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Global wine shortage could be good news for struggling wineries


The shortage of California wine is rippling through the system, causing serious if not quite catastrophic consequences.

Winery principles tell me that when their sales forces fan out across the country, buyers are unhappy at the lack of supply and in some cases are personally blaming the winery!

I’m sure that distributors as well as retailers both on and off premise find themselves in an uncomfortable position when wines they’ve sold for years are suddenly unavailable. Of course, the rational part of them knows that no one at the winery is responsible for short crops: Mother Nature is.

But there’s a vein of paranoia that runs through the end users of the three-tiered distribution system like a low-grade infection, and sometimes these buyers can’t be sure if the winery really is low on supply, or is just cutting them out and pretending to be short.

It’s bad for the winery. If buyers feel the winery is shorting them, they might turn to someone else they can get product from, thus terminating what might have been a long relationship.

We’ve all been reading about a wine shortage, for instance here and here, which cites BofA Merrill Lynch that “Global supplies appear to be tightening simultaneously,” with government policies in Europe and Australia deliberately discouraging production, while bad weather in South America had the same effect.

The problem is exacerbated by increasing demand from China for U.S. and particularly California wineries, some of whom are selling a surprisingly high percentage of their top wines there.

Several highly placed producers have openly fretted to me about the shortage, wondering what their companies are going to do. But the truth is, they have few options. They can’t turn to Oregon because crops there run so short due to natural circumstances. Washington has huge, fertile spaces in the east, but that state’s frequent hard winter freezes intimidate California producers, who aren’t used to having entire vineyards wiped out in a single night.

The 2012 vintage, California’s biggest ever, threw the industry a lifejacket, throwing it into temporary balance, but it probably won’t be enough to overcome the result of prior years of below-average crops, coupled with increasing demand. As Gomberg Fredrickson’s Jon Fredrickson told the Unified Wine & Grape Symposium earlier this year, “California ran out of wine.”

The result? Higher prices. The trend is especially notable at restaurants, where by-the-pour prices are inching up. It’s curious that all this is happening just as the country (and world) seems to be emerging from the Great Recession, putting a little more money into the average consumer’s pocket. Are consumers willing to dig deeper for their daily Pinot Grigio and Merlot? I expect they are–and that’s good news for wineries that have gone through the hell of the past five years, and survived.

Has expensive Napa Cab reached the tipping point? And how will we know when it has?


I’ve suggested repeatedly on this blog over the years, and especially since the extent of the Great Recession became apparent in 2009-2010, that Napa Cabernet Sauvignon was in danger of pricing itself out of the market.

This was due, not only to the effects of the Recession itself, when even the Rich were trending down their spending habits, but to the simultaneous rise in this country of a new demographic: MIllennials, now hitting their 30s, whose tastes in wine (and in much else) are radically different from those of their predecessors.

For one thing, Millennials are much less interested in what “everybody else is drinking” or in what “historically has been regarded as famous” than in finding things that are unique, different, unexpected, surprising, edgy, story-driven, bold, undiscovered, hip and (let us not forget) affordable. That certainly does not bode well for triple-digit Napa Cabernet, which is none of the above.

The people who do like the cult wines are the kind that collect and store wine in large cellars, who dine at Michelin-starred restaurants with wine lists the size of phone directories, and whose selection of these wines may be inspired as much by the desire to show off than by actual interest in them. Don’t believe me? Talk to any [honest] sommelier who works in such a restaurant. They’ll tell you [off the record] exactly what they deal with, night after night.

But these customers—these sorts of wine harlots—are an endangered species. It’s so clear: it couldn’t be more apparent if the Finger of God appeared out of the sky and wrote it on a vast wall. Even in Bordeaux, the top Chateaux are struggling: Decanter yesterday reported that “American merchants bought less high-end and high-priced Bordeaux 2010 en primeur than they had for the 2009 vintage,” with buyers gravitating toward crus bourgeois and balking at the likes of Angelus, Palmer and Leoville-Las-Cases. A buyer for Sherry-Lehmann said anything above $25-$40 U.S. was just “far too high” for his clientele.

I doubt if the Bordelais care. They’ve been through the ups and downs of the economic cycle for centuries, through wars, peace, phylloxera, revolutions, depressions, recoveries, and they know that, no matter how long the market stays down, it always come back up again. This may still be true with regard to Bordeaux.

But Napa isn’t Bordeaux. It’s become so crowded in $100-plus wines that they seem to be more the rule than the exception. For every expensive Cabernet with a true pedigree–Phelps Insignia, Harlan, Stag’s Leap Cask 23, Diamond Creek, Mondavi Reserve–there are 3,4,5 newcomers with no provenance, no history behind them, manufactured ersatz out of thin air by hiring an expensive viticulturalist and consulting winemaker, slapping something together in the bottle and then hoping enough gullible snobs will buy it.

Unfortunately, this is all too often the case. But how long can they get away with it? I suspect there remain enough white-tablecloth restaurants with big spenders who want wine lists containing verticals of big names, and that isn’t going to go away anytime soon. But it cannot last; its days are numbered; that game is going to be over, whether in five years, ten or fifteen, I cannot say.

Yet there has to be a tipping point at which Napa no longer can sustain so many overpriced wines. I don’t expect Napa itself to understand where the tipping point is, or will even recognize it when it comes: Napa is very, well, Napa-centric, as perhaps it should be; but it does tend to see the world from within its own rarified bubble.

No, the tipping point will be installed upon Napa by that outside force, the free market. We’ll know it has happened only when we begin to see prices start to plummet on the most expensive wines. I myself believe I’m already seeing that, but to accurately track it, one would need the services of a staff, utilizing databases able to track real-time information in individual markets, across hundreds of individual brands, including their clubs, mailing lists and favored accounts. This forensic accounting is obviously beyond my capabilities. The tipping point therefore already could be happening, but be invisible.

Why does top Cabernet cost so much more than top Pinot Noir?


This question arose several times this past week, particularly after my twin posts on Cabs and Pinots I liked in 2012. As “Mike” commented:

Regarding “bargains,” while it is undoubtedly true that it is harder to find a great CA Pinot under $30 than it is with some other varieties, I think CA Pinot provides superb “value” when you consider the full QPR. Consider that your top rated wines above are $100 and average maybe $60-70. Compare that to the prices of your highly-rated Cabs. It’s one of the things I’ve always appreciated about California Pinot Noir.

This is certainly true, but begs the question, Why? It’s not because there’s an inherent difference in quality between top Cabs and Pinots. A Janzen 2009 Beckstoffer To Kalon Vineyard Cabernet Sauvignon (97 points) is not a better wine than Failla’s 2010 Occidental Ridge Pinot Noir (also 97 points), even though the former retails for $135 while the latter is a “mere” $60. So what gives?

Here are some factors that could raise the price on the Napa Cabernet: buying grapes from Beckstoffer, who charges a lot, price of new barrels, cost of consultants, cost of bottles (Napa Cabernet generally is in heavier and presumably more expensive bottles), cost of corks. Without knowing the details, I will assume that all these costs were higher for the Janzen than for the Failla. Still, that can’t account for a difference in price of $75!

So we have to go to factors that are unrelated to the cost of production. One that’s obvious right off the bat is the influence of peer pricing. In Napa Valley, you can’t price a wine below the price of your perceived competitors (or so the argument goes). If your wine costs significantly less than the “neighborhood” you want to live in, then buyers—consumers, somms, retailers, even, alas, some “critics”—will perceive you as “lesser” and conclude that your wine cannot be as good, even if it is. This is why, when Screaming Eagle raised its list price some years ago, you saw a kneejerk reaction up and down Napa Valley: everybody who perceived himself as in the same elite category as Screaming Eagle felt it necessary to jack up their prices accordingly.

So that’s one reason, but there’s another, more related to history: California mimics Europe in its approach to the pricing aspects of wine, and Bordeaux in general always has been more expensive than Burgundy. While there are obvious exceptions, this statement is true. It’s curious, because the average Bordeaux chateau has a higher production than the average Burgundy domaine, so you’d think it would be the other way around. But no. For some reason, going back hundreds of years, consumers (wealthy white western Europeans and, a little later, Americans like Thomas Jefferson) were willing to pay astronomical prices for top Bordeaux wines like Lafite and Latour. That tradition is larded through our wine culture and remains in force today.

What’s changing, of course, is that an entire younger generation of Americans couldn’t care less about Bordeaux. Report after report proves this. As Eric Asimov wrote, for a greater number of Americans,  especially younger ones, Bordeaux “is now largely irrelevant.” Pressure on the Bordelais to ease up on prices has been neutered only by the false and thus unsustainable popularity of these wines in Asia. But the marketplace eventually rationalizes everything (if Adam Smith is correct), and so we should see an equalizing of Bordeaux and Burgundy prices internationally sooner or later.

In California, the distorting effects of this historical imbalance between Bordeaux and Burgundy struck early, but are now in an interesting state of flux. We saw the Great Recession pose a threat to triple-digit Napa Cabernets. Now that we’re in recovery, we see a consumer who’s no longer willing to blindly plonk down whatever it takes to buy the Cabernet of the moment. And to the extent this consumer exists, he probably has gray hair.

This is Pinot Noir’s moment to shine, and it can happen, if—and it’s a big if—the top producers manage to resist their hubris and keep prices moderate. And by “moderate” I mean less than  $100.

Can Cameron Hughes negotiate good times as well as bad?


Nice to see negociant Cam Hughes getting some love from Big Media, in this case Forbes, who says he “spends his time hunting opportunities that translate into great deals for wine buyers.”

I’ve been a Cameron Hughes Wine fan for years. I nominated Cam for Wine Enthusiast’s “Innovator of the Year” award this year (he didn’t get it, alas), because I believe the man has more or less reinvented the old art of the negociant in a way uniquely suitable for the 21st century.

Negociants used to be central to business practice in Bordeaux. Indeed, as Eddie Penning-Rowsell says  in his masterpiece “The Wines of Bordeaux,” “the wines of Bordeaux owe so much to the merchants (negociants) and their enterprise, and they are so entwined in the history of Bordeaux’s growth and production as well as the sale of wine, that to give them…no more than the passing attention they have received so far would be inadequate as well as ungenerous.”

Such names as Barton, Jernon, Skinner, Nerac, Lawton and Guestier are part and parcel with the rise of Bordeaux in the 18th and 19th centuries. They bought the wine in cask from producers, blended it and sold it on the market, at a time when the chateaux had not the ability to do so. To be sure, the negociants were not always trusted. Thomas Jefferson warned a friend not to buy from negociants: “I can assure you that it is from them [i.e., the chateaux] alone that genuine wine is to be got, and not from any winemerchant.”

In the 20th century, of course, the Bordeaux negociants lost their primacy, as chateaux developed estate bottling and rising prices enabled them to market their wines directly. The concept of the negociant, by contrast, never really caught on in California (unless you can call something like Gallo a negociant, which I would not). This is why Cameron Hughes is so important.

Not that he was the first. Don Sebastiani first brought the modern concept to my attention in a major way when he established Don Sebastiani & Sons, which did win Wine Enthusiast’s 2005 Wine Star Award for Best American Winery of the Year, on my nomination. But Cameron Hughes has expanded beyond anything Don Sebastiani & Sons envisioned, becoming a worldwide presence. The Recession may have been disastrous to high-end wineries, but it’s proved a boon to Cameron, who profits from Bad Times. He’s able to pick up superpremium wine at discount prices, bottle it under his brand with his now-famous Lot numbers, and give the consumer some of the best values out there.

Not everything Cameron touches is gold. A 2009 Meritage, with a Napa County label, even at $10 was barely drinkable, while a 2010 Field Blend, $11, was rustic and brusque. Perhaps this is solely a function of their prices, for above $15 or so, a Cameron Hughes wine is as near a guarantee of quality as you’re likely to find in a California wine. I don’t have the time or patience to count all the Best Buys and Editor’s Choices I’ve given them over the years.

Will the recovering economy hurt negociants like Cameron Hughes? Probably. When I asked him where his Napa Cabernets came from (the agreements are strictly proprietary), he replied, “If you drive Highway 29 between Yountville and Rutherford, you’ll see.” These are precisely the wineries that were caught in the wringer by the Recession; buying on the cheap must have been as easy for Cameron as shooting fish in a barrel. But we have every reason to suspect the economy is recovering, and as it does, these wineries should be able to return to their normal $40-$60 a bottle price point. It will be interesting to see how Cameron Hughes deals with Good Times as well as Bad Times.

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.

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