Wine prices are still too high
Everybody knows that housing prices are still too high, especially in Sun Belt places like Las Vegas, South Florida and certain parts of California. Prices won’t stabilize until demand equals supply, and supply was way overbuilt to begin with. So housing prices continue to fall. You can only conclude that they were too high to begin with, and must plunge further before the bottom is reached.
The situation is analogous to California wine prices. There are simply too many wines out there in the $20-$50 and higher range that aren’t worth it. Once again, I’m not going to mention any names, because that would be unfair; for every “ABC winery” that’s overpriced I could name 5 dozen others.
First, let me start with a general observation that wines scoring between 83 points and 86 points are, by Wine Enthusiast definition, “good.” And the definition of “good,” in our view, is “Decently made, with varietal identity, serviceable. At most, minor deficiencies.” Now, there’s nothing wrong with a “serviceable” wine, but my Webster’s dictionary defines “serviceable” as “useful; usable; durable; ready for use,” which is not exactly a glowing endorsement. For example, if you drive a car, you probably want something that’s more than “useful.”
The majority of California wines are serviceable. They’re what a Frenchman might call vin de table or vin ordinaire, the kinds of wines most people drink on most days with very little fuss or clamor. A decent dry red, a crisp fruity white, or maybe a perky little rosé is a serviceable wine. How much should a serviceable wine cost? It’s in the eye of the beholder, but in my view, an everyday wine should be less than $15. And there are tons of everyday wines out there that go for less than $15, not only from California but from around the world.
Here’s the problem. Over the last few months I’ve reviewed a lot of wines I scored at 84 points, which is right in the middle of the “serviceable” spectrum. Here are a few (without specific identities) and their prices:
a Central Coast Bordeaux blend with tutti-fruity flavors and tons of weird oak: $28
a Napa Valley single-vineyard Cabernet that had sharp, green tannins: $50
a Russian River single-vineyard Chardonnay that was too oaky and popcorny: $38
a Napa Valley rosé that tasted like cola: $35
a Paso Robles Viognier that was practically a dessert wine, it was so sweet: $29
a Sierra Foothills Syrah that was pleasant and simple, for $32
a Dry Creek Zin that should have been about $15 but was $40
Well, you get the idea. Each of these wines was basically decent, but why on earth would anyone pay the asking price? And keep in mind, these are prices that were established (either by the producer or someone along the distribution chain) after this past Spring — in other words, when the country already was deeply mired into a Recession, and everybody knew that consumers were diving down in terms of the prices they’re willing to pay for wine.
How do you account for a wine that’s overpriced and mediocre (definition: ordinary, average) being sold for so much money during a Recession? I, myself, don’t know how to. Is it blindness? Whistling past the graveyard and hoping there are enough gullible consumers out there who will buy it anyway? Is it simple ignorance of reality, a kind of cellar-vision whereby a winery owner lives in his own little world and doesn’t understand what’s going on? Is it a desperate act forced upon vintners by their banks? Is it the belief that their own particular wine — their love child — is actually worth the price they’re asking? Is it a form of lethargy? All the above?
Whatever the explanation, the fact is that every day I review wines that are average and ordinary, and when I see their prices I’m shocked and appalled. If a Recession is indeed a time for correction, of the same kind that housing is experiencing, then wine prices are going to have to be seriously corrected, and not just at the super-ultra-premium end. They’re going to have to be corrected in the $20-$40 tier, where, as Ricky Ricardo might have said, there’s a lot of ‘recting to do.
Breaking news!
Conde Nast is closing Gourmet magazine!! The N.Y. Times announced it this morning. This is a major event in print publication. Gourmet in its time was required reading, especially for wine lovers who could revel in everything the great Gerald Asher wrote. Gourmet will be missed.
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I know one of the most popular words of advice I received coming out of college was to bid on the higher end when negotiating salary. If you don’t people will gladly pay you for a lower price and not make one mention of whether you’re worth more. Wine being the process it is, I’m sure many of the people making these “good wines” can’t help but feel involved and connected to the product. While reviewers may not value their creations beyond “good,” as producers, they have an unspoken obligation to value them as “great” which reveals itself in the form of price.
Is that blind and misguided for this market? Perhaps. But it’s a hard pill to swallow when you know once those prices are lowered you can never raise them again, unless your quality goes up with it. As with anything, it’s easier to be the person giving advice than the one who needs it.
Dylan: I hear you! But we all have our jobs and mine is to give advice.
Wine prices? Too high? The beauty of being a commodity, which wine is at its most heart, is that there are periodic price corrections. I have always found across my three decades and more of wine writing, however, that there were wines not worth the money and that those wines were a large part of the reason why wine critics like thee and me had jobs. Some of those wines will fall back to earth in this current economy, some will disappear as quickly as they rushed into the search for inflated profits and some will maintain regardless. Let me know when Jordan sees it prices slip.
As for Gourmet, that news just took my breath away. It reminds us all in the print business how fragile these times are.
Charlie, agree with your comment about Gourmet. It had a distinct place in magazine land. There was nothing like it. Gerald’s wine writing was some of the best in the English language over the last few decades. Readers, it’s worth looking for his compilations. One is “Gerald Asher on Wine,” published by Vintage Books in 1986 (soft cover). The article on California Cabernet Sauvignon alone is worth the price.
Steve,
I would think the answer is pretty simple….the producer didn’t think the wines were mediocre. I know that I personally have often disagreed with various reviews we have received (yes, even from you). And I have often seen seriously divergent scores from critics….and 85 from yuo and a 91 from the Spectator and a 94 from Parker (and vice versa).
The long and short of it is, making wine for critics is a fools game….you can’t do it….you make the best wine for yourself and price it at what you think is a fair price.
Adam Lee
Siduri Wines
Adam: So given the proliferation of critics, there’s no difference between any 2 wines? Because someone will always like something, even if no one else does? That’s a slippery slope. I think it’s indisputable that there are a lot of o.k. everyday wines out there that are seriously overpriced.
So, I started my morning filling out an online survey for Gourmet Tastemakers, mostly about travel and culinary tie-ins. Then your Gourmet news popped up. Ruth R. was just in town promoting her book. It just doesn’t seem possible that there’s not room for such an institution to survive today’s madness. Like Charlie, I’m beyond speechless.
I suspect that Adam does not disagree with you as regards your central premise. But, as I looked at your list of overpirced wines, I began to wonder which wines you were talking about.
Popcorny Chardonnay from RRV? Sure, but which one? Would I agree?
Sweet Viognier that was almost dessert wine? I have liked many sweet Viogniers–Yves Cuilleron makes a killer sweet Condrieu. Would I agree?
Rose’ that tasted like cola at $35 or even $15. I woud probably dislike it as well. But would I really find it tasting like cola? Sweet and oaky? How did it get that way?
And that, to me, is a large part of what Adam was saying. Wineries make wine and then price them according to what they think their value is (i. e., what the market will bear).
I long ago learned that market pricing had something to do with what I sometimes perceived as quality but a lot more to do with what the market perceives as quality. And marketing, history, even familiarity come into play there.
We all agree, I hope, that conditions in the market have produced a fair number of high priced wines, and I am guessing that even Adam agrees that prices that go up can come down.
But, “overpriced” is a relative term, and it is not just relative to the perceptions of critics like us. I have probably told this story before, but it bears repeating here. I used to be a professional economist before I discovered that wine writing was a lot more fun, and one of the lessons that I most treasure came from my mentor who taught me that the market was smarter than me or any one of us. His famous words of warning were, “You cannot swim upstream against the market”.
Our wine tasting society is finding much the same thing. In our last Taste-Off of 16 CA single variety wines, the average score was 3.03 (85/Good) out of 5 stars. The highest scorer, sourced from grapes grown at 2400 feet in Lake County, but made by Napan Nils Venge at Frank Family winery, received an average score of 3.65 (Good/Very Good).
Like many people with mortgages, many vintners find themselves “sideways”, or is it “underwater”? They have more into their structure than its (re)sale value. Much dumping will ensue in one fashion or another. Pricing is not just marketing; it is based on costs plus minimal profit. What’s a winery to do where the lines can’t cross?
On Gourmet: Some years ago I put out a newsletter of events called ~Epicurious~. Through a journalist friend I was commissioned by a division of Condé Nast during that time to write a handout on places to visit in Wine Country for a medical trade association meeting in San Francisco. A year later CN launched their website called….epicurious.com. Hmmm. Since I couldn’t hire any legal horsepower, I put a curse on them which is beginning to take effect. Too bad it involves a financial crisis that is bedeviling more people than SI Newhouse.
Tom, I hope you won’t put a curse on my blog.
Steve,
When this recession began, and all the expensive California wines remained unsold, I seem to recall a post of yours (slight chance it was one of your other cohorts but I’m pretty sure it was you) which had a title to the effect of “lowering prices is not the answer” Is this a memory laps of mine? or were you encouraging wineries to hold fast with their schtick only now to tell them their overpriced? Or perhaps I am wrong and now you are saying that too many brands enter the market well above what they are worth? Please clarify as I am a little confused now as to your position.
Wine pricing–one of my favorite subjects! One of the “advantages” of making (and selling!) wine for 30 years is that we have seen times like this before. Since we sell so much directly to the public, we are well aware when a wine is priced “incorrectly” or the public is feeling the pinch. Early last summer we reduced the price of four wines and, this past August, announced that nearly all Valley View wines would be priced substantially lower until the economy changes. This has boosted sales to pre-recession levels and allowed us to maintain case production. The fact is that most people who set wine prices have little direct exposure to the true wine drinking public. Many who have maintained their prices also don’t have to rely on wine sales to meet payroll and other expenses. We have all heard the mantra about not lowering prices because you can’t raise them again, but is anyone besides me questioning it? Can housing prices go up? How about mortgage rates or the price of wheat or oil? People expect wine prices to be lowered in the face of this economy and, because many domestic wineries are not, they are buying less expensive wines from other countries. A wine is worth what people will people will pay for it–but we do not exist in a “wine vacuum.” People have choices and those wineries that offer quality wines at affordable prices will survive. Those wineries with “ego” prices may have to change their strategy.
An 83-86 is not vin de table, absolutely not. If a wine has serious faults, if it really tastes like Coke, then it is a 70 or less. Vin de table is maybe a 60 or …30, actually sorta hard to find now, except at truck stops in France, Spain, and Italy and supermarket wines for one euro a bottle.
How many of us had subscriptions to Gourmet? Not I. If you like a magazine, subscribe. Give mag subscriptions to the kids, nephews, nieces, sisters, brothers (I do and they love them).
Subscriptions are cheap as chips and much easier to read on the sofa or kitchen table or in the bathroom than the laptop.
The conversation about wines being too expensive began in the late 1960’s and early 70’s when B.V. Reserve jumped to $5 and Heitz Chardonnay was $7 a bottle. Barrels were $50 and an acre of good Napa Vineyard land was $4000. One of the best vineyards in Oakville sold for $7000 an acre. All prices were considered exorbitant at the time, but they are 20 times that now. I couldn’t afford them then and I still can’t. I have lost all ability to track value. Fortunately there are many wonderful affordable wines from less known parts of the world left to enjoy. Please don’t review them. They are beneath consideration.
Regarding Gourmet, I am heartbroken. It has been a good companion and in my home for forty years.
Mark, re: “Once you’ve lowered prices can you ever raise them?”, one strategy some wineries seem to be using is to create a new tier that’s slightly higher than the reduced tier and charge more for it. The new tier might be single vineyard or bloc designation or carry some “reserve” name.
Vinorojo, I don’t know if that remark was mine or not. I did a search but couldn’t find anything. I did find a post from August 2008 in which I quoted an economist that prices were going up — but that was before the Recession hit in full fury in the 4th quarter. Two months later, when the extent of the carnage was becoming known, I wrote that retailers were “desperately trying to move inventory even if that means taking a profit hit, or the wineries themselves are trying to move inventory by lowering their prices…”. And by January 2009, when the nation was deep in economic despair, I wrote: “Here’s what I would tell wineries: Lower your prices to the minimum you can, unless you really, really think you can get away with not doing so. But make sure you’re not fooling yourself through hubris.” Now here we are, nine months later, and some of these wineries don’t appear to have taken my advice! Either that, or they’re fooling themselves through hubris.
Steve,
You’ve described some these wines as “tutti-frutti flavors and tons of weird oak,” “sharp green tannins,” “too oaky and popcorny,” “tasted like cola,” “practically like a dessert wine it was so sweet.”
By what standard do you find them serviceable? They sound more like undrinkable to me. For $15 I expect a lot more than that, and have little trouble finding it. Perhaps this makes your point stronger at the cost of your credibility as a grader.
Jack, I go by our definitions at Wine Enthusiast, where our ratings go from 80 to 100. Anything below 80 gets a 22, which means completely undrinkable. So a score of 83 or 84 is serviceable, meaning that you can drink the wines and unless you’re fairly fussy (which most wine drinkers aren’t), you can enjoy it. I try not to hold my impossibly high standards against a vin ordinaire.
A single vineyard Chard that drinks like popcorn? I thought that was the goal! Not that I like that style. The versions that especially smell like burnt popcorn are detestable.
I still maintain that too many producers are aiming for a vin de garde (or something cheaply imitating such a wine with the large producers). So when the producer cuts yields to .5 tons/acre and lavishes the juice with new French oak, he/she expects a commensurate price. I think they’re missing the point since what they generally have are young vines and fairly high sugar levels. How do they compete with someplace like Bierzo that has rediscovered old vines and has no “tradition” of 50%+ new oak like in CA to suppress the grapes’ character?
Too many winemakers with egos, not enough vignerons with truly interesting grape-vineyard synergies.
My argument would go against Charlie Olken’s comment. I as one believe wine to be more like art than a commodity. And like art terribly difficult to value. Many of us have walked through the local museum of modern art looking at a piece they would value at twenty dollars only to find that it last sold for over half a million. Wine like art includes a strong element of taste. Your 94 point renaissance piece may look like an 82 in my eyes but the impressionist piece that a say is a solid 100 may sit as a mere 88 to you.
I agree with what Adam Lee had to say. Wine writers and their reviews don’t qualify pricing by the producers. If fact, I disagree with what many of them write anyway. Taste is subjective, and, in a way, price is too.
“How do you account for a wine that’s overpriced and mediocre (definition: ordinary, average) being sold for so much money during a Recession?”
Well, it’s easy- the cost of fruit was driven up during the long boom, and you have to have grapes to make wine. Renting a place in CA ain’t cheap. You have to pay people. Things like glass and labels cost money. And, finally and most importantly, consumers paid these prices for years- it seems exceedingly churlish to complain about $50 pinot now…
jb
Phil–
Wine is a commodity. Works of art are one-offs.
Even a wine made in two hundred cases has 2400 separate bottles. Price is a function of many things, but in the long run, it is a measure of what the winery wants to charge moderated by what the market will bear.
I absolutely agree with you that subjective point scores are subject to individual judgment. So are the prices for an individual piece of art. But, I have a different view of Jordan Cabernet Sauvignon, for example, or Schramsberg Blanc de Blancs or any wine that has to sell to lots of people in the market place. Ultimately, transactions happen and those transactions are measurable in terms of dollars. They define the agreed upon price between seller and buyer. The fact that qualitative judgments about the wine may vary have nothing to do with the way markets work.
I suspect that ultimately fine wines are priced like any luxury good, which is to say that they’re prices as high as the producer/marketer/etc. think they can get away with and still sell them.
Steve,
Great subject for the times. When wine became so “fashionable” this end should have been predictable. The market got infected with the “I’m gonna impress somebody” bug and the gap between price and actual value got greater and greater. I mean the bigger the price, the more impressive. Of course, none of us in the industry could exist on the actual value(being what it cost to produce, bottle, and deliver) of our wonderful goods. But you are absolutely correct that we must get much closer. I think Champagne and Bordeaux have a lot of ground to cover. Hopefully, the closeout system will continue to crank up and everybody will overcome the greediness and pass the bargain to the consumer. Write off the loss and get back to making slower but steadier money.
Gibson: “Write off the loss and get back to making slower but steadier money.” And better wine!
Everybody knows that housing prices are still too high, especially in Sun Belt places like Las Vegas, South Florida and certain parts of California. Prices won’t stabilize until demand equals supply, and supply was way overbuilt to begin with. So housing prices continue to fall. You can only conclude that they were too high to begin with, and must plunge further before the bottom is reached.
Supply and demand don’t explain housing prices. Google tulip mania bubble.
Dave–
You have stated half of the reason why housing prices fell–the supply went up, but the other half of the equation is that demand for exsiting housing was pushing prices up. When incomes started to fall, and folks got worried the demand fell. Then prices fell, and all of the sudden, not only did the potential house buyers not want to pay beyond their means, but they lost the equity in their houses to be able to trade up.
There were underlying causes, but it was still supply and demand.
As an old friend of my family who had been in the business of selling his whole adult life said to me one day, “You can’t take margin to the bank!”
I have this posted over my office door and look at it every day on my way out to sell yet another bottle of wine.