Opinion

Felix Salmon

Desnobbing wine

By Felix Salmon
January 20, 2011

David Kesmodel reports that US consumers finally seem to be waking up to the fact that there’s no correlation between price and quality when it comes to wine:

The economic downturn was toughest for the U.S. wineries that sell wines for $20 a bottle and up. After switching to less-expensive wines in the downturn, many consumers are staying at those lower prices because they liked what they found, industry executives and analysts say.

Actually, there are two parallel things going on here. The first is that wine in the $9 to $12 range tastes just as good as wine in the $20 to $30 range. The second is that US wine over $20 is massively overpriced.

Kesmodel’s article quotes three individual winemakers. Two are in Napa; the first sells wine at $100 a bottle, while the second sells wine between $28 and $55. The third is in Washington, and sells wine at about $50 a pop.

At these levels, wine is not an everyday pleasure — not unless you’re solidly in the ranks of the rich. Instead it’s a tool for snobbery and one-upmanship, and a way of selling wine to people who choose wine based on exactly two numbers: its rating out of 100, and its price in dollars. In both cases, it is understood, higher means better.

It’s not hard to shatter these illusions, though. Once people move from $50 US wines to $11 French wines and actually prefer the latter to the former, then it’s all over for the Americans.

Much of the California wine business is based on the idea that California wines compete only with each other; in the upside-down world of Veblen goods, they often compete on price not by being cheaper than their competitors but rather by being more expensive.

It’s also true, however, that people who downgrade from luxury goods to better-but-cheaper mass-market alternatives very rarely trade back up again. Once you trade in your Vertu for an iPhone, you’re unlikely switch back.

And that seems to be what has happened in the wine world. If American wine drinkers are losing their snobbery, that’s great news for anybody who wants to see a vibrant culture of wine drinking in the US. But it’s very bad news for high-end wineries selling their juice at upwards of $50 a bottle.

Comments
13 comments so far | RSS Comments RSS

For those who have the money to be wine snobs, the more power to you, please, keep the wineries booming in business. (and it leaves the $10 – 20$ bottle of very good Chilean et al wines for us non snobs.

http://www.andoart.com/frameSaves/Ando_W ine_Art_Gallery.htm

Posted by hsvkitty | Report as abusive
 

+1 to hsvkitty

And just another datapoint to how out of control Californian wines are. I was just in Temecula (out in Riverside county to the east of LA), which has a burgeoning winery scene and there are several wineries that are moving rapidly upscale and pricing their wines accordingly. It’s now passe to find a bottle of wine from one of these unknown wineries for $35 to $50. It’s really quite shocking just how readily people are to pay these way overpriced wines.

Posted by GregHao | Report as abusive
 

I agree. I live in Germany, and from here, American wine prices for wines are incomprehensibly weird. On the other side of the river and up the hill from where I live, for instance, is Kunstler, one of the most respected Wineries in Germany. I drive up regularly, and buy their Riesling by the case. A California vintner with the same sort of status that Kunstler enjoys here would be so far out of my price range that it would be a joke.

Same goes for the Hungarian wines that I stock up on when I visit my wife’s family there. I can buy world-class artisanal wines there for the price of the cork on a similar bottle from Napa.

Posted by seanmatthews | Report as abusive
 

I don’t think it’s snobbery as much as brand laziness.
Even the simplest liquor store will have a dozen or more pinot grigios. It’s hard to keep track. So if you buy one that you really like – I’m looking at you Santa Margherita – you keep going back to it.
If enough people do this, demand surges and the price climbs. The wine, of course, didn’t get any better.
But to leave behind the knowledge of that particular brand and try something new is daunting, so many people are reluctant to do so.
Of course, if their financial straits force them to re-select, they’ll find that the new pinot grigio tastes about like the old one, so they’ll stick to it.

Posted by RZ0 | Report as abusive
 

@RZ0 – that’s an interesting perspective but I wonder how much market action there really is. The supply far outstrip demand for the most part and the kind of distortion you’re talking about is something I’m curious to see more in depth (for lack of better word) research.

@seanmatthews – part of it is the matter of transport. It’s quite a long way for a bottle of wine to travel from the hills of Napa to Kunstler. Transport costs aside though, I think California wines are just outrageously overpriced, whether you’re at the winery, at a wine shoppe in Los Angeles, or points beyond.

Posted by GregHao | Report as abusive
 

@seanmatthews, German riesling is the world’s greatest wine bargain, but that’s an apple & oranges comparison. Consumers of California wine were mostly drinking red wine and when they chose white, it was chardonnay. That the latter was a poor choice (German riesling being a much better match for most foods than California chardonnay) is beside the point. The thing is, there are better and cheaper substitutes for *California-style wines*.

As for Hungary, it makes many great wines, but almost the only thing that reaches American shores is Tokay. That is unlike German riesling, which is still widely available here.

Posted by Greycap | Report as abusive
 

Everything right, Felix, except the bit about French wines.

The $9-12s are all about Spain, Argentina, Chile, and Oz.

The French, as usual, would rather tear up the terroirs than cut prices.

Decent CdRhones are very rarely found under $15, ditto Cd other appelations, while Chateauneuf du Papes, Burgundies, and Bordeauxs (and gasp!, even Muscadets) continue blithely on, presumably in homage to the Californian crazies (and their nearby Oregon and Washington crazies who also charge the earth for not very much)!

Posted by Gorillameek | Report as abusive
 

Since we are putting kids through college, wines over about $15 are rare in our house.

A high percentage of the wine that we drink is from Chile. We have a good friend down there, so I don’t feel guilty about supporting their economy.

There are some tasty inexpensive wines from Italy and Spain that do no fit into the offical classifications (eg chianti).

It has been amusing to see some of the lower end French wines begin to get labelled by grape variety instead of region and village. I can imagine them choking as they print the label.

I almost never buy California wines as I find that I can get equivalent wines from other places for about half the money. I do buy some New York State wines since it is local – as with anywhere, you need to know what you are buying.

I think some of the other countries have a tradition of vin ordinaire, so have decent lower priced wines that are good to have with food. We generally have a box of wine available so that we can have a small glass with dinner. These generally seem to be from the vin ordinaire tradition. Very few of the box wines that we buy are from the US. The US doesn’t seem to have really addressed that tradition.

Posted by ErnieD | Report as abusive
 

Years ago, there was a California Chardonnay that I loved (sorry, GreyCap, I don’t care for rieslings). It was a little pricey, but I enjoyed it. The winery literally doubled the price, and I moved on. There are simply too many reasonably priced alternatives that are at least acceptable.

Is it the classic price-demand curve? I can make the same amount of money by raising the price and shipping less wine?

Posted by Curmudgeon | Report as abusive
 

“Is it the classic price-demand curve? I can make the same amount of money by raising the price and shipping less wine?”

Most probably they will sell the same amount of wine. With a good product, and decent marketing budget and a few hot shot sales people they might have sold out a few years. If you’ve sold all your cases and the phone is still ringing than you’re leaving something on the table… the only way to know how much is to walk the price point higher until at least one case goes unsold.

Wine is a good business that way because that unsold case can probably get priced up rather than down with the passage of time even if it really dosen’t deserve to as Felix suggested in an earlier post.

I know so little about drinking wine that I usually go for craft beer instead. I would love some wine entheuists to give me a list of some $10-$20 reds that do have some chance to actually improve over a 5-10 year period (assuming good stewardship on my part). Do such beasts exist or is improvement of wine mostly urban legend at the $20 and under price point?

Posted by y2kurtus | Report as abusive
 

Is Parker just an illusion, like a curveball?

Posted by maynardGkeynes | Report as abusive
 

Does the end state look like the megabrewer/craft brewing market? Hitting 89-91 with Parker et all is a matter of charring oak barrels and controlling process. You can do it with Spanish Garnacha and Tempranillo, Chilean Carmenere and Cabernet, Argentinian Malbec and Australian Shiraz.

So is the end state a collection of big, international,laddered brands, like Miller, Miller Lite, Heineken and Guinness, hitting the Parker target at industrial scale, and then an assortment of craft wines? Or is the snobbery and lifestyle so compelling tht it will never reach that level of consolidation? How big can a wine label get?

Posted by Dollared | Report as abusive
 

I like the idea of allowing phone app users to add info about great tasting low cost wine. The iNapa iPhone app has just been updated and it is a great tool to explore California Wine Country. It locates the 10 closest to current location or select an area on a northern California map to display wineries at that location or browse by name. A fun way to find your favorite wine and discover new wineries. No network required & no typing necessary. http://itunes.apple.com/us/app/inapa/id3 59715668?mt=8

Posted by dkmcguire | Report as abusive
 

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