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That Constellation-Meiomi deal? Land is more valuable than brand

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I sometimes wonder if the general public knows how much land acquisition is a strategic consideration in many of the winery deals that have gone down in California. Sometimes, these acquisitions don’t make any sense, on the face of it; you wonder why in the hell winery X bought winery Y. But if real estate is part of the deal, it can make a great deal of sense.

Such seems to have been the case with Constellation’s purchase of Meiomi, announced yesterday. Not on Contellation’s part, but on the Wagner family’s.

Meiomi’s proprietor, Joe Wagner, of the family that famously owns Caymus, Belle Glos, Mer Soleil and other wineries, told Shanken News Daily that he was selling Meiomi for an unbelievable $315 million because the deal will give him the liquidity necessary to become a much larger landowner. Wagner says he hopes to amass 2,000-3,000 acres of California vineyards over the next five years.”

“A much larger landowner.” That’s the game the major players are playing these days. Everyone assumes several things: (a) the U.S. appetite for wine will only grow, (b) exports of U.S. wines overseas also will grow, especially as trade deals like the TTP go into effect, and (c) supplies of grapes are only going to tighten as the best appellations and regions get planted out. Under such circumstances, buying vineyards now—or selling a superhot brand like Meiomi for a fortune, in order to buy land later—is smart.

Did the Wagners start Meiomi, back in 2006, in order to sell it after it became hot? Who knows? But I doubt that they, or anyone, could have guessed how wildly successful Meiomi would become. I suspect they started it because, nine years ago, the country was still in the throes of its “Sideways” fascination, and the Wagners surmised, correctly, that you couldn’t have too much good Pinot Noir. Probably, they figured Meiomi would be a nice, profitable little brand, like Mer Soleil or Belle Glos: an affordable Pinot Noir, from coastal vineyards. Myself, I don’t particularly care for it—too sweet, like candy; in a tasting of other Pinots, the sweetness sticks out like a sore thumb. But Americans, at least the ones who buy Meiomi, are gobbling it up: Wagner told Shanken that Meiomi is on par to sell 700,000 cases this year. Perhaps the Wagners looked into their crystal ball and figured out that Meiomi has had its fifteen minutes and is on the way down. This would not be the first winery that Constellation bought that had already reached its zenith.

So we know what the Wagners get from the deal: a boatload of cash that will finance future vineyard and/or land purchases. And what of Constellation? They get a super-famous brand that flies off supermarket shelves, which is really the Constellation business model. I can’t see Meiomi getting better in the future—that would be asking too much of Constellation. But with all their access to grapes, they can grow Meiomi forever, keeping it affordable even as production approaches a million cases.

There’s another thing about buying vineyard land: it’s always there for other purposes besides vineyards. Zoning regulations mean you can’t just do anything you want, but investing in land has been the most secure place to put your money since the beginning of time. And in the case of coastal California, if you happen to have a few extra hundreds of millions of dollars, you can buy some pretty fabulous property that will only increase in value. Whether or not it’s in vineyards in ten or twenty years, you don’t really care; that land is going to be extraordinarily valuable no matter what happens (unless coastal California disappears into the sea in the Big One).

Parker vs. “trendy reds” is a fake choice



Here, you see, is the false dichotomy that infects so many of our wine conversations today: that there are “two different kinds” of wine and that we, as consumers and writers, “must pick one or the other,” as if we were in a vinous civil war where no one is permitted to be neutral and like both sides equally.

That is once again the premise of this think piece in San Francisco Magazine, whose very headline starkly presents the choice said to be confronting us: Should You Be Drinking Parker Bombs or Trendy Reds?” The article lists six red wines from California that all received “a perfect score from the Wine Advocate” and then contrasts them with six other red California wines “which probably aren’t going to net any 100-point scores…”.

Civil wars are dreadful things. Most people caught up in them, I suspect, would prefer to be left alone to live their lives in peace, but the fact of a civil war makes that practically impossible. We saw this in our own American Civil War (particularly in the border States) and we see it again, horribly, in places like Syria and Iraq, where common people—husbands and wives, children and old people, farmers and merchants and mechanics and teachers—get sucked against their wills into the crosshairs of the most disastrous arguments. Sometimes—often—it seems like these are arguments between maniacs, “full of sound and fury, signifying nothing,” as Macbeth described Life, “a walking shadow, a poor player that struts and frets his hour upon the stage and then is heard no more.”

I submit that this false dichotomy is just such “sound and fury,” that it signifies absolutely nothing, except the unfortunate tendency of the media to fasten on anything that smells of controversy. Those proffering the argument that there are two kinds of wines, and that we must choose, frankly are almost exclusively from the “trendy reds” side of the spectrum. You never hear people who like Harlan or Verité or Saxum say that lighter red wines, such as Domaine de la Cote or Frog’s Leap Cabernet, are undrinkable. No sane or fair wine writer would take that position; if she were to do so, her credibility would be instantly undermined.

And yet the opposite is not the case; that is, writers and somms who like a lighter style of red wine (whatever that means) are able to charge, with impunity, that bigger red wines (whatever that means) are somehow marred or tainted or suspect.

How did we ever arrive at this impasse? More importantly, why do we suffer it to exist, in the exchanges that pass for our national wine conversation, which is supposed to be polite and reasoned, not polemical? This is why I have referred to the purveyors of the “lighter” side of the argument as the Taliban. (See here and here, for instance.)

An extremist, whether religious or cultural or stylistic, who insists that his interpretation of scripture is the only correct one is, by definition, a radical. And haven’t we seen that radicals of all stripes are the last things we need in this world?

So I return again to my old argument: When it comes to “lighter” or “more powerful” red wines, we don’t have to choose. We don’t have to feel as though we must choose, just because some authority (a sommelier, a newspaper columnist) tells us we must. People are so uncertain and insecure about wine; they look for whatever slender reed they can find, to grasp onto lest they be sucked into the quicksand of utter confusion. And this is why those purveyors of false choices do such a disservice to American wine drinkers. By creating the pretense that there is a true canon, as opposed to a false religion, they add to the confusion and, in the process, sow dissention where there ought to be nothing but respectful analysis and personal choice. It’s not and never has been “either-or.” It’s both. I wish that this phony argument, which now has enjoyed more than its expected fifteen minutes of strutting on the stage, would, like Macbeth’s walking shadow, go away and be heard no more.

Gay-friendly: Progress in the wine industry, but a long way to go



Years ago—it has to be at least ten—I wrote an article for Wine Enthusiast about the emerging gay market for wine, and how important it was proving to be. I was seeing more wine advertisements aimed at gay people, and a handful of wineries was reaching out to them, albeit quietly.

At the time, I knew quite a number of gay people in the wine industry, among them winemakers and P.R. folks, but they were mainly in the closet. The wine industry is generally a pretty open place, but there are pockets of conservatism, and many gay people did not feel comfortable enough to come out.

My oh my, how that has changed. As American attitudes towards gay people (and we’ve now expanded that to the acronym GLBTQ) have softened, the presence of gays in wine, always there but largely invisible, has become clearer. It is due to a generalized spirit of welcoming that inspired the wine community, but it’s also recognition that the gay community has a lot of disposable income—and gay people like to drink wine (according to The Daily Beast, Gay people drink 16 percent more than straight people”).

I’ve never been one to lump Americans, though, into separate-but-equal identity groups. It seems to me that, since we’re all in this together, we ought to find ways of association that transcend things like gender, race, religion, age, ethnicity and sexual orientation—even political persuasion, which sometimes can be the most difficult difference to bridge. But that’s idealistic, I’m sure; the truth is that we do tend to feel binding ties with people who are like us, and I suppose that’s good, as long as it doesn’t make us so chauvinistic that we forget that we’re actually tied to everyone.

I don’t think, even when I was younger (when such an event would have been unthinkable), that I would have gone to Out in the Vineyard’s recent Gay Wine Weekend, held in Sonoma County. And now, when I’m old enough to be most of the attendees’ father, I’m not sure I would have been comfortable had I gone. But I sure am glad Out in the Vineyard exists, and I’m super-glad that Jackson Family Wines, exemplified by La Crema, supports it. This company is strongly pro-GLBTQ, a progressive stance I wish more California wineries shared.

Some wineries feel that being too closely identified with GLBTQ issues—which remains contentious among some unkind people in America—will hurt their bottom line. The wine industry, like most industries, constantly keeps tabs on how it’s perceived. Wineries don’t want to be thrust into the position of being on the backlash end of a homophobic boycott, as Wells Fargo recently was when the celebrity-preacher, Franklin Graham, exhibited narrow-minded and hateful behavior in criticizing Wells for having the temerity to put on a gay-friendly T.V. commercial. Graham, who seems not to understand the direction of history, or perhaps just doesn’t care, no doubt instilled fear among some winery proprietors who, personally, have no problem with the GLBTQ movement, and might even privately support it; but who fear the wrath of a popular religious leader whose admonitions are obeyed by millions.

One can hardly blame wineries for being afraid of such pressure; I cast not the first stone. But it does make me even prouder of gay-friendly wineries, not only Jackson Family but also J, Windsor Oaks, Sebastiani, DeLoach, Francis Ford Coppola, Ravenswood, Gary Farrell, Iron Horse, Lynmar, Korbel, E&J Gallo and many, many others. That’s the good news. The not-so-good news is that wineries (like most U.S. corporations) still tread exceedingly carefully using obviously gay people in their marketing and, especially, their advertising. Rev. Graham, and people like him, unfortunately have succeeded in getting their threatening message across: The stifling of free speech.

When Mohammed won’t come down from the mountain



So I called up this winery the other day. It’s not too far away from Oakland. I’m putting together another tasting and asked if I could buy a bottle of their Cabernet Sauvignon and have it shipped to me. The guy—the owner-proprietor, I think—said no. He said it’s not worth his while to “drive down the mountain” to send a single bottle. If I wanted to buy a case, he explained, that would be a different story.

I thanked him and told him I wasn’t looking for an entire case, so goodbye. No $ale. But the incident bothered me and so I put it up on Facebook and asked my friends, “What kind of a business model is that?”

Lots of comments, as usual. I suppose I think more about these marketing and sales issues since I’ve worked at Jackson Family Wines than I would have when I was at Wine Enthusiast. I thought the winemaker’s attitude was pretty dumb (not that he was rude about it; he wasn’t. In fact, he couldn’t have been nicer. He simply explained that he was way up in the middle of nowhere). The bottle price, by the way, was $27.

What did my Facebook friends say? You can read all the comments here. Most of them roundly criticized the guy. Jeff Stai, from Twisted Oak, wrote I’m way up in the mountains and I’ll sell you a bottle. wink emoticon.” He added Today’s one bottle sale is next month’s five case sale.” Bill Smart said the guy’s business model is “One that is not going to last for very long?” (Bill did put it in the form of a question.) Chris Sawyer said the business model is a “case study [in] how to inflict bad mojo on your brand.” Sean Piper said “If you ever buy a bottle of my wine I’ll personally hand deliver it to you.”

And yet, the guy had his defenders. Neil Monnens wrote, “More power to him…Imagine you are his friend or family and he leaves you to go down the mountain to sell one bottle of wine to someone…it’s not worth it. Good for him.” Victoria Amato Kennedy wondered “What was the profit margin on the one bottle after factoring in gas/shipping costs/time?” I understand that, but I would have paid whatever shipping cost the guy charged me. The fact of the matter is, he was too lazy to drive down the mountain. As Patrick Connelly wrote, “Bad customer service = increasing selling difficulty.”

If I had a little family winery (which this was) I’d drive down the mountain! How hard can it be? It’s summertime, no rain, easy-breezy. Besides, even if it’s a 30-minute drive to the UPS Store, aren’t there other things the guy can do while he’s in town—buy groceries or supplies, call on an account, have a nice meal, see a friend? I’m sure that people who live up in the mountains always have lists of stuff to do when they’re in town.

As I’m constantly reminding people nowadays, you do what it takes to sell your wine. Establishing customer relationships is one of those things. Although I didn’t identify myself to the guy, how did he know I wasn’t buying the wine for a Parker tasting? I could have been some rich Silicon Valley venture capitalist looking for a house Cabernet. You never know. Sending somebody a bottle of wine can sometimes change your life in unexpected, great ways. But first, you have to be willing to come down from the mountain.

Winemaker’s choice: When marketing and the perception of exclusivity collide



I had coffee yesterday with a winemaker from Napa Valley who works for a high-end winery: triple-digit Cabernet and all that. We were taking about marketing, when she said something about Napa wineries that intrigued me enough to write it down: “Do you want to sell wine,” she asked, “or do you want to be ultra-exclusive?”

Great question, especially in the context of Napa Valley Cabernet. She was referring to all these Cabs that cost an arm and a leg. In our conversation, we mentioned specific wineries, which I will not. What she meant, of course, is that these wineries seem to have a choice: they can get out there and market (in all its multi-faceted dimensions), or they can rest on their laurels and assume that their wines will be in demand for a long time to come.

Wineries that choose the latter—on the assumption that their cult status, high critical scores and in-demand waiting lists will always provide them with more customers than they can supply—somehow seem to think that marketing is a dirty word. There’s something grubby about it, they feel. Only pedestrian little wineries have to actually sell themselves; a great, grand winery does not. Does the Domaine de la Romanée-Conti have to get out there and hustle? Of course not, or so the argument goes.

Well, I don’t know if Romanée-Conti has to market or not, but I would think so. Wilson-Daniels, who distributes them in the U.S., used to invite me up to their St. Helena chateau once a year, along with a few other writers and critics, to taste through the entire range of seven new DRC releases of the vintage (La Tache, Romanée-St-Vivant, Romanée-Conti, Richebourg, Echézeaux, Grands-Echézeaux and Montrachet). It was terrific fun, but I think you’d have to view that as marketing, although I don’t know if Wilson-Daniels does it anymore. Anyhow, the lesson for me was “Even the Domaine de la Romanée-Conti has to market.”

And yet, quite a few Napa Cabernet houses don’t seem to think that they do. The apparently feel that what has worked for them in the past will work for them into the future. Marketing would dull the perception of exclusivity that they currently benefit from, and their fear is that, once a super-expensive wine is no longer perceived as exclusive, it may no longer be in demand from wealthy customers who don’t want to drink what everyone else is.

The thing to consider here is inventory. Now, you and I will never know how many unsold cases of (fill-in-the-blank winery) are piling up in some temperature-controlled warehouse. It may very well be that the winery everybody thinks is selling out every vintage actually has back vintages piled up to the ceiling. (This would be one of the winery’s closest-held secrets.) But I think this is the case far more than you’d think, and certainly, one hears rumors to that effect. Of course, a rumor is just that, but like they say, where there’s smoke, there’s fire.

When there were only a handful of Napa Valley Cabs that cost $100 or more, this was not a problem. But nowadays there are scores of them. I’ve long believed that it’s impossible for all of them to be selling everything, every year. There just aren’t enough people out there to buy it all up, even when you roll in China. Thing is, many of these proprietors are so wealthy that they’re not really concerned about selling everything. They can afford to sit on inventory for a long time, and besides, the wine may actually be getting more valuable as it ages. I knew someone who once bought out the entire production of a well-known Napa Valley Reserve Cabernet for an entire vintage, and then warehoused for resale it for ten years. They made a lot of money on that one.

Lest you think I’m suggesting that fostering the perception of exclusivity is somehow tainted or wrong, rest assured I am not. Rarity and desirability are integral to marketing anything, be it artwork, writing pens or wines. More than two thousand years ago, certain Roman and Greek vintners figured out how to do it (where do you think the concept of “the Comet vintage” came from?). The Bordelais proved masterful at it four hundred and more years ago, and they’re still pretty good at it. All that the Napans have done is to learn at the feet of the masters.

Bordeaux is Bordeaux; it probably will never go out of demand, even though that demand waxes and wanes throughout the centuries. But one cannot say the same of Napa Valley Cabernet Sauvignon, or so it seems to me. It has certainly solidified its hold on the imagination of wine lovers, but Napa does suffer from certain potential problems: it’s under attack from the low-alcohol crowd, prices are ridiculous, competition from elsewhere (including Bordeaux) is increasing, and younger consumers don’t seem to have the infatuation with Napa that their parents had. These things aren’t deal-killers, quite yet. But any one of them could prove hurtful to Napa, and a combination of them all might be the straw that breaks the camel’s back.

Musings on Diageo’s rumored sale of its wineries



I hope Diageo is doing all right financially, but to judge from all these rumors that the London-based company is going to sell its iconic wine brands, maybe they really are experiencing some difficulty.

Their California brands from Napa Valley or County include Sterling, Beaulieu, Acacia and Provenance. The first two will be familiar to anyone who knows the history of Napa Valley. Beaulieu, founded in 1900, defines the classic old-line, pre-Prohibition winery; Sterling, which began in 1967, was one of the boutique wineries that made Napa famous in the modern era. Meanwhile, Acacia, dating to 1979, helped launch Carneros to the forefront of Pinot Noir. Provenance, whose inaugural vintage was 1999, is far younger, but has had a good run—I always did like their Cabernets.

So what’s up with Diageo? To begin with, the company’s stock price had a pretty good run-up to the Great Recession, but then plunged like everyone else. In 2009, it hit its nadir, then peaked again in 2013, only to experience a steady slide since then—leading the Motley Fool to recommend Diageo as a good buy.

That same article, suggesting Diageo is going through a “phase of lackluster performance,” attributed the drinks giant’s problems to “tough trading conditions in emerging markets, subdued consumer demand in some developed markets” and bad exchange rates.

Concerning that “subdued consumer demand in some developed markets,” I would suggest that the problems at Sterling, Beaulieu et al. stem from the consumer (and sommelier) perception that those are tired brands. Indeed, you could teach a college seminar on the ups and downs of an American winery by using the example of Beaulieu alone.

That Beaulieu was one of the great wineries of Napa Valley, and California, for many decades is indisputable. The winery helped to invent Napa Valley; it pioneered in Cabernet Sauvignon from the Rutherford Bench, and in hiring Andre Tchelistcheff, in 1938, Beaulieu gave California is greatest and most influential winemaker ever. “The Maestro” was mentor to multiple generations of winemakers before passing into the Great Vineyard in the Sky, in 1994.

Even had Beaulieu maintained quality in the 1980s and 1990s it probably would have slipped in the public’s estimation, due solely to the natural lifespan of most wineries. But quality did vary, and the winery seemed to lose focus. I always admired, and gave high scores to, the Georges de Latour Private Reserve Cabernet Sauvignon, and their Bordeaux blend, Tapestry, also was quite good. But the Pinot Noirs and Chardonnays were inconsistent, and whenever Beaulieu tinkered with Rhone-style varieties, as they frequently did, they seemed in over their heads.

As for Sterling, which was such an exciting winery in the 1970s, the glitter wore thin, as the winery hit a patch of averageness. The Cabernet, particularly the Reserve, could still be quite good; but really, there was little to differentiate it from dozens of others, a dilemma given the fickleness of the American wine consumer, who’s always looking for the next new thing. Despite a considerable marketing budget from Diageo, both wineries also were debilitated by the release of large-production, inexpensive lines, in Sterling’s case the Vintner’s Collection, in Beaulieu’s the Coastal Estates, both of which tended to confuse gatekeepers and consumers as to what either winery actually was. In this, Beaulieu and Sterling erred in the same way as did Robert Mondavi Winery, which tried—and failed—to be all things to all people.

Beaulieu remains a good winery and Sterling can be restored to glory; it’s never too late. If Diageo does sell either or both, I hope it’s to a new owner who will love them for what they have been and for what they can once again be.

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