Tag Archives: Wine Pricing

Millennial Math — Where’s the value in wine?

A few days ago I wrote about the “Boredom Factor” that is sapping Millennials’ enthusiasm for wine. But engaging Millennials with things that are new, interesting and authentic is only part of the battle. The industry also needs to reframe the discussion about value and pricing.

Photo by Ecole polytechnique Université Paris-Saclay. Uploaded to Wikimedia Commons under CC-BY-SA-2.0

Let’s face it, wine delivers horrible “bang for the buck”–especially compared to other alcoholic beverages. This is true at all price points, but particularly at the low-end (and ironically titled) “value wine” segment.

For smaller boutique wineries, worrying about “value wine” might not seem like a big deal. But the issues impacting the top shelf take root on the bottom.

If you want to know why $100+ bottles of Napa Cab are in danger, head to your local grocery store and look around.

Millennial Math in the Grocery Store

I’ll get to our boutique and more premium wine brands below. But let’s start with a cash-strapped Millennial who want to spend less than $10 for something to drink. You could go to the wine aisle and find stuff like this.

Yellow Tail and other under $10 wines

Then there are other options as well–like Barefoot, Arbor Mist, Cooks, Andre’s and more. At this one grocery store, I estimated that around 40% of their wine selection was sub $10. So, diversity, yeah?

But they all fall into the same “sameness” of sweet, simple or boring Cabs, Chards and Red Blends. Sure, you have the occasional gimmick of things like the “living labels” of Treasury Wine Estates’ 19 Crimes. However, after the novelty of a cute label wears off, it’s still the same boring juice in the bottle.

Now right next to the wine department in many stores is a beer department which has likely been greatly expanded thanks to the craft beer boom.

Let’s see what under $10 options our Millennial shopper has there.

22 oz Beer bomber singles

These are 22 oz “bomber” sizes of beer which is only a tad smaller than the standard 750ml (25.4 oz) bottle of wine. In this one Albertsons grocery store, I counted over 80 different SKUs of at least 20 different styles of beer among under $10 bombers. And this was a rather small grocery selection for the Seattle-area market.

If you think of beer styles (Belgian Tripel, New England IPA, Oatmeal Stout, etc.) like grape varieties, the beer department has the wine industry smoked when it comes to answering the “Boredom Factor.”

Even among the same style (like IPA), you are far more likely to find distinct personalities and differences (hoppiness) among various brews than you ever would dream of finding among under $10 Cabs, Chards and Red Blends.

I have a fair amount of industry folks who read this blog so I’m going to ask you to step back and take off your “wine hat” for a moment. If you were a young post-college Millennial shopper with no personal connection (like having visited a winery) or long-term relationship with drinking wine, what would you spend your $10 on?

Are we just waiting for better times?

Yeah, things suck right now for the broke 20-something Millennial. But can we really predict their future buying potential based on the habits of their 20s?

It’s true that most Millennials have not entered their peak earning ages. Likewise, most have not reached the ages when previous generations started embracing wine.

Jason Haas, of Tablas Creek, makes that later point particularly well as he points out some of the silver linings amidst the gloom and doom assessments about Millennials.

The median age of a Millennial is 30, but the Millennials at the peak of the demographic bubble are just 24. Were many Baby Boomers drinking wine at age 30, let alone 24? No. How about GenX? Not much. Millennials are drinking more wine than preceding generations were at the same age, which should be a positive enough trend. — Jason Haas, Are the gloomy messages about the state of the wine industry warranted? I say not for wineries like us. 2/4/2019

I concede Haas’ point and appreciate his optimism. I’ve certainly not hidden my affection or admiration for Tablas Creek’s business acumen. Though Haas is a “proud Gen Xer,” he pretty much runs Tablas Creek like a Millennial with a brand that embraces transparency, authenticity and sustainability along with pushing the envelope for new and exciting wines.

Without a doubt, if more wineries followed Tablas Creek’s example, the Boredom Factor would almost be a non-issue.

But what I fret that Haas’ optimism overlooks is the habits and perceptions that are being ingrained into Millennial consumers right now. Haas’ generation (and the Boomers) had the benefit of a promising economic outlook before them–where there was the potential for growth in earnings and career development.

That is a luxury that many Millennials don’t have and this is something that we are all too aware of. Even if things get a little bit better into our late 30s and 40s, it’s going to be very difficult to shake the mindset and spending habits of our formative 20s and early 30s.

Valuing “Value”

While things are not as bad as they were during the Great Depression, social scientists and economists are already drawing parallels to the spending habits and mindset of Millennials with those of the Silent Generation born between 1925-1945.

Even though the Silent Generation benefited from the post-war boom, many kept the spending habits imprinted on them during the hardship of the Great Depression. Prominent among those retained habits was the idea of stretching your dollar–even when you had more dollars to stretch.

Millennials certainly like to be entertained. We want experiences and to feel connected. And we avoid boredom like the plague.

But we deeply value “value.”

The $15-25 Sweet Spot

Let’s go back to the grocery store and look at the more premium $15-25 “sweet spot” range of wine pricing–with emphasis on the sweet.

Meiomi & 7 deadly with cheaper spirits

Usually, Meiomi is not over $25 so, for the sake of argument, I’m including it here.

When you get up to the higher price points, wine’s competition is not just beer (with many interesting six and twelve packs available in this price range) but also spirits as well. But spirits adds another dimension because they’re far less perishable and the servings are much smaller.

With wine and beer, you ideally want to enjoy it the same day that it was opened. But a comparably priced spirit can last weeks or even months.

Now I can hear wine folks scoffing at the idea of Captain Morgan or Deep Eddy taking away throat share from anyone older than 23. Yeah, I get it. The “Fireball crowd” eventually grows up. But for those folks who lose the sweet tooth and want something with more complexity, the spirits department still offers numerous options–especially among whiskeys.

Plus, because of how long a bottle of whiskey last, a Millennial could even stretch their $25 drinking budget to $40 and still get some very compelling value.

Old Forester and Woodford reserve

Personally not a fan of the Redneck Riviera but I’d take it over Meiomi any day of the week.

Granted, you have to sometimes deal with the inconvenience of getting the product out of lockup. Also, in some states (like Washington) there are crazy high liquor taxes to account for too.

However, this is all part of the sum-value Millennial Math that we deal with on every trip to the store. What the wine industry needs to concern itself with is how all these figures are adding up.

Banking on Premium Spenders

I want to embrace the optimism that as Millennials feel financially secure, they will turn to wine and start spending in the premium category. That means not only a strong wine industry but also a strong economy overall.

But I can’t shake the feeling that even if Millennials have more money to spend, that they’re not going to be impressed with the value they see in high-end wines. This is something that I’ve personally experienced myself. I’m very fortunate in my financial situation to where I can occasionally splurge on bottles like Opus One, Silver Oak, Cristal and Petrus.

You know what? I’d rather drink Pappy.

I feel this way even though I’m a highly-engaged wine drinker with a personal connection to wine. I’ve been bitten hard by the bug and have a healthy cellar to show for it.

But if you ask me for my brutally honest choice of whether to spend another $2600-4000 on a bottle of Petrus or something like the 1981 Glenmorangie Pride, I would choose the Glenmorangie every time.

And this is coming from someone that keeps a picture of Petrus as their background banner on Facebook!

However, when I step back and let my Millennial nature take over–when I think about the sum-value of what I’m getting compared to what I’m paying–whiskey beats out wine.

If that’s the case with someone like me, then how do you think the math is playing out with my co-horts?

The Petruses of the World are not the ones that need to worry.

Petrus is not going to have problems selling their wine. Even if Millennials aren’t spending at levels of past generations, wineries like Petrus make so little at such high prices that they only need a few folks to bite the bullet each vintage. There is always going to be enough people like me who shell out thousands to attend our Super Bowl–even if it ends up being a 13-3 snorefest.

The real hurt is going to be felt by all the wineries making NFL regular-season and playoff-type wines. They’re the ones that are going to have to convince Millennials that their wines are worth the price of the ticket.

Let’s go back and look at our supermarket shelf at some of the $50-100 options.
$50 to 100 wine vs spirits

That is an excellent price on the Grgich. The only thing that kept me from pulling the trigger was wondering how long it had been standing upright under the supermarket’s harsh lights.

Again, why spend $50-100 for something that needs to be enjoyed mostly in one night (unless you spend another $200+ for a preservation system like the Coravin) over something you could stretch for months?

Wine’s saving grace has been that only a small segment of drinkers have developed a taste for brown spirits like whiskey, tequila and rum. But those categories are growing–especially among Millennials and women.

If the boredom factor doesn’t kill off the $100+ Napa Cab, brown spirits certainly will.

But it all starts back in the beginning, with the spending habits and perception of value that Millennials are developing now with their under $10 and $15-25 options. Here is where wineries are losing the battle before the war even begins.

Yeah, Millennials wanderlust is great and can definitely help wineries that are offering different and exciting wines. But that same wanderlust also fuels our openness in trying other beverages like craft beer and brown liquors. The more we try them, the more those other options become players in the “sum-value” game of Millennial Math.

And, right now, that math is seriously working against the wine industry.

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Why I Buy Bordeaux Futures

As folks who have been following my on-going series examining the offers from the 2017 Bordeaux Futures campaign have noticed, I enjoy playing the Futures Game.

But I understand that this is a game–one where I’m gambling money on today in hopes of future pleasure in the years to come.

Though while I have a gambler’s heart, just like when I’m playing the Somm Game in Vegas, I like to hedge my bets and get the cards stacked in my favor.

When it comes to buying Bordeaux Futures, I have one solid rule that I never waver from.

Buy for pleasure, not for investment.

Like the stock market, you can certainly “invest” in buying Bordeaux wines with the goal of selling or trading them at a higher value. Of course, there are some legal gray areas that are worth paying attention to and David Sokolin’s Investing in Liquid Assets is a great read for anyone interested in dipping their toes in that area.

But I’m not looking to make a profit. I just want to get a good deal on something that I will enjoy drinking at some point. If I lock in the price of a bottle as a future that ends up saving me $20 versus buying it later on a retail shelf, I’m a happy camper.

By not hoping for the price to skyrocket after purchasing it as a futures (and buying only 1 to 3 bottles for personal consumption), I’m able to keep my expectations grounded and realistic.

However, there are certainly times when Bordeaux’s notorious fickleness and pricing does end up giving me a really good deal that I kick myself for not buying more of.

Case in point-2015 Ch. Margaux.

I purchased a single bottle of this wine back in June 2016 for $519.97. I don’t have the wallet to often buy multiple bottles of First Growth Bordeaux or many other estates that regularly fetch $200+ a bottle but a bottle here and there when the vintage and price is right is something I can afford to do.

Lest anyone doubt the price I originally paid for the 2015 Margaux from Total Wine & More’s Concierge service.

I knew 2015 was a very solid year and one worth bulking up my cellar with from both the value end to some of the top crop. With Margaux being one of my favorite estates, it was worth buying at that price as well as a bottle of their second wine, Pavillon Rouge, for $134.97.

The wine had some nice barrel scores during the 2015 en primeur season like 95-98 points from Antonio Galloni of Vinous, 98-100 from Neal Martin (then of Wine Advocate) and 19/20 by Jancis Robinson.

While I don’t personally ascribe much weight to critic scores, I do read the tasting notes for tidbits about the vintage and general style of the year. But the numbers themselves are virtually meaningless to me. I’ve drank 100 point wine and I’ve drank 94 point wine and derived the same amount of pleasure–not to mention many excellent 88-92 point wines.

Then Came The Jump

But I’m very cognizant about the impact of critic scores on the pricing of Bordeaux so when I’m on the fence about a futures purchase, I do weigh how much the price could potentially jump once the bottle scores are released.

So while I certainly expected to see the price of the 2015 Margaux rise above $519.97 (like to maybe around the $994 ave of the 2005), I have to admit that I wasn’t quite expecting this.

100 points Jeb Dunnuck.
100 points Jane Anson of Decanter.
100 points James Suckling.
100 points Jeff Leve of The Wine Cellar Insider.
100 points Roger Voss of Wine Enthusiast.
99 points Lisa Perrotti-Brown of Wine Advocate.
99 points Antonio Galloni of Vinous.
99 points James Molesworth of Wine Spectator.

And now we have the 2015 Ch. Margaux averaging $1,643 a bottle–more than $1100 above what I originally paid for it as a 2015 Bordeaux Futures.

YIKES!

Yeah, I wish I had bought at least one more bottle.

Other Good Futures Deals I’ve Gotten

While I certainly don’t expect anything from the current 2017 campaign to jump as crazy high as the 2015 Margaux, I still think there is enough consistent savings and value that merit buying futures even in vintages like 2017. But as evident with my 2017 series of posts, I do a heck of a lot of research and decision making before putting my money down on the table.

It’s a lot of work, but to me it’s worth it to get solid deals like this:

2015 Pavillon Rouge — Futures price $134.97, now averaging $233
2015 Valandraud — Futures price $139.97, now averaging $186
2015 Pape Clement — Futures price $76.97, now averaging $120
2015 Malescot St. Exupery — Futures price $47.97, now average $74
2014 Mouton Rothschild — Futures price $299.97, now averaging $517
2014 Angelus — Futures price $219.97, now averaging $297
2014 Canon — Futures price $59.97, now averaging $92
2014 Prieure-Lichine — Futures price $29.97, now averaging $48
2013 Lascombes — Futures price $44.97, now averaging $74
2013 Rauzan-Segla — Futures price $49.97, now averaging $68
2012 Clos Fourtet — Futures price $76.49, now averaging $98

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Wine Geek Notes 3/1/18 — Brexit Wine, Stouffer Cocktails and Sexist Marketing

Photo by Evan Swigart from Chicago, USA. Uploaded to Wikimedia Commons under  CC-BY-2.0
Here is what I’m reading today in the world of wine and alcohol.

Interesting Tweets and Links

Brexit And Wine: How Political Change In The European Union Impacts The Wine Industry from Vinfolio’s blog (@Vinfolio)
Very fascinating look at how the economics of Brexit (with its influence on the pound sterling) caused a mad buying spree in the UK and the potential trickle down impact that it had on fine wine pricing.

Portman Group Joins Calls To Stamp Out Sexist Drinks Marketing by Lauren Eads (@Lauren__Eads) at The Drinks Business (@teamdb) which made its way to my dashboard via Latest Wine News (@LatestWineNews)
While not as big of an issue in the wine world as it is in beer and spirits, in light of the #MeToo Movement, this is something worth keeping an eye on. From another angle in the article, I’m concerned about over reach from the UK government in their “immoderate consumption” guidelines.

Stouffer’s Lost Cocktails Empire by Wayne Curtis (@waynecurtis) at the Daily Beast (@thedailybeast) which made its way to my dashboard via MacCocktail (@MacCocktail)
This was a “WTF” link for me as I had no clue that the frozen dinner Stouffers of today was such a big player in cocktail culture in the 1950s. Incredibly interesting read that I guarantee you will learn something from!

Other Rabbit Holes I Need to Explore

Today I discovered that one of my favorite rosé wine, Château de Fabrègues from the Costières-de-Nîmes, is apparently made by the large Les Grands Chais de France who make the supermarket wine JP Chenet and are a huge player in France. Looks like I need to do more research on them.

The roles of consultants in wine is always controversial. The Drinks Business has a nice slide show that I want to find more material on.

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Behind the Curtain

By The Wonderful Wizard of Oz / By L. Frank Baum; With Pictures by W.W. Denslow. Published: Chicago ; New York : G.M. Hill Co., 1900. - From the Library of Congress Online Catalog. The image page is here and the description page is here., Public Domain, https://commons.wikimedia.org/w/index.php?curid=3090042Harvey Steiman of Wine Spectator did a write up about the unique marketing approach of a new Oregon winery, Alit. With the pedigree of Evening Land Vineyard’s co-founder, Mark Tarlov, and winemaker Alban Debeaulieu, formerly of White Rose Estate, Domaine Drouhin Oregon and Maison Joseph Drouhin, this new project was already guaranteed intrigue but, as Steiman notes, Alit upped the ante by releasing their Pinots for the absurdly low price of $27.45 a bottle.

Yeah, you read that right. $27.45 for a premium Oregon Pinot noir from one of the Evening Land guys and a former Drouhin winemaker?!?! Toto, I don’t think we’re in Kansas anymore.

The idea behind Alit Wines is transparency with the winery’s website (and Wine Spectator article) going into great detail to describe how they break down the cost figures that brings them to charge $27.45 for a bottle of Pinot noir sourced from acclaimed vineyards in the Dundee Hills, McMinnville (including Momtazi Vineyard) and Eola-Amity Hills. The hope for Tarlov and Co. is that they’ll be rewarded for their transparency with consumers, empowered with the knowledge of the nuts and bolts cost of production, seeing the advantage of bypassing “the middlemen” and buying directly from the winery.

Alit's breakdown of the cost of wine. Credit: https://medium.com/@MarkTarlov

Alit’s breakdown of the cost of wine. Credit: https://medium.com/@MarkTarlov

On the surface this sounds like a solid strategy and I was intrigued enough to put in an order myself. Potentially great wine at a great price is always a plus and its exciting to think about what could happen if more premium wineries followed suited with this focus on transparency. But as both a consumer and as someone who has spent over a decade in the wine industry (both production and retail), I don’t see this as a yellow brick road leading to a revolution in wine pricing.

I also can’t escape the nagging feeling that instead of just empowering consumers, that this peek behind the curtain of production costs will have the same effect on consumers that Dorothy’s glimpse behind the curtain at the Wizard had on her. Yes, it is nice to see what’s behind the curtain but do you lose a bit of “magic” when everything doesn’t seem to be what you once thought it was? Are you going to enjoy as much that $60 Pinot you enjoyed before now that you can add up in the back of your mind that it may really only cost the winery around $15 to make?

Pay No Attention To The Conspicuous Consumption of Wine.

Wine is weird. On one hand, it is a consumable agricultural good just like any foodstuff. So drilling the price of a bottle of wine down to the price of the raw materials, labor and cost of production and transport sounds like a simple endeavor. Yet, wine is also much more than that and, especially in the United States, it can also be considered a Veblen good–an item whose price and value often drives demand, instead of just necessarily the demand driving the price.

This is a big reason why I doubt that you’ll see Alit’s marketing model being readily adopted by other wineries. Of course, nearly every winery in the world would wholeheartedly support encouraging consumers to buy most, if not all, their wines direct from the winery. Not only does it allow them to control the consumer’s experience, making sure that they are getting their wines in the best condition possible, it’s also how wineries make the most money. That last point is key. Look at the prices that you see at a winery’s tasting room and then compare them to what you would be paying at a typical retailer. Are you getting the savings of “cutting the middleman”?

Most likely not.

In the Wine Spectator article, Alit’s Tarlov explains that this is because wineries don’t want to hurt their distributor and retail partners by drastically undercutting them in price. There is certainly truth to this because the wheels of the wine industry are greased by trust and relationships. However, the one thing more valuable than relationships in the wine industry is the perception of your brand. This is why retailers sometimes get in trouble if they price a winery’s wine “too low”. It impacts the “brand”. Wineries are loathed to ever lower the prices of their wine because it can lower the prestige and value of the wine in the eyes of consumers.

A heart is not judged by how much you love; but a wine is judged by how much it is loved by others.

By Man vyi - Own work (own photo), Public Domain, https://commons.wikimedia.org/w/index.php?curid=7907924

And men are judged by how they wear fanny packs

Consumers are weird. We all want a great deal, but not too good or there must be something wrong. The placebo effect is alive and well as our brains are hardwired to get more pleasure from things that we perceive as being more expensive and ergo more valuable.

Now as wine lovers, who presumably want to get the most for our money, what should we do? Do we just chuck it all out the window and drink Two Buck Chuck from here on out?

Let me ask a different question. If you’re a fan of American football, what is more appealing to you? Spending around $50 or less for a family of four to see a local high school football game or spending an average of around $131.93 per person to see a team like the Cincinnati Bengals play home games against the Cleveland Browns and Buffalo Bills? No offense to the Bengals, Browns or Bills fans among my readers but there are certainly games where you can argue that maybe the high schoolers would field a better product for the money.

By Jeffrey Beall - Own work, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=16607189

“Seriously??? 5 missed FG and 4 missed xp…costing us 2 games. Yeah…sounds like a keeper…”(11/29/2016) — Kyra Olson, author’s Facebook friend and Bengals fan since 1981

Now we can argue about the nuts and bolts of the talent and skills of football players, the quality of equipment, the stadium atmosphere and then craft metaphors about how that relates to vineyard terroir, winemakers, new oak barrels and such. But I think we can drill it down to a much more simple question: What experience gives you more pleasure?

What experience fills you with more sense of excitement and anticipation as you enter the stadium before the game? If you were given a gift of tickets, opening which set (to the HS game or the NFL one) would quicken your heart more? For most people, it’s the latter and that is a huge reason why seeing an NFL game is often 12x more expensive than seeing a high school football game–regardless of the end quality result on the field. The value of the product is judged by how much it is loved by others. With the typical NFL stadium holding around 70,000 spectators, there are quite a bit of people who are willing to pay top dollar to be one of the few who get to sit in those seats.

The same is true with a bottle of wine. For as solid and tasty that something like a $8-12 bottle of Columbia Crest Grand Estates Cabernet Sauvignon can be, the level of excitement and anticipation of opening it up just can’t match up to opening something like a $60-68 bottle of DeLille Four Flags Cabernet Sauvignon. There is the bare nuts and bolts value of the raw materials and cost of production but how do you quantify the value in that sense of excitement, anticipation and pleasure that comes from that? With only around 1,450 cases made each year of DeLille’s Four Flags, there are plenty of people who put high value on being one of the few who get to enjoy that sense of excitement and anticipation.

You, my friend, are a victim of disorganized thinking (as we all are).

Plus there is always great beer under $20!


While I do applaud Mark Tarlov and the folks behind Alit for being bold with their marketing plan on transparency, I do think it creates an unfortunate impression that wine pricing is a simple affair. It’s not because wine isn’t simple and, more importantly, people aren’t simple. Just as in Oz, when the Wizard chastised the Cowardly lion for confusing courage with wisdom, we also shouldn’t confuse the value of our pleasure and enjoyment of wine with the nuts and bolts cost of things. Just as our perception of taste is personal, so too is our perception of value. A wine is good is if it is good for you and a wine is worth its price if it is worth it to you.

If an $8 Cabernet gives you pleasure and is worth $8 to you, Enjoy! If a $28 Pinot does the same, drink up! But, likewise, don’t devalue your pleasure and sense of the wine’s worth if your mouth drools with anticipation at pulling the cork out of a $60 bottle of Cabernet Sauvignon or Pinot noir. It’s your palate, your wallet and your pleasure.

And if paying around $131 to watch Mike Nugent miss fields goals and extra points gives you pleasure, well you can talk to my friend Kyra about that.

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