices are for his current releases, because his website doesn’t say. But various online shopping sites, like this one, and here, show them generally in the low triple digits, more than most cult Pinot Noirs, but considerably less than the top Napa Valley Cabernet Sauvignons. [EDITOR’S NOTE: A reader subsequently notified me that the 2010 Saxums are $89 from the mailing list, still considerably higher than Failla.]

The similarities between Justin and Ehren are strong. Both are young, personable guys who had a vision and made it come true despite considerable challenges: Justin was in Paso Robles, an area generally considered too hot and a bit of a backwater (although that’s fast changing). Also, Justin decided to specialize in Rhône-style wines, which have never been in high favor, especially among connoisseurs. Ehren’s challenges were in his selection of a site for his estate vineyard: an almost inacccessible stretch of the Sonoma Coast that, when he began his project, did not have the cachet it does now. And Ehren wasn’t known for Pinot Noir and Chardonnay; he was the winemaker at Turley, where Zinfandel and Petite Sirah ruled. Neither Ehren nor Justin started with a big wad of money: they both put plenty of sweat equity in.

Both men were “discovered” early on by people like me, and both went on to the well-deserved success they enjoy today. Where they differ, obviously, is in their pricing strategies. I wouldn’t blame Ehren if he raised his prices: I think buyers would gladly go along. Well, maybe not gladly, but they would. Nor do I blame Justin for raising his: he believed in himself and in his wines, he figured the market would bear the price, and he was right.

Perhaps Ehren feels that hedging his pricing will protect him from future economic swings in the market and, in the long run, ensure Failla’s continuity. Perhaps Justin feels he might as well take advantage of the opportunity Saxum’s fame brings him right now. I personally can’t say one strategy is better than the other. I just know that both of these guys are making astonishingly good wines. I also know that, while Justin proves that you often have to dig deep for great wine, Ehren is showing that world-class wine can be had at less than stratospheric prices.

More value wines, in this case, Editor’s Choices


Yesterday I wrote about Best Buy wines on the market now. Best Buys are defined rather strictly by Wine Enthusiast according to a price-score relationship. For example, if a wine scores 87 points and costs no more than $12, it automatically gets a Best Buy designation. The editor (in this case, me) has no discretion in the matter. It’s all in the numbers.

We also have another class of special designation called Editor’s Choice. This is where we editors can apply our discernment and judgment. The guidelines for Editor’s Choice are “wines that represent excellent quality at a price above our Best Buy range, or wines that merit special attention whether for quality or uniqueness regardless of price.”

This obviously opens up a whole world of possibilities. It would be easy, I suppose, to overdo the Editor’s Choice selections, since the parameters are so loose as to be almost subjective. But I’ve found, over the years, that I’m pretty selective about it. I don’t want my Editor’s Choices to seem promiscuously chosen, or selected for any reason other than that the wine really impresses me for something.

It’s hard to say, in the abstract, why I choose Editor’s Choices. A better approach is to use specific wines I gave the designation to and explain my thinking.

Often, even expensive wines can earn an Editor’s Choice:

Failla’s 2010 Chardonnay, from Ehren Jordan’s estate vineyard way up at Fort Ross, on the far Sonoma Coast, isn’t cheap. At $44, it’s pricier than most people I know would spend on a bottle of wine, except for a special occasion. But then, not every Chardonnay I review gets 99 points, which makes $44 seem bargainesque, which makes the wine an Editor’s Choice.

Ditto Von Strasser’s 2009 Estate Vineyard Cabernet Sauvignon, from up on Diamond Mountain. It’s not the only Napa Cab I gave 98 points to. But, at $70, it’s a helluva lot less expensive than its peers, not to mention dozens of triple-digit Cabs that aren’t even as good. That makes in unique.

Then there’s the De Loach 2009 Pennacchio Vineyard Pinot Noir, from the Russian River Valley, which I gave 96 points. Seriously good Pinot, and the price–$45–makes it a must buy. An easy winner for Editor’s Choice.

There’s another category that’s not super expensive, but not cheap either. Let’s say, from $18-$30. If these wines are outstanding or unique in some other way, I’ll give them an Editor’s Choice. For instance:

Arrowood 2009 Saralee’s Vineyard Viognier, from the Russian River Valley, got one for its 95 point score and (almost everyday) price of $30. It also earned the designation because good Viognier is rare in California, and this is a really good one.

This was a no brainer: Joseph Carr Dijon Clone Chardonnay, from the Sonoma Coast. 94 points for eighteen bucks? You have got to be kidding.

Another Duh! Editor’s Choice was the Tangent 2011 Paragon Vineyard Viognier, from Edna Valley. 92 points, $17. Can’t beat it. In the same everyday price/high quality realm is Gainey’s 2010 Limited Selection Sauvignon Blanc, from down in the Santa Ynez Valley. 92 points at $19 is a steal.

Sometimes I give an Editors Choice just because the wine is offbeat and different, or I get the feeling it will be great with a vast array of food. Some of the Pinots and Cabs I rate very highly are highly specialized wines that, good as they are, are necessarily limited in what foods to drink them with. I mean, Harlan and Colgin and Verité demand foods with a high degree of sophistication and specificity geared to the wine’s flavors and textures. On the other hand is a wine like Vina Robles’ 2010 Red4, from Paso Robles (90 points, $17). A Syrah-Petite Sirah blend, it’s so versatile and elegant, if I were a sommelier I’d buy it. Production was nearly 12,000 cases–ease of finding in the marketplace can also weigh in on the Editor’s Choice designation.

One of the least expensive wines I gave an Editor’s Choice this past year was the Sterling 2009 Vintner’s Collection Syrah, with a Central Coast appellation. Thirteen bucks, 87 points. Hey, at that price, it would be one of my house reds (if I had one). High case production, too. It’s a pleasure for me to be able to use my judgment and recommend a wine as an Editor’s Choice because I know a lot of people will be able to use that information and benefit from it.

The middle’s getting squeezed


When I was in Napa yesterday, I was talking to a guy who’s pretty tuned into the valley’s wine culture. Our conversation ranged over a variety of topics, not just wine, but the economy, politics, Occupy Wall Street, etc., and obviously we got onto the issue of the declining middle class, which seems to be the big domestic story in the country.

At one point, we were driving down Highway 29, through Oakville and Rutherford, looking at all those famous wineries, and I said that I often wonder how they’re all doing in this recession. I said I can’t believe they’re not hurting. My friend had actually read my post from a few days ago on “Why more wineries aren’t failing” and he agreed that the banks probably are holding back from doing more foreclosures; but he agreed also that even if the wineries aren’t going bankrupt or having to sell themselves, many of them are probably deep in debt and struggling, especially those whose retail prices are in the medium tier (hard to define, but let’s say $20-$60). The extremely low-priced wines, such as those produced by Bronco, some Gallos, Bogle, some of Don Sebastiani’s stuff like Smoking Loon, Woodbridge by Robert Mondavi, Red Truck and Big House are probably doing pretty well, because they make sound wines at around $10 a bottle, and that’s the sweet spot for consumers these days. But the middle class isn’t going to buy a middle-priced bottle these days, the way they used to, because they either don’t have the money, or are afraid to spend it.

“If you think about it,” my friend said, “the middle-priced wines are kind of like the Middle Class Americans. They’re both being squeezed out of existence.”

Middle class Americans are indeed under pressure, a fact that Republicans, Democrats and everyone in between can agree on (although solutions to the problem appear to be intractable). The problem with the mid-priced wines is that they’ve pretty much targeted themselves to Middle Class consumers. High end drinkers won’t buy them (I don’t want to get into naming specific brands, but think of the stretch of wineries from, say, just south of the Oakville General Store to Calistoga along 29. You can choose just about any one you want). High end wine drinkers want Harlan, Hundred Acre, Futo. On the other hand, the financially strapped consumer (student, blue collar worker, housewife on a budget, retiree) can’t afford $20 and up for their regular house wine, and so they turn to the cheapies. As a result, the more the Middle Class in America is pinched, the less wine the mid-priced wineries are able to sell to them.

It’s a vicious cycle, but I think my friend got it exactly right. These wineries have got to be hurting, but the banks are going light on them, for now. Things won’t recover for the mid-priced wineries until the economy recovers, employment starts rising, and consumers feel like they have some discretionary money to spend again.

I do want to comment on some remarks that Rob McMillan, who I think is a banker with Silicon Valley Bank, made on my “Why more wineries aren’t failing” post. Rob said “Only 7% of wineries describe themselves as being significantly weak,” which is a statement that needs examining. First of all, self-professed status reports, in any poll, are notoriously misleading, so I suspect that the percentage of wineries that are actually “significantly weak” is considerably higher than seven. Secondly, you’d have to define “significantly weak,” as opposed to merely “weak,” to understand this number precisely. Perhaps 67% described themselves as “weak,” but not “significantly weak.” These surveys all depend on how you ask the question.

Secondly, Rob wrote “grape prices are going up.” I suppose this could be true, especially after this vintage, which is going to be very low-yielding, by every account. However, the 2010 crop was a large one, the third biggest of the decade, and according to the California Dept. of Food and Agriculture, grape crush prices, measured as dollars per ton, were down considerably in 2010 from their 2009 highs.

Even if grape prices go up in 2011, such is the law of supply and demand that, if demand remains low for high end wines, it won’t matter. Soft demand will balance out high prices, which will put an additional squeeze on those $20-$60 wines. It’s all tied together: restore the Middle Class to fiscal health, and the mid-priced winery tier will recover.

What exactly is the relationship between price and quality? Seriously…


Before I wade into the thicket implied by my header, let me bring to your attention this little spat from across the pond, in which the spokesman for Britain’s third largest supermarket chain accuses the editor of Decanter of being a “snob” after the editor, Guy Woodward, told the BBC there’s a “huge amount of difference” between bottles of wine that cost only 2 British pounds apart, with the more expensive being the better.

The tiff lit up British twitter boards with the ferocity of a royal wedding (well, almost), forcing Woodward to explain what he really meant. On The Telegraph’s website, he said that, at the average price of £4.60 paid in Britain for a bottle of wine (about $7.50 U.S.), “the chances of getting an interesting wine are slim.” Although he had praise for certain cheap wines, including a Rioja, Woodward remained unapologetic. “But these wines remain the exception rather than the rule…”. Continuing, Woodward calculates that “If the price of wine were to rise, producers would be paid a decent wage to reinvest in their vineyards, we’d have better wine [and] people would learn to appreciate it…”. It’s the price wars, with all their deep discounting, that rage in Britain, as here in the States, that keep the cost of wine low, and thus the quality–or so Woodward says.

Is he right?

Well, readers of this space, as well as those familiar with my reviews, know I have long argued that the correlation between price and quality isn’t as neat as you might wish it to be. Often as not, I’ll give a winery’s standard bottling a higher score than its pricier reserve. In big blind tastings, such as the ones that the Napa Vintners arrange for me, I’ll often rate relatively inexpensive wines ($25-$40) equal to, if not higher than, super-expensive cults. I love giving a Best Buy to a wine when it conforms to Wine Enthusiast’s price-rating guidelines. And even when it doesn’t, I’ll give a coveted Editor’s Choice to a wine that out-performs for the price.

But in general, I’d have to agree with Guy Woodward: it is awfully hard to get a great bottle of wine for $7.50. Or even $10. Not to say it’s impossible; it can be done, especially nowadays, when negociants like Cameron Hughes are able, somehow, to buy expensive, well-grown wines at big discounts from producers, who can’t sell it. This is why there are so many great Napa Cabernets lately in the $20-$30 range.

But $20 is not $7.50. At that price point, you have to do your homework very carefully–either that, or you just can’t be too fussy. The wine price wars are fought as fiercely here as in Great Britain, perhaps even more so, driving quality down to an acceptable bottom rung, below which not even the most aggressive producer dares to sink, lest the consumer reject his wines in droves. I have frequently defended the big, mass producers for giving Americans what they want and can afford–but let’s not pretend that these are quality wines. I will claim Guy Woodward’s words for my own: Under $10 or so, “the chances of getting an interesting wine are slim.”

Giving props to the broad market


We wine writers, and the popular wine media in general (I include the major blogs), frequently suffer from a rare myopia: while we’re obsessed with cult wines, collectibles, the Big Names and expensive boutique bottles, meanwhile the everyday work of producing and selling inexpensive wine to the majority of drinking people continues around the clock. The labors of the people behind lower-priced wines from California’s 5 largest wineries–Gallo, The Wine Group, Constellation, Trinchero Family and Bronco (according to Gomberg Fredrikson)–are largely invisible to the average consumer. But their vast sales forces are out on the sidewalks every day, meeting with buyers from the nation’s leading chains, negotiating deals, driving from venue to venue, flying from city to city, market to market, battling it out for shelf space in a never-ending grind that’s almost gladiatorial.

It’s easy for wine lovers of a certain cultural milieu to turn up their noses at boxed wines, wines with no vintage in big bottles at the bottom of the supermarket shelf, or indeed even vintaged, varietal wines that cost only $10, give or take a few bucks. But these are the wines that fuel America–more importantly, they are the entry-level wines that, for many consumers, will lead up the price-point ladder to more expensive ones. And let there be no doubt that Americans are drinking inexpensive wines in droves. We justifiably celebrate the cool-climate coast as the soul of California wine, but the truth is that the vast, inland Central Valley is California wine’s heart and lungs, the circulatory system that pumps out vast quantities of sound, everyday wine across the country and, increasingly, abroad, from Scandanavia to China. So great is the appetite for inexpensive Central Valley wine that, to quote the Ciatti Company’s May 2011 report, “Bulk inventories continue to be depleted, driven by large wineries, negociant brands and the re-awakening of mid-sized wineries expanding into the $8-$15 a bottle category. The majority of San Joaquin Valley grapes now have commitments…”.

According to Ciatti (an important broker), while Chardonnay continues to trend upward, so does white Zinfandel and “generic” white wines, while “new products such as Muscato, Sweet Reds and [domestic] Sangria” are increasingly popular with “a new demographic of wine buyers.” Just who these new buyers are is less clear, but several assumptions are safe: (1) they’re value conscious, (2) many are likely new entrants to wine and (3) they may well be precisely the younger (Millennial and Gen X) consumers who are said to be more adventurous and experimental when it comes to wine, looking for things their Dad doesn’t drink.

At any rate, the shipments of inexpensive California wines so far this year are soaring, and when you compare them to the stagnation of expensive (more than $15-$20) California wines, it’s clear that this segment is keeping the market alive. And not just in the Central Valley. So tight has the bulk market there become, says Ciatti, that it’s “pushing buyers into the coastal regions for next year and into the future…”. These coastal growers may not get the prices they’d hoped for or historically have received, but at least they’ll have someplace to sell their grapes and/or wine, and make enough to keep them going until the economy recovers.

What today’s post is, I guess, is a toast to the big wineries and inexpensive wines we so often overlook. They’re the base of the pyramid, the legs under the stool, the “broad market momentum [that] continued to soar” in early 2011, according to Gomberg. Here’s to America’s vins de pays.

Some lessons learned from the first decade of the 21st century


Hard to believe in just 37 days the first decade of the 21st century will end. Seems like only yesterday we were partying like it was 1999 (wait, it was 1999) and in a panic about the Y2K meltdown. Now here we are on the verge of 2010. In the blink of an eye, a decade has flown by.

It’s been ten years of discontinuity and discombulation for everything in America, and that includes the wine industry. I went back to review some things I wrote for Wine Enthusiast back in 2000, to see what we were thinking and talking about then. The wine market was, of course, robust in 2000, coming off the previous decade of up, up and away. In August of that year I wrote a column that reflected on the historical swings of the Bordeaux market over the preceding, well-documented two centuries. “Switch now from Bordeaux to California, and especially Napa Valley,” I said. “Many of the top wines, particularly Cabernet Sauvignon, have doubled in price since 1990…the price of many, if not most, expensive wines has got to come down, and will…If you don’t believe that the world’s most prestigious wines can suddenly, exuberantly collapse in price, just read ‘The Wines of Bordeaux’ and find out.” That book, by Eddie Penning-Rowsell, traces the sine curves that Bordeaux prices always have described.

The dot-com bust and Sept. 11 dealt blows to the wine industry, but nothing like the staggering knockdown that the Great Recession of 2008-2009 delivered. I still see “suggested retail prices” of $100, $150, $250 for certain Cabernets, but frankly, I don’t believe them. A winery owner can claim to be asking (and getting) triple-digits for his wine but that doesn’t mean he is. So I was right that prices would collapse, but it’s a prediction anybody can make, at any time, because sooner or later, prices always tumble. But that has never stopped certain people from trying to talk prices back up, as for example this article from Investors Chronicle, which argues that “the market for quality wine has enjoyed a rapid turnaround” and cites somebody from something called The Wine Investment Fund as saying that fine wine “has earned it[s] place alongside gold, equities, bonds and other assets in an investment portfolio.” We may forgive The Wine Investment Fund, which is based in London, Bermuda and Hong Kong, for hyperbole, since it’s hardly a disinterested party.

I asked, also in a 2000 column, the following question: “Have you noticed that wine is getting sweeter and softer?” Apparently, I had, although 2000 was a little before I remember actually becoming convinced that California wine had a real problem, namely lack of acidity and excessive residual sugar. Later that year I wrote a little story about Jess Jackson stepping down as Board Chairman of Kendall-Jackson, and quoted him as saying, “I’m seventy. I’m retiring.” Some retirement! But along less happy lines, at the end of 2000 I reported on the news that Robert Mondavi Winery had “extended its reach to a fourth continent, Australia,” with its announcement of a joint venture with Rosemont. In retrospect we can see that this really was an early warning sign of the winery’s impending demise, caused by the hubris of exalted ambitions. RMW’s actual death dragged on for another four years, but finally occurred in December, 2004, when the company was sold to Constellation.

Several conclusions can be drawn. Wine prices are down now, but unless this is the End of History they will rise again, pace Penning-Rowsell, although it could take a while for the high end to recover; there were eras when Bordeaux took decades to come back. Softness and sugariness remain stubborn problems in California wine, but there’s evidence that that trend-line has peaked, thankfully (although it’s a Dracula that threatens always to rise again from the grave). Jess Jackson happily remains with us, at the helm of a great wine company. And the unhappy experience of Robert Mondavi should be a warning sign to ambitious empire builders. What are its lessons? Be careful what you wish for because you might get it. The Devil’s in the details. The bigger they are, the harder they fall. Dot your i’s and cross your t’s. The fundamentals still apply as time goes by.


And speaking of the second decade of the 21st century

The world will have heard by now that Gary Vaynerchuk has won Wine Enthusiast’s “Innovator of the Year” Wine Star Award for WineLibrary TV. I am personally thrilled by the prospect of finally meeting Gary when we all gather, in black tie, at next year’s gala ceremony, at the New York Public Library’s 42nd Street branch. I feel like I know Gary from his comments on my blog, and he is obviously a force to be reckoned with as we head into the two thousand and teens. Congratulations to Gary and to all the Wine Star Award winners!


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