When is it time for a winery to “offload” underperforming brands?
It happens. You’ve had a line, or SKU, in the market for years, but for some reason, it’s never gained traction. So the hard decision must be faced: Is it time to pull the plug on Grandma?
This is the situation Treasury Wine Estates is facing. The Australian company, which lost more than $100 million in 2013-2014, has brands “that [are] not a priority and may be retired [or] offloaded,” according the industry publication, The Drinks Business.
This can never be an easy decision for a big company like TWE. Companies love all their brands, the same way parents love all their children. You can’t throw an underperforming child under the bus, of course, but companies aren’t families, they’re business; and sometimes, “retiring non-priority brands”, or repurposing them in some way, is the only way to stay healthy.
* * *
Does this shock you? It shocks me. “One in four bottles of Californian Pinot Noir and Chardonnay have been through the industrial alcohol removal process supplied by ConeTech in the past year.” That’s another report by The Drinks Business, which adds that the spinning-cone process of lowering the alcohol content of wine is more popular than ever because “winemakers would rather take out alcohol from a ripe wine than risk creating lighter, possibly greener wines from harvesting earlier for naturally lower abvs.”
Well, as Dana Carvey’s character, The Church Lady, used to say on Saturday Night Live, Isn’t that special?
I’ve written before that I don’t mind some technological intervention to produce sound, clean, drinkable wines. These are what Americans want. Critics denounce them as Franken-wines, but to me, that just seems derogatory and mean. Besides, the truth is, since this de-alcoholization is done secretly, no one can ever know just which wines have passed through the spinning cone, so before you give such a wine 96 points and then have to appear foolish when someone outs you, restrain thy criticism.
However, I will venture to say that winemakers are resorting to this somewhat risky procedure because the public drumbeat against higher-alcohol wines has reached such a fever pitch that they feel they have no choice. Many of them, themselves, probably hate themselves for doing it—for giving in. Some of them may be under orders to do it, by the people who sign their paychecks. It’s hard for me to believe that any winemaker willingly and happily sends her wine to the spinning cone.
Speaking of those “greener wines” that are the potential result of picking early—which is the natural way to produce lower-alcohol wines—I’ve tasted some of them at big Pinot Noir tastings, and they’re dreadful. Well, I suppose if you like dried oregano, mint and green tomatoes, they’re all right, but if you prefer cherries and raspberries (which I do), you’ll be disappointed.
Thus we find ourselves staring directly at the schizophrenia running through our modern California wine business. The bullet quote in The Drinks Business article is this: “The consumer preference is for riper style wines, with juicy fruit, but consumers want this with more moderate alcohol levels.” Someone should politely tell consumers you can’t get ripe fruit without high brix, which in turn translates into healthy alcohol.
But that’s not a message that consumers want to hear, and so producers—caught between the proverbial rock and a hard place—increasingly are turning to the spinning cone. And if California goes back to a series of warm vintages, like we used to have, we’ll see even more wines spun out.
Silicon Valley Bank’s annual industry survey has been summarized by Lewis Perdue’s Wine Industry Insight, and while I don’t have a link (it came late yesterday via email), I’d like to make it the focus of today’s post.
The most interesting part is SVB’s “predicted sales and case growth by region.” I did manage to drag the chart onto my desktop, and reproduce it here.
It’s kind of small: sorry about that.
As you can (or cannot) see, the chart takes nine California regions and predicts their case growth and sales growth for this year. The regions with the least growth are the Sierra Foothills, Lodi, the Central Valley and, surprisingly, Napa County (in that order, from least upward). The region with the highest growth by far is Anderson Valley/Mendocino County. Mid-Coastal (Santa Cruz/Monterey)) also is projected to have high growth, as are Sonoma County, Lake County and the Central Coast (San Luis Obispo/Santa Barbara).
I don’t find any of this in the least surprising. It’s actually quite interesting, because it’s always interesting to see a bird’s eye view of these large regions and compare and contrast them with one another. I’m delighted that Anderson Valley is doing so well. It’s a small region, but so impressive, especially for Pinot Noir and the Alsatian varieties. Someone described Anderson Valley Pinot to me as a cross between Santa Cruz Mountains and Oregon, and I think that’s about right.
Mid-Coastal is a term I hadn’t heard before regarding Santa Cruz/Monterey; generally, I think of those as Central Coast. Santa Cruz isn’t a very big wine-producing county, although it is of high quality. Too bad all those vineyards in the Santa Clara Valley are now housing developments and Silicon Valley companies! But Monterey is a very high-production place, and as we’ve seen for some time now, it’s also coming up in quality. I’m not talking just about its best-known AVA, the Santa Lucia Highlands, but the county as a whole. Prices also have remained reasonable, which surely is one of the most important reasons why Monterey is doing so well. People are looking for a bargain, and they get it with Monterey wine.
I said Napa County was one of the places with the least predicted growth, but that’s a little misleading. It’s on the lower side compared to the higher-growth regions, but not by much. The point, I think, is that sales there are limited by the high prices. We can argue about whether they’re warranted another time; for now, suffice it to say that American consumers, post-Great Recession, seem to be looking for value, and Napa doesn’t really represent value, any more than, say, Classified Growth Bordeaux represents value, unless you’re willing to say that a 95-point Cabernet that costs $150 is a “value.” I mean no disrespect to Napa Cab, only to suggest that it is a little too pricy for most people, and that’s what seems to be holding back Napa’s sales growth.
Sonoma County on the other hand is doing well, and I think that’s because their prices just haven’t kept up with Napa’s. We all know that Sonoma County, with its many appellations, is far more diversified than Napa, or for that matter than just about any other major wine-producing region in the world, in terms of the varietal range. And quality, too, is really high. But the Sonomans have never been able to charge Napa-esque prices, which is to our (the consumer’s) benefit.
Then there’s Central Coast, defined as Santa Barbara (mostly) and San Luis Obispo. Santa Barbara has been one of my top wine regions for more years than I care to remember. I was championing it early, and the reason I can say that is because Santa Barbara vintners were telling me, a long time ago, that I “got” their region, while other critics didn’t, in their view. I don’t know about that, but I do know that Santa Barbara, with its various AVAs (Santa Ynez Valley, Santa Rita Hills, Santa Maria Valley) caught my fancy in the early 1990s, and whenever a Santa Barbara winemaker told me that other critics never visited there, I always was astonished.
Santa Barbara’s a funny place, price-wise. The best wines are expensive, but, again compared to Napa Valley, not really. And there are quite a number of fabulous wines, across varieties ranging from Pinot Noir and Chardonnay to Cabernet Sauvignon, Merlot, Sauvignon Blanc, Viognier, Syrah and Grenache, that haven’t leapfrogged into the too-expensive category…yet. I think Santa Barbara prices are heavily connected to the economy, but they’re still reasonable, which explains why the region is experiencing growth.
I won’t say anything about the low-growth regions here. I wish them luck.
Anyhow, as you read this, we northern Californians are hunkering down for the Great Storm of ’14. Good luck to us, and to you.
It’s too funny, really. When I first started out in this biz, you couldn’t give Napa Valley wine away to the French. “Mais non!” was their attitude. It was vin de table, merde, Algerian plonk.
Some of us knew otherwise, and suspected that the French—so chauvinistic in the belief that no other culture could rise to their level, especially American culture—were simply whistling past the graveyard. After all, their run of dominance—lasting for centuries—had no assurance of lasting forever, and they were continually hearing California’s footsteps coming up behind them.
But now, listen to what the respected CEO of Moët Hennessey, Jean-Guillaume Prats, has to say about Napa Valley. He previously managed Cos d’Estournal, the Super-Second Bordeaux, which he took to new heights, according to Wine Spectator, so this isn’t merely some oddball voice out of France; his father, Bruno, owned Cos. So Jean-Guillaume is, in other words, the very establishment that once scorned Napa Valley.
Here’s what Jean-Guillaume said: “I do believe some of the great wine from Napa Valley will be the equivalent of the First Growths in years to come, not only in terms of price—it is already achieved—but in terms of perceptions, of quality, and in terms of being looked after and thought after by wine collectors around the world. So Napa, for me, is soon to become the equivalent of the great Medocs.”
Wow. They ought to put those words on a billboard right next to the “And the wine is bottled poetry” one on Highway 29. You wouldn’t need the whole quote: Just “Napa…the equivalent of the First Growths” would do it.
It doesn’t surprise me that the Bordelais are finally coming around to appreciating Napa Valley. After all, Christian Moueix and Baron Rothschild did it decades ago, visionaries that they were. What’s ironic is that nowadays it’s some Americans who continue to diss Napa Cabernet. Why they’re so stubborn in this attitude, when even representatives of the top French chateaux gaze with envy upon Napa’s near-perfect climate and soils, is beyond me.
* * *
And now, from the Department of Ideas That Are Going Nowhere, let’s zip around to the other side of the world, Australia namely, where an article in the North Queensland Register is calling for wine grape prices to be more objectively determined, like meat prices.
Mr. Rob Hunt argues that, of all agricultural commodities, only the price of wine grapes “is determined using subjective criteria.” He contrasts this with “an objective system” of pricing, such as that employed by his country’s Meat Standards Australia system, in which, I gather, a short loin is a short loin no matter where it’s from, and priced accordingly. That is, indeed, an objective system. It is also very different from one in which (for example) a Cabernet Sauvignon bunch grown in Beckstoffer Tokalon costs much, much more than a similar bunch grown in Paso Robles.
But nobody ever said wine grape prices are objective. They’re not, because wine wholesale prices aren’t subjective. We pay for certain names and reputations, and I for one assume that more rigorous vineyard practices go into a highly-reputed wine than into an everyday one. So it’s not likely that we’ll be grading wine grapes the same way we grade meat anytime soon.
On the other hand, Mr. Hunt is entirely correct when he observes, “I suspect there’s nothing more frustrating for growers than to see their carefully tended grapes dropped into the same receival bin as others of lesser quality.” That is a very sad situation for growers who work hard to grow quality fruit. We saw something similar happen in the early histories of counties like Santa Barbara and Monterey, where those grapes—fine quality for the most part—were shipped north or east, to be lost into vast blending vats destined for jug wines. The solution, as it turned out, was not to regulate prices, but to elevate the reputation of those counties, through small-production wineries making wines of critical esteem. You have to have the reputation first; then you can raise prices, not the other way around.
It is, I suppose, the fault of the historian and logician in me that I’m always looking for the meaning of things. I’ve always thought that all things are connected in some mysterious way, and that certain events have implications, not only for how the future will unfold, but for trying to understand where we are now. Such an event is the purchase of Steven Tanzer’s International Wine Cellar by Antonio Galloni, which hit the airwaves yesterday via dueling press releases.
The context here is several-fold. One, both Tanzer and Galloni are enormously influential in this little world of wine criticism in which I and, I assume, most of my readers dwell. Antonio got his fame after being employed by Robert Parker to write for The Wine Advocate, which is how I met him (for the first and only time), at a tasting at the Culinary Institute of America, where Antonio was kind enough to give me a very long interview, which I turned into a three-part blog post. (Here’s the link to part one.)
I was very grateful to Antonio for that (he probably knew enough about me to know that my blog could be, ahem, a little controversial). I went away from that experience thinking what a gallant, intelligent and well-bred mensch Antonio is.
Tanzer I never met; not that I recall. But he’s always loomed in my mind because of the huge reputation he’d garnered among the people I respect: winemakers, sommeliers and folks like that. Tanzer’s name was one of those that mattered in high-class wine reviewing. So what I’m trying to say is that both Galloni and Tanzer earned my respect.
For years we’ve been tracking the evolution of wine criticism, the dualism of print journalism versus online, the gradual fading away of my Baby Boomer generation, and we’ve all tried to figure out what’s coming next. Who will matter? How will wine criticism and recommending work in the next decade and beyond? For me, a major question has been: Will there continue to be super-important critics (and their associated publications), or will wine critiquing become so crowd-sourced (due to the sheer magnitude of blogs) that no one voice will have national or international authority?
My answer to the latter question has consistently been: We will continue to have “important critics” because some fundamental part of human nature demands it. Humans want “authorities” to tell them what to buy, and to justify their tastes, especially in an area like wine that’s so confusing, subjective, emotional and, let us admit it, irrational. A few years ago, at the height of the blogosphere’s insistence that “critics don’t matter,” I couldn’t bring myself to believe it. It seemed to me to be wishful thinking on the part of the many (who wanted a piece of the action), against the power and influence of the few (of which, until last Spring, I was part). But I always thought that someone would take the place of the Parkers, Laubes, etc. of wine criticism.
Now, with this acquisition of Tanzer, it appears that Antonio’s Vinous is moving forcibly into a position of great influence and its associated power. I welcome this. Both men seemed marked by fairness and objectivity, and an indifference to external influence. Both men, too (as well as their teams) are profoundly talented. So we could be looking at the next great force in wine writing.
The one question that remains for me is whether or not this new Vinous will address itself chiefly to super-ultrapremium wine, or will examine wines from all price points. This is a decision, obviously, that Antonio and his business partners will have to address, and I hope they will review everything, from under $10 wines to the rarest and most expensive bottles. If my two cents is worth anything, that’s the way to go.
So it seems to me that the meaning of this marriage is that wine criticism is consolidating among a younger generation, who will continue to publish both online and in hard copy. The torch is being passed, folks, and IMHO it couldn’t be placed into better hands.
Wine critics are insulated from the buying public. They live in a sort of bubble in which popular tastes are shut out, and only their own impressions impinge upon their consciousness. Yes, there’s something solipsistic about being a critic—maybe even narcissistic. But that’s the way it should be, because the critic must remain immune to all influences except that of his own taste and discernment.
Sales people, on the other hand, must constantly be in touch with the public. It’s always been something of a chicken-and-egg conundrum whether the success of a particular wine, or type of wine, is due to the top-down approach of marketing and P.R., or whether it’s from a bottom-up movement from the street. Probably it’s a little of both, and individual cases will vary. However, this we do know: customer satisfaction is more important now than ever.
By that I mean that the customer has more ways of being satisfied (or dissatisfied) than ever—more ways of expressing it, more capacity to share with others, more ways of having leverage at the winery. This is due, obviously, to the Internet and social media, and ease with which we can get online and publish our thinking with mobile devices. But you already know that.
So it wasn’t particularly surprising when I saw this study yesterday on “Three things consumers want [from a company]: responsiveness, involvement and conviction.” What was surprising was the huge gap between what people say they want more of, and how they think companies are actually performing. Measured by this metric, most companies suck.
For example, in the area of greater responsiveness (to complaints, questions, concerns, and so on), 78% of people want an almost “on demand” responsiveness from the company. And yet, only 17% of the respondents felt that companies actually respond in a timely manner. That’s a gap of 61%. If I was doing business with a company that answered my queries only 17% of the time, I’d find another company to do business with.
Corporate America certainly understands this and is responding. In my own life, I use Comcast, PG&E and various web service companies a great deal, and, like you, I sometimes have the need to contact them. In each case, their response time has gotten much faster, and the process of contacting them has gotten easier (not that it’s pleasant…). So kudos to them for that.
Wineries don’t have as good a track record. It seems to me they could be doing a much better job reaching out and staying in touch with customers or potential customers. You might think that bigger wine companies have an easier time of it, because they have bigger budgets and can afford to hire communications experts, including digital ones. But bigger wineries also have more demands from their customers, so it all kind of evens out in the end.
The “conviction” issue is interesting. It means that consumers want their brands to have “a clear mission and purpose,” even to the extent of “driving change in the world.” We’re told that Millennials in particular feel a sense of obligation to the world’s problems and, in that sense, they’re more likely to support a company that, for instance, helps the environment. But this is a tricky business: oil companies (Chevron, for instance) tout their environmental concerns, but lots of consumers don’t believe it; they think Chevron is “greenmailing”—telling lies to further their actual cause, which is making profits.
How can a winery tout its “convictions” in such a way as to seem authentic, not phony? It’s vital for companies to figure this out, because a phony conviction can have a backlash. I think there are two ways of doing it: one is to avoid getting stuck with a negative image in the first place (the way the oil companies did), because then you don’t have to tear down those walls of suspicion. The second way is to get your message out, clearly and directly. This, too, is problematic: if you tout your do-goodness too much, people will say you’re just trying to win their friendship (and their money). If you don’t say anything at all, nobody will know about your good deeds. The challenge is to talk about yourself in such a way as to inform people but not lose their trust.
When I was a working wine critic, people said I possessed a certain amount of power. Maybe so, but I never was in a position to dictate to a winery what appellation they were entitled to use on the label!
If I had been an official taster with the Institut national de l’origine et de la qualité, the French quasi-governmental agency that regulates the appellation contrôlée system, I would have had that right and that power. Which scares even me: uneasy lies the head that wears a crown! But that is the case in France, where “the 2012 vintage of Pontet-Canet’s second wine, Les Hauts de Pontet-Canet, [was] refused AOC classification by an independent tasting panel. As a result, the wine will have to be bottled as a Vin de Table rather than a Pauillac,” according to the drinks business newsletter.
It seems ridiculous to put that much power in the hands of a group of bureaucrats, but that’s the French way. Besides, I wonder if the official tasters tasted the wine blind. (If any of you know, please tell me in the comments.) The drinks business article tried to discern why the tasters rejected the wine; the best they could surmise was that Pontet-Canet’s combination of biodynamic winegrowing and use of amphorae (a sort of “egg”) resulted in the wine’s lacking “Pauillac typicité,” whatever that means. Now, I don’t know the total number of wines that bore a Pauillac AOC in 2012, but it has got to be in the dozens if not hundreds, right? So how “different” could the Les Hauts have been (after all, it is from a respected Classified Growth), for the tasters to have rejected it? Was it the sole outlier in the entire commune? Perhaps the tasters knew what it was, and their personal attitudes toward biodynamics and amphorae shaped their perceptions.
It’s not that I’m feeling sorry for Pontet-Canet and its owners, the Tesseron family. In fact, the brouhaha may work in their favor. Melanie Tesseron told the drinks business that the wine “is becoming fast a collector’s item.” I don’t doubt it. Anomalies often do. The famous “upside down plane” stamp is a collector’s item.
In wine, pretty much the same thing happened when Piero Antinori launched Tignanello, in 1971; because he blended the Sangiovese with Cabernet Sauvignon and Cabernet Franc, the Italian government wouldn’t let him label it Chianti Classico. He had to use the lowly “Toscana” appellation. But it didn’t exactly hurt Tignanello, which became a collector’s item.
Not that we’re in any danger of it, but I’d hate to see California turn into the kind of dictated winegrowing region that so much of Europe is, where you can only grow the grape varieties the government approves of, or else you have to lower the appellation. Can you imagine how that would work in Napa Valley, which, presumably, if we had strict typicity rules, would be limited to Bordeaux varieties? A vintner who blended in a little Syrah with the Cabernet (as B Cellars did in 2004, in their Blend 25) would be entitled only to North Coast, or possibly a California AVA. Under those circumstances, B Cellars might not even have bothered making the wine, which would have robbed the world of a beautiful 94-pointer.
I’m off to the beautiful Santa Maria Valley for the rest of the week, but will try to post tomorrow. Meanwhile, we’re supposed to get some pretty good rain on Friday in Northern California, which is a very good thing!