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Musings on Diageo’s rumored sale of its wineries

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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.


Moving away from “the wine list”

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Lucy Shaw’s interview with Christopher Cooper, reported in the drinks business, contains some wise and useful insights, especially Cooper’s contention that sommeliers “need to work harder, take more risks and open their eyes to the bigger world of drinks, taking in beer, cider, cocktails and spirits.” Declaring the traditional wine list “dead—boring…wine bibles [that] are crap,” he even charges that customers “are being forced into buying wine rather than other drinks in restaurants as it’s profitable.”

Wow, lots to break down here. It’s true that restaurants make a lot of money selling wine, although I don’t know if wine is more profitable than beer and cocktails—perhaps someone can enlighten me.

Since I’m a wine guy, representing wineries, I do wonder if this suggestion—that restaurants open their wine lists more or less equally to beer and spirits—will cut down on wine sales. This would be a serious impediment to wineries, especially in this day and age when on-premise is so important to them. But I don’t think so. Here’s why.

To begin with, the gigantic wine list—the size of the Manhattan telephone directory—has clearly had its fifteen minutes of fame. It won’t disappear overnight, but I assume and hope than eventually it will be seen for what it is: a bloated appeal to snobbery. Diners don’t even want such mammoth wine lists anymore; they want something with, maybe, 30 wines and an attractive by the glass selection, creatively chosen, moderately priced and—this is key—curated by someone who knows and loves wine, and doesn’t just throw the Big Names on there for the hell of it.

So restaurants shouldn’t just add beer and spirits to already-overweight wine lists, they should shorten their wine lists. Who gets to stay on such coveted real estate? Ahh, glad you asked. It’s the wineries that offer the most bang for the buck.

The real action these days isn’t in the critical scores or the latest magazine cover stories, it’s on the sales turf. Everybody—Bill Harlan to Fred Frenzia—is out there thinking of how to stay relevant. Nobody really understands the rules because frankly, my dears, there aren’t any, or very many, and such rules as there are tend to get broken quickly as the landscape undergoes constant mega-change. There’s a lot of bull out there that masquerades as expertise when in reality it’s just another service being pitched. The details differ at each price scale, but basically, the question for vintners is: Am I still going to be able to sell this stuff five, ten, twenty, a hundred years from now?

This is a worthy question for a vintner to ask—indeed, the only worthy one. I have a feeling that wineries that can prove to the world that they are in this for the long haul, will find themselves a leg up, because having a real long-range plan means they’re performing at the top of their game. Nobody wants overnight successes, built on some phony formula, that won’t exist tomorrow. We want to support wineries that have been doing a good job for a long time and haven’t gotten complacent.

And that gets us back to wine lists, which, according to the Cooper theory of reality, should actually be called “wine, beer and spirits lists.” It’s a good idea that will upset the wine industry temporarily, but in the long run will be good for consumers, and that’s what it’s all about.


Why do scores matter so much to sales people, and so little to buyers?

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I was talking yesterday with someone who’s deep in the wine industry, and he made a remark that surprised me at first, but then, the more I thought about it, the more sense it made.

I was asking him (as I ask almost everyone these days) if critical scores and reviews still matter, and he said, “To sales forces, yes. To most buyers, no.”

Now, we have to define a couple terms. By “sales forces” he meant the people who actually go out on the road to sell wine. They work for wineries or for distributors. Their job is a hard one: they not only drive (or fly) a lot, they’re trying to sell to buyers who are jaded, who are pitched daily by other sellers, and who demand deals and specials often beyond the ability of sellers to comply with.

By “buyers” he meant the people in decision-making positions, at restaurants or stores, who filter the world’s supply of wine into a single wine list or store offering. That’s a very important job: The world contains approximately a gazillion wineries. A restaurant or store can offer maybe a few hundred different brands (maybe a few thousand, if you’re a BevMo! or some similar big box). Thus, these buyers are coveted among wineries and their sale forces: Whether or not the winery makes any money is largely in their hands.

So why do scores matter so much to sales people, and so little to the actual buyers?

Well, the case against sales people is that they could be selling anything: widgits, or bananas, or components for the space station. Their expertise is in selling and its components: the pitch, the deal, the personal relationship, the profit. Sometimes, sales people are too busy to master the actual intricacies of the wine they’re selling. They speak a different language from sommeliers or conscientious merchants. There’s a limit to how much knowledge they can master about any given wine, so they’re sometimes looking to telegraph information about the wine in a fast, easy way. And the fastest, easiest way to convey such information is to quote a score, preferably from a famous critic. That, they hope, will do the job of selling the wine, without asking them to take too much time and energy into being able to converse about it at a higher level.

I completely understand that attitude. But why don’t buyers attach as much importance to scores as do sellers?

Well, some of them do. Stores or (more rarely) restaurants that are score-driven will have shelf talkers or newsletters that advertise a famous critic’s score, if not actual facsimiles on the wine list. That not only reassures customers that “someone important” liked the wine, even if they don’t know who that someone was (it might have been the wine columnist for the Podunk Shopper’s Guide), it also relieves the restaurant or wine shop of the necessity (and cost) of having someone on the floor who actually knows what she’s talking about.

And even in high-end restaurants and stores, where they go to great lengths to employ knowledgeable people, why would they quote a critic’s score, when they employ people who are perfectly capable of forming their own opinion about the wine?

So we have this divide between sellers and buyers in our wine system, and in my opinion the divide is widening, as buyers are smarter than they’ve ever been, and more and more sellers are out there trying to sell their wine. In fact, it’s a buyer’s market. Never in history has their been such intense competition to land on a wine list or store shelf.

As a former critic, I always was flattered whenever I saw someone using a score of wine to sell wine. Sometimes it was a shelf talker; sometimes it was a newsletter report. Whatever it was, it made me feel good—because someone valued the work I had put into reviewing their wine.

Now that I’m no longer a critic, my feelings are more mixed. I would never, ever disparage the critic’s job. At the same time, I do understand that buyers are less invested in critics than they used to be. They’re trying to figure out ways to sell the wines they’ve bought, and loved, without having to resort to the coincidental opinion of a third party whom they may not necessarily even respect. This disparate choice confronts every buyer in the country with a dilemma. Everywhere I go, I try to understand how these buyers are dealing with that conundrum, and as I learn, I enjoy sharing those lessons with you.


To innovate or not? That is the question [for the bottom line]

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When it comes to developing new types of wines, wineries find themselves walking a narrow line. On the one hand, they want to stay on top of emerging trends in consumer taste, if not actually lead them. On the other hand, they don’t want to get too far out ahead of consumers, and risk making wines no one wants to buy.

Here in California, where you can grow just about any variety in the world, the question is of special poignance. The California wine industry was brilliant in its period of youthful creativity because vintners took risks that promised, and succeeded in delivering, great rewards.

But California wine isn’t youthful anymore. It’s a mature, multi-billion dollar industry, and like most successful industries, its leaders have to decide when, and how much, to innovate. This involves no small amount of risk. Even Apple—widely regarding as the most innovative company in America—may have stumbled a bit with the Apple Watch. It’s not clear yet whether it has the staying power of, say, the iPod and iPhone. (And why didn’t they name it the iWatch?)

Similarly, wineries have to decide in advance if something will have the staying power to make investing in it worthwhile. But the history of wine is replete with examples of ideas that didn’t work quite as planned. For example, some years ago, Sangiovese—the Tuscan grape variety responsible for such great wines as Chianti Classico and Brunello di Montalcino—was predicted to become “the next great red wine in America.” As a result, California vintners planted it extensively. By 1996, there were 1,359 acres of Sangiovese in the state, about 1/8 the total of plantings of Pinot Noir.

Fast forward to 2013, when there were 1,868 acres of Sangiovese in California, an increase of only 1.3%–one of the smallest increases in acreage of any major variety in California over that same period. By contrast, plantings of Pinot Noir in 2013 had exploded to 41,301 acres. There is now 22 times more Pinot Noir planted in California than Sangiovese.

What happened? Despite the rosy scenarios, Americans turned their backs on Sangiovese, For whatever reasons, they didn’t like it. Many wineries found that they had to tear out the vines, or bud them over to another variety, at great expense to their bottom lines.

This shows that good forecasting is a necessary part of running a successful winery. But forecasting is not an exact science. Winery owners are, at heart, conservative. I don’t mean that in a political sense, but in a business sense. They don’t like to lose money, which is why, when they find a formula that works, they tend to stick with it. They understand, most of them, that, if they hope to remain in business for the long haul, they have to have some sense of where the market is going. They understand, too, that things never stand still; the California wine market will change over the years. The question is, How? In reality, that translates to the question: Should we venture beyond (fill in the blank: Cabernet, Chardonnay, Pinot Noir, Zinfandel, Sauvignon Blanc, Syrah) and try something out of the ordinary, that might possibly make great wine? But too often, in this conservative mindset, winery owners are opting to take the safe and tried route.

Yes, there are wineries tinkering at the edge, with Gruner Veltliner or Tannat or things like that. But really, we remain a chocolate and vanilla wine-drinking country. If I were a winery owner, would I roll the dice and gamble on something few people have ever heard of? Probably not. But I like to think that, if I succeeded in making and selling Cabernet or Pinot or Chardonnay, I’d devote a few acres to rarer varieties. After all, not that long ago Pinot Noir was a big nothing in California. But people, like Richard Sanford, Joe Rochioli, Jr. and Joe Swan, believed in it—and look where we are today.


Who’s to decide what wine phrases are illegal?

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I blogged the other day about a lawsuit brought by an L.A. guy against MillerCoors. He’s suing them because he found it “unsettling” to discover that they were really the producers of a beer he thought was a craft beer, Blue Moon.

Evidently, this topic—of when or whether a beer is an authentic craft beer as opposed to something else—has caused something of a brouhaha in the industry. This article, in Wine Industry Advisor, explains some of the complexities. Entitled “Craft: A term in controversy,” it points out the murkiness that a lack of definition of the word “craft” can cause.

I told a friend of mine, co-proprietor of a wine shop that also has a small but excellent selection of craft beers by the bottle, about the lawsuit, which she hadn’t heard of. I asked what she thought, and it was the same as I think: The L.A. guy is probably looking for some easy cash. Then she said, “If he wins, then half the wineries in the world will get sued.”

What did she mean? That wineries routinely use words and phrases that have no legal definition, but that have certain meanings or connotations in the consumer’s mind. “Reserve” is one such word. I wrote about numerous others several years ago in this blog post. At that time (2011), I suggested that the government should “clear up” these terms. But I’ve now changed my mind. As I’ve gotten older and, hopefully, wiser, I’ve become more concerned about the government getting its fingers into every aspect of our lives, so that now, I don’t think we need legal, binding decisions from On High on what things like “barrel select,” “Old Vines” or “Bottle Aged” mean. These are evocative terms that imply certain practices and conjure up pleasant visual images. That’s what marketers do, whether it’s with autos, high tech gizmos, perfumes, fashion or vacation spots, and if we forced every advertisement, commercial, brochure and packaging text to adhere to some strict, formal meaning of each and every word and phrase, we’d be even deeper into continuous litigation in America than we are today.

Besides, think how hard it would be to define these terms. Take “bottle aged.” Every bottle of wine sold anywhere has been aged in the bottle for some period of time, even if it’s just a few months. People may imagine dusty wine cellars where splendid old bottles lay sleeping until they’re nectar, but there’s nothing wrong with them having that mis-impression, especially if it adds to their pleasure when they actually drink the stuff. Do we really want or need to know that “bottle aged” means ten months, or fourteen months, or nineteen months? I mean, come on. Besides, if there was an overly-specific definition for “bottle aged,” wineries would just start using terms like “”aged in the bottle,” and then we’d have more regulations, more lawsuits and so on, ad infinitum. Ditto for “barrel select.” This, too, implies something very special about the wine, but in truth, most wine—whether sold in bottle, box or keg—has come out of a barrel. Can a stainless steel white wine be called “barrel select”? I wouldn’t go there, and I doubt if any winery would actually label a stainless steel wine “barrel select,” but if they did, I wouldn’t lose any sleep. (Besides, some investigative blogger would probably bust them for it.) And then there’s “old vines.” I, personally, think an “old vine” should be at least thirty years of age, but that’s just me. Besides, if a winery is really using ancient vines and is proud of them, they can always put that information on the back label. I’m a big fan of information on back labels—not ingredients, which I think can go on the winery’s website, but authentic, interesting information, like how old the vines are, what the varietal blend is, the vineyard’s elevation, amount of new oak, and so on.

This line of reasoning that I outlined above also touches on the nature of small wineries that claim to be, or are thought of as, “artisanal” versus larger wineries. I always said, as a wine critic who tasted many thousands of wines every year, that I didn’t care about the winery’s size. I cared about the wine: Was it good, savory, interesting, worth sipping and considering, or was it plonk? I always thought it was snobby to dismiss big wineries (whatever “big” means), and that it was disingenuous to celebrate small wineries (whatever “small” means) just because they were small. I had lots of wines from tiny little wineries that were awful, and lots of wines from “big” wineries that excited me. I still feel that way. We should experience things as they actually are, and not sweat the small stuff, like the way they describe themselves, or how many cases they produce. As for those fans of organic and biodynamic wines, I can’t tell you how many off-the-record stories I heard about bags of chemicals on the back loading dock of wineries that claimed not to use any. My advice: Don’t believe any hype. None of it. Taste the stuff, and if you like it, buy it, and tell the critics where to go.


WSET and wine education: Does it develop a house palate?

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I suppose it was inevitable that the wine industry would eventually develop something like the Wine & Spirit Education Trust (WSET), which is to wine what community colleges are to higher education.

In general it’s a good thing to have a college-level curriculum for wine knowledge and then force aspiring students to go through it. They learn about the entire gamut of wine and spirits: basic to advanced knowledge and service, graduating from Level 1 to Level 5. This professionalizes the wine industry. WSET, which is based in London, recently announced they’re expanding to China.

Prior to WSET’s founding, back in 1969, the wine industry had no central repository of knowledge. People learned on the job, in the country in which they lived, which is why they developed regional perspectives. A Londoner, for example, might apprentice at a wine shop or auction house, where Bordeaux, Burgundy and Rhine wines predominated. He would become a master of them, but not necessarily of wines that were not widely distributed in Great Britain, such as the wines of Spain, Italy or, much less, the New World, including California, South Africa and Australia. Even French regions like the Rhone valley and the Loire were little understood in London. This tended to maintain the supremecy of Bordeaux and Burgundy. It was a self-reinforcing, self-referencing business model that worked for its time and place, but was essentially unfair.

Which is why a fellow like Harry Waugh was so unusual. Harry was at the peak of his game in the 1950s and 1960s. Sitting on the board of Chateau Latour, esteemed as a stately and principled wine merchant and gadfly, he was the consummate Bordeaux and Burgundy man. So when he began visiting California, at the behest of a small group of Napans, this was seen as an oddity by his fellow enophiles. They assumed Harry’s new-found interest in barbarous California would quickly fade, after which he would return to the fold.

It was not to be. Harry found himself charmed at first by California wine, an enchantment multiplied by the worshipful treatment accorded him by the rich Californians who understood that he was an important factor in British, and thus European wine tastes. They flew him back and forth across the pond, provided his local transportation, took him to the best restaurants, served him their best wines and lavished their own personal bonhomie upon him and his wife.

Little wonder Harry quickly fell in love with California wine. Would he have done so had he experienced them under blind tasting conditions, in a dreary little room at Christie’s? Possibly. But to drink them under such lavish, friendly circumstances undoubtedly played a role.

At any rate, the tale of how Harry shipped California wine back to London and then coaxed his important friends in the industry to try it is now legendary. It was an essential part of why and how California wine succeeded in being viewed in the same league as Bordeaux and Burgundy, well before the Paris Tasting of 1976. (Indeed, it can be argued that Harry was at least partially responsible for Steven Spurrier including California wines in his lineup in the first place.)

Had there been a WSET back in the 1940s and 1950s, when Harry was coming of age in the British wine industry, I rather doubt he would have discovered California. He would have been confined to WSET’s curriculum, and had neither the time nor, probably, the energy to explore beyond it. All I mean to suggest is that formal education, in any field, can have its own set of internal restrictions. It’s important to students of wine to explore the world of wine on their own, developing idiosyncratic preferences (or antipathies) that may not be included in formal agendas of study. This not only opens them to new opportunities, it guarantees the wine industry an expanded set of palates. My main worry with the centralization of wine education is that it tends to develop a house palate that can be detrimental to differing styles. The wine industry should remain ever open to a spectrum of approaches to wine.


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