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More wine scams, this time in Berkeley

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We never saw this level of wine scam before. Now it’s Premier Cru, which had been a very well respected wine shop in Berkeley until their recent collapse. Coming on the heels of the Kurniawan scandal and others, Premier Cru’s problems raise a troubling question: Why so many of these wine Ponzi schemes and frauds?

My answer: The greed of some consumers, who see wine as a commodity investment.

Premier Cru was the go-to store in the East Bay for collectors who wanted that extra-special bottle. But, as so many of them are now learning, Premier Cru appears to have been selling wines they didn’t have, or selling the same wine twice, stalling buyers off who weren’t getting wines they had already paid for, and eventually ending up with “more than $70 million in unpaid debts.”

How the heck does a wine store achieve that dubious distinction? Simple: When it takes advantage of credulous customers who want to own trophy wines nobody else can get and think they have an inside track on getting them.

The regrettable seeds for this were a long time coming. I can speak only from my perspective of nearly 40 years watching the San Francisco wine market, of course, but in many respects the S.F. Bay Area has been the epicenter for this remarkable era of show-off wines. Even when I started, there was a cadre of collectors who wouldn’t touch anything but First Growths and Grand Crus. At first I thought it was because they were men of discernment and refined tastes, but I soon learned that that wasn’t it. They were label drinkers, pure and simple. I doubt if one in ten of them knew what he was talking about. But what they did know was that having a vertical of Mouton-Rothschild gave them a certain cachet in their crowd, and that’s the only thing that meant anything to them.

They weren’t bad people, just wine likers (I hesitate to say wine lovers) who’d gone astray. Something about the rarity and scarcity of these collectibles made them crazy with lust. These were the sorts of people for whom Premier Cru was a sort of nirvana. Whenever I was there—looking for some under-$20 value in Burgundy or Cabernet—I’d see them conferring with the floor staff over some missing vintage in their collection they just had to fill. They were the same sort of people I used to see at the old Draper & Esquin on Montgomery Street in the FiDi, back in the day. Snooty snobs—“snoo-snos,” I called them. I thought that was an unhealthy development in the world of wine, at least the world I inhabited, which was of people who truly loved and cared about wine, and had a curiosity about it that drove them to try new things from new places.

Sadly, this distorted psychological phenomenon concerning wine got worse during the Reagan years, when fast and easy money gave MBAs the ability to collect Bordeaux and Burgundy and cult Cabernets before their thirtieth birthdays. It seemed to level off in the 1990s, why I don’t know, but then, with the burst of wealth in San Francisco in the 21st century, it has returned, with a vengeance. People are not content simply to drink good, interesting wine anymore. They want the trophies, the bragging rights wines, the Fabergé eggs, and they’re willing to pay whatever it takes to possess them.

Well, that’s what happens when you have a critical mass of credulous buyers: unscrupulous dealers are perfectly happy to take advantage of the situation. The bubble gets bigger and bigger, until poof! It bursts, and the poor souls who entrusted these crooked businessmen get holding the bag.

Running a reputable wine shop is a wonderful career. Most wine shops are reputable. There are many I’ve been in that do a fabulous job. Unfortunately, this current atmosphere of show-off seems to be fostering some bad apples. But maybe, with the arrests, detentions and lawsuits ensnaring these Ponzi wine dealers, we’ll see less of this sort of thing going forward. I do hope so. I hope that everybody will come to see that wine isn’t an artifact for collection, much less investment, like a stock certificate. What a horrible way to see this noble, divine beverage, as the liquid equivalent of loot, to be bought and traded like pork bellies, or even worse: as the garish equivalent of a gigantic diamond pinky ring.


Wine, beer and spirits for Millennials: which is cooler? (Hint: It’s not wine)

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If you’ve been reading this blog for any length of time, you know I’m interested to the point of obsession with industry issues, such as who’s buying wine, how it’s doing with Millennials, price points and so on. One thing I’ve been keeping my eye on is restaurants. Everybody loves to eat out, but what are they drinking with their food?

The conventional wisdom of the past few years is that wine is losing ground to craft beer and cocktails. I’ve tended to agree: Beer and mixed drinks are getting a lot of love from the media, with all those tattooed mixologists and craft brewers grabbing the headlines (and spotlights; layout editors know exactly who looks good on the page or screen). Wine by contrast seems stodgy. It’s not, of course, and never has been, and remains my favorite; but for some reason, wine seems less hip lately than beer and mixed drinks.

Forbes has written an interesting article along these lines, citing Paul Franson, of Wines & Vines, that Millennials [have] gravitated toward cocktails and craft beer,” and moreover, that when Millennials do drink wine in restaurants, the wines tend to be those that are “hot,” which I take to mean things like Muscat or orange wine, which have no lasting value at all.

This squares with my observations of my Millennial friends in Oakland, a very hip town, on the cutting edge of most cultural things, and thus an interesting case study. What happens in Oakland, from hip hop to fashion in clothing not to mention politics, often leapfrogs across the country.

And the truth is, my friends in their 20s and 30s like to drink; in fact they drink a lot, bless their little souls, but what they’re not drinking is wine. They are, as Forbes and Franson point out, downing cocktails and beer.

Why? The answer is important, but not simple. On one level they see wine as the alcoholic beverage of their parents if not their grandparents. Why is that? Because beer and cocktails don’t make a big deal about their intellectual components, the way wine does with notions of terroir, etc. Another is that beer and cocktails don’t pretend to be about anything else but getting buzzed. Wine tries to hide the impact of its alcohol. It always has, especially at the top levels, where it portrays itself as offering an experience that is intellectual, sensual, hedonistic, imaginative, fabulous—anything and everything but a liquid that makes you high. Wine seems almost embarrassed by its alcoholic content, which is why this entire argument against alcohol levels has arisen. Is vodka embarrassed by alcohol? Is tequila? Are IPAs? Of course not. But wine likes to pretend it has no alcohol.

I don’t know how we got into this situation. Possibly it’s because the intellectual conversation about wine got started a lot earlier than our conversations about beer and spirits. Between the Bible, the medieval references to wine, Thomas Jefferson and so on, wine has assumed an august place in the culture. Nobody was praising beer and spirits two and three hundred years ago. Maybe, back then, they were ashamed of wine’s alcoholic effects on the brain and body, so they avoided writing about them. We have inherited that tradition today.

I’m not suggesting we should brag about how high wine gets you. But the fact that beer and spirits tend to be grabbing Millennial attention strongly suggests a new approach to how we portray wine. We need to make wine cooler, sexier, and more relevant to a generation that instinctively recoils against canned messages and cheap advertising slogans. There is, in its essence, no reason why wine is less attractive than beer and spirits. But the way we’ve been communicating about wine hasn’t been enough to convince Millennials that it’s something they should feel cool about ordering in a restaurant. Can we change that?


Fake wine? Consumers don’t care, and with good reason

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Not sure I agree that “fake wines take a toll on everyday consumers,” as this opinion piece from the Boulder Weekly claims. (The article is by Terroirist.com’s David White.)

It’s hard, on the surface, to see how or why 99.9% of wine drinkers are harmed by the shenanigans of a Rudi Kurniawan. They don’t play the auction game, which so often is fueled by greed and ego. They don’t even look for those kinds of wines. Nor is there any evidence of fakery among wines that don’t cost an arm and a leg. Most people just want to have a nice wine at a fair price, and they couldn’t care less that some criminal ripped off a Koch over a bottle of ’34 Romanée-Conti.

David himself concedes that the problem of counterfeit wine means little or nothing to consumers who can’t afford cases of grand cru Burgundy or first growth Bordeaux.” If it hurts anyone, it’s extremely wealthy collectors who probably don’t even properly appreciate these wines, but just buy them to show off: people who might deserve the comeuppance they get for spending so much money, for such venal reasons, on something as trivial as rarity wine, when so many people are trapped in poverty and despair.

(Did I just call wine “trivial” ? Yes, in this context: that there are far more things Koch money could do to elevate mankind than spending it on bragging-rights wine.)

But in order to prove his case that fake wines really can “take a toll on everyday consumers,” David cites the case of a guy, John, whose late father had loved ’61 Lafite. John then had the opportunity to buy a bottle of it, for $1,300, but—familiar with the Kurniawan case—John shied away. He explained, “I decided I could not risk paying $1,300 for something that wasn’t real.”

I can understand. “Once burned, twice shy,” goes the saying; although John hadn’t been one of Kurniawan’s victims, he apparently now sees every expensive bottle as suspect, and would rather save his hard-earned cash for bottles whose authenticity is near certain.

The case of John is an anecdote, one that “tugs at the heartstrings,” in David’s words, but I don’t think it represents the feelings of the vast majority of wine people, even those who aren’t rich but who might want to occasionally spend a lot of money on a special bottle. With all due respect to John, I just can’t believe that the Kurniawan case scares very many people off. I think they might want to have a conversation, or a series of conversations, first, to make sure that spending four figures on a bottle is really something they want to do. They should talk to the seller (restaurant, auction house, whatever), and to whatever experts they can find, asking tough questions about provenance, before making up their minds. And that’s a good thing.

The interesting issue this brings up is, Would somebody who drank a fake expensive wine, but didn’t know it, even notice it? It’s like one of those Zen koans: “If a tree falls in the forest and nobody hears it, does it make a sound?” You can rephrase it as, “If somebody put a lovely, full-bodied red wine into a Lafite bottle, would people who didn’t know about the ruse admire it anyway?” My belief, based on long experience, is, Yes, they’d like it anyway, because they were drinking the label, not the wine. And this applies, not just to everyday consumers like John, but even wine experts. Perhaps that ’61 Lafite was really a Second or Third Growth, snuck into the Lafite bottle; or maybe a 50-yer old Zinfandel. How would you ever know?

The point is that we drink wine with our minds as much as with our palates. It is in the mind that the mystery and romance of wine dwell. It’s good that wine possesses mystery and romance; may it always be so. But it’s horrible that certain wines have become a commodity, a Gobelin tapesty in a bottle for the uber-rich to compensate for their shortcomings in other areas. I’m not saying that law enforcement agencies shouldn’t go after these counterfeiters with maximum diligence. They should. Like white-collar criminals everywhere, the fakers should be held to account. It’s just that, for the average consumer, this Kurniawan business, and associated scandals, really has no impact. If somebody out there wants to drop $1,300 for a once-in-a-lifetime wine, they should do so without paranoia. Go to a reputable supplier, the vast majority of whom are ultra-dependable, and be assured. And consider that, even if the wine you buy is fake, you probably won’t know the difference anyway. So enjoy!


Too many chefs? A culinary academy closure raises questions

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It’s a real shockeroo that the Culinary Academy in San Francisco is closing. Its graduates include Ron Siegel, now of Michael Mina but I remember dining at the old Charles Nob Hill restaurant, which he eventually left to go to Masa’s. Talk about a resumé!

There are two outposts of the culinary arts in the food-obsessed Bay Area: The Culinary Academy [also known as Le Cordon Blue] and the Culinary Institute of America, in Saint Helena. To have one of them shut down in the midst of one of the greatest restaurant booms in memory is amazing. The official reason for the Culinary Academy’s closure is high food and facility costs,” but a major financial problem was “a $40 million settlement in 2011 of a class-action lawsuit by students who claimed the school inflated graduation and job placement rates.”

According to that settlement, 8,500 students who attended the Academy between 2003 and 2008 were eligible for tuition rebates, based on the notion that “they were told a culinary degree from Le Cordon Bleu would allow them to become chefs, but that many students who graduate are unable to obtain that position.”

One hardly knows where to start in the commentary. During the first 15 years of this new century, being a chef was one of the hottest careers in America—at least, the America of the coasts, and in the urban and rapidly urbanizing centers of the country, where despite the Great Recession people had good jobs and were developing the discretionary-income behaviors of upping their food game and looking for great local restaurants in which to dine. I’m sure that many applicants to the Culinary Academy dreamt of being the next Ron Siegel, and why not? It’s a good dream.

The “chefs are hot” movement was rivaled, in our food-and-wine world, only by the “somms are hot movement,” which itself was exceeded by the “mixologists are hot” movement. Still, there seems to be enough room in our hedonistic culture for chefs, somms and mixologists to co-exist, with plenty of jobs for all.

What, then, are we to make of the Culinary Academy’s closure? I will not weigh in on the merits of the 2011 lawsuit, but clearly, even graduates of an esteemed cooking school in San Francisco found it hard to obtain the sort of work they were expecting; some of them faced “in excess of $100,000” in student loans, hardly an amount a young line chef, even if she could get a job, would be able to repay for many, many years.

I remember when I moved to San Francisco, everybody wanted to be an M.B.A. That was the hot job of the first Reagan administration. Of course, all those newly-minted MBAs didn’t get rich. That degree, too, was over-hyped and over-sold. I frequently have the same feeling about sommeliers today. There are so many ways to get certified, whatever that means, that I sometimes think, pace Warhol, that in the future, everybody will be a sommelier for 15 minutes.

But an oversupply of chefs? What else are we to make of the Culinary Academy’s closure? Clearly there are two things going on: (1) the media’s obsession with these sexy careers, and (2) the corresponding reality that there are not enough jobs for all the graduates of the nation’s cooking schools.

I believe in dreams. I made my career as a wine writer based on my dream. But that was then; this is now, and I don’t know that the dream of being a chef is based on reality. There comes a time when a career gets so popular that too many people pursue it; being a wine writer is in a similar plight today. I am second to no one in the esteem in which I hold chefs. They have been instrumental in our evolution as a culture. If I had a kid who dreamed of being a chef and asked for my advice, I’d be torn. Follow your dream? Or forget about it because the competition is so intense and the chance of success is diminishing. I honestly don’t know what advice I would give.


2016 wine trends

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One differs with Tom Wark and Julie Ann Kodmur with no small amount of trepidation. These two veterans are among the ablest and most effective of California winery publicists. I worked with them both for a great many years, and know for a fact that they have their fingers on the beating pulse of the business. But sometimes, you have to disagree with even the smartest people.

They have a new joint blog out (actually, “joint” blog makes it sound suspiciously herbal. The actual new “joint” publication would be Andy Blue and Meredith May’s “the clever root.” But I digress.) Julie Ann and Tom ran a post yesterday, “Ten 2016 Trends the Wine World Needs to Watch.” Most of their prognostications, I agree with; some, in part; others, not so much. Here’s the story.

“Natural Wine” Is Solidified As A Bonafide “Category” in the Wine World. Tom and Julie Ann may believe it. I don’t. To me, “natural wine,” whatever the heck that means (and it doesn’t mean anything, technically) is the new “biodynamique,” a buzzword for publicists to use to convince greenies to buy their clients’ wine. It sounds trendy and environmental—who wants unnatural wine?–but its meaninglessness limits its shelf life. (“Sustainable” is different. It’s certified by third-party organizations.) Even the people who peddle “natural wine” will soon tire and move onto something else, whatever that is.

Continuing Backlash Against the Wine Industry in Well Developed Wine Regions. Is there a backlash going on that I don’t know about? Well, yes: Julie Ann and Tom refer to demands by locals in wine country “to address problems this minority believes are caused by the wine industry,” e.g. traffic, crime, noise, environmental impacts, etc. This is indeed happening but there’s nothing really new about it. It’s a form of NIMBYism that does need to be addressed, but I have a feeling that where money talks, nobody walks: the wineries will pretty much get what they want, because they are the tax base in most of these regions.

Distributor Consolidation. This too has been going on for years. Yes, the problem is getting worse, from the point of view of smaller wineries that are locked out of the chain. There undoubtedly will be greater consolidation, but the good news is that the Internet and social media, with their DTC promise, are becoming effective counter-weights to the three-tiered system.

Emergence of Younger Wine Writers. It is true that “the older, experienced crew begins to think about retirement.” How could it be otherwise? It also is true that “young writers [have] been toiling at second tier wine publications and websites.” Will there be a simple one-two switch where Blogger Joe is the next Jim Laube? Well, somebody has to be the next Jim Laube so it might as well be Blogger Joe. However, what is missing from this analysis is the sad fact (from the point of view of young writers) that the number of influential writing positions will remain pitifully small. There are simply too many young writers and too few spots for them to work for decent money.

Increase in Use of Media (not Social) Relations in the Wine Industry. Being publicists, Julie Ann and Tom might be expected to predict how important their sphere will become. I’ve been around for a long time, and watching the interplay between wineries and P.R. firms has been fascinating. The theory is that increased competition will drive wineries to P.R. firms for “help reaching the media with their brand message.” Yes…and no. Some wineries will; some won’t, because they (a) can’t afford it, or (b) aren’t convinced external P.R. is worth it, or (c) are turning to their own in-house social media efforts, which they believe can replace traditional P.R. Can it? We’ll see. Traditional P.R. may (accent on “may”) be an endangered species—the streetlamp lighters of the 21st century. Too soon to tell.

Opportunity in Diversity. Will wineries, in an attempt to gain a niche, produce “different types of wines…new beers, ciders and spirits…” and so on? There are two schools of thought. One is that what has worked in the past (Chardonnay, Cabernet Sauvignon, Pinot Noir and so on) will continue to work in the future. The other is that the constant craze for new, trendy and different will enable some wineries to exploit consumer fickleness. Unfortunately, crazes have the lifespan of a gnat—remember Moscato? Personally, I can’t see wineries getting into “distilling or cider-making,” much less beer brewing; it’s not part of their core competency. So I’m not sure how much “opportunity” there really is in this new “diversity.”

More Groups and More Categories to Choose From. The idea here is that “group marketing” is easier/cheaper than individual marketing—a Darwinian herd strategy where the “pack” can better fend off the wolves than the lone individual. Julie Ann and Tom cite IPOB and ZAP as examples. There is truth here, but in a larger sense, wineries always have been torn between joining groups (which spread the benefits thinly but broadly over everyone) and going it alone, where they stand to gain a greater share of the glory and money. This is an inherently existential question each winery must ask itself. I, myself, can’t see any more groups, such as IPOB, successfully emerging. IPOB has been a pheenom, and will be hard to replicate. What I do see is more and more tourism opportunities for wineries: sponsored tastings at resorts and cruise ships, Uber rides from the hotel to the winery, that sort of thing. But this isn’t quite what Julie Ann and Tom are talking about.

More Virtual Wineries as Cost of Entry Continues to Increase. Obviously.

The Call For Expertise. I’m glad that Julie Ann and Tom agree with what I’ve been saying for years: “Many consumers [will] more actively seek out vetted experience in their pursuit of wine advice…in contrast to the Everyman Wine Critic and the Crowd as the source of knowledge…”. Amen, brother Tom and sister Julie Ann! I said it in 2008 and I’ll say it again: just because somebody runs a wine blog doesn’t mean that they have experience or credibility. At last, the consumer is beginning to realize that vetting counts. Despite predictions, widespread in the blogosphere, of the imminent demise of the major wine pubs, their “continued success…is evidence that consumers are looking for real expertise.”

Purposeful Authenticity Will Be More Important Than Ever. The message is that “wine companies that can provide…real, heart to heart, meaningful, authentic content will capture hearts, minds and possibly wallets.” Agree. The question is, how do you know if the “heart to heart” is real, or just a clever simulation of authenticity (like those oil companies that tout their commitment to the environment while actually wrecking it)? This is very hard; it requires consumers to put on their B.S. detectors. Ultimately, this issue of “authenticity” is the stickiest wicket of all, because nobody knows what it really means, and “the crowd” will always be divided as to who’s really authentic and who isn’t. One thing for sure: you can smell inauthenticity a mile away.

* * *

I’m driving to Oregon today for more research into my Jackson Family Wines project. To think that just 72 hours ago I was on a warm, sunny beach on the Riviera Maya and now I’m headed up to the cold, rainy north country. I’m bringing my flannel shirts.


Bill Gates’ “Content is King,” 20 years later

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We’re coming up on the 20th anniversary of Bill Gates’ now-famous manifesto, “Content is King,” in which he made a number of predictions concerning the future of the Internet. Keep in mind that, in January of 1996, the Internet, or World Wide Web, was still an object of curiosity to most people, including even those who designed and operated it. Everybody knew how revolutionary the Internet was, but nobody was quite sure how to use it. Yes, the military already was utilizing it for communications, simulations and so on, but the average American was very much puzzled concerning what it meant for her.

I was one of them. I remember getting my first assignment to write about it. It was from Lewis Perdue, at the old Wine Business Monthly magazine, who told me to check the Internet out, and particularly to find out what I could about wine “chat rooms.”

I had no idea what he was talking about. I didn’t know how to get on the Internet (or if “getting on” was even the proper terminology). It turned out I had to go to the Berkeley library, rent time and use a hideously slow dial-up modem. It took forever to get online, and once I finally did, I hardly knew what to look for. But eventually, I found a few wine chat rooms and dutifully wrote up my article.

Back then, there was little talk of email, and none at all of social media. Winery websites were rare as unicorns (if in fact any even existed), and shopping via the Internet was a mere gleam in Jeff Bezos’s eye. Therefore, when Bill Gates wrote his little article, it caught people like a storm. He already was the most famous person in the world of computers and software (along with Steve Jobs), had been on the cover of TIME magazine in 1984 (when he looked like the nerd, Richard Hendricks, on TV’s “Silicon Valley”), and was understood to be a great prognosticator.

The title of Gates’ paper suggested his point. “Content,” he explained, would be the “long-term winner” in the race to make “real money…on the Internet.” And being a businessman, of course, Gates’ goal was for Microsoft to make real money.

Here are the predictions he made, which I have gleaned from the article. Following each prediction, I offer commentary as to how accurate the prediction was in terms of what has subsequently ensued, and to what degree the prediction has come true.

“Supplying information and entertainment” will be the “exciting things” that will fuel people to turn to the Internet.

PREDICTION ACCURACY: High.

HAS IT COME TRUE? Big “yes.”

The universal ease of “anyone with a PC and a modem” being able to “publish whatever content they can create.”

PREDICTION ACCURACY: High.

HAS IT COME TRUE? Big “yes.”

The ease with which this content can be “distributed worldwide at basically zero marginal cost to the publisher.”

PREDICTION ACCURACY: High.

HAS IT COME TRUE? Big “yes.”

“Intense competition,” some of it successful and some of it a dismal failure, “in all categories of popular content.”

PREDICTION ACCURACY: High.

HAS IT COME TRUE? Big “yes.”

“Printed magazines” can be “served by electronic online editions.”

PREDICTION ACCURACY: Medium-high.

HAS IT COME TRUE? Qualified “yes.” It’s still unclear how online advertising can raise the revenues that print advertising did.

“To be successful online, a magazine…must…have audio, and possibly video,” and not just “take what it has in print and move it” online.

PREDICTION ACCURACY: High.

HAS IT COME TRUE? Qualified “yes.” Too many magazines do exactly that: move what it has in print online. Magazines need to do a much better job of giving consumers a reason “to put up with turning on a computer to read a screen.” And Gates obviously underestimated the importance of video. “Possibly”? No, definitely.

Concerning the “breadth of information on the Internet,” it will be “enormous…”.

PREDICTION ACCURACY: High.

HAS IT COME TRUE? Big “yes,” but Bill Gates conspicuously missed the importance of “SEARCH” in order to find things in this avalanche of information. Perhaps if he had, Microsoft would have invented Google.

Concerning pay for content providers, “The long-term prospects are good, but I expect a lot of disappointment in the short-term as content companies struggle to make money.”

PREDICTION ACCURACY: High.

HAS IT COME TRUE? Big “yes.” Gates got it exactly right: Content companies (bloggers included) still struggle to monetize their efforts. Did Gates envision a solution to this problem? He did:

“In the long run, advertising is promising.” He also foresaw subscriptions as revenue-raisers.

PREDICTION ACCURACY: Moderate.

HAS IT COME TRUE? No. Gates wrote (1996) “today the amount of subscription revenue or advertising revenue realized on the Internet is near zero.” Now (2015), it still is pitiful, and most content providers can’t hope to make a living through either subscriptions or advertising. So, while Gates understood that “paying for content doesn’t work very well,” he was overly optimistic that the problem would be solved. His statement that “This technology will liberate publishers to charge small amounts of money” has failed to materialize. Unless you’re Parker or Jancis or somebody like that, almost no wine blogs make money.

Finally–gotta say it–Bill Gates missed social media. If he’d stumbled onto that, Microsoft could have invented Facebook.

Still, this little 1996 paper has turned out to be one of the most important and visionary analyses ever written concerning the Internet.


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