While we should not forget or
ignore the Millennials right now,
we had better be primarily focused
again on the Boomers, at least for
another decade. With this group,
authenticity is everything. They
have been conned; they are jaded;
and they no longer believe modern
For this reason, I have changed our
wine label designs to classic style. I
actually had started the trend before
the meltdown. It seemed to me there
were just too many “3 Blind Moose”
Within this 10- to 30-year arc, however,
trends still change on a dime.
It has always been that way through
my career, but technology has accelerated
everything. Now, an event
occurs and “boom” — it is all over
the Internet. Now, I get a call in the
afternoon and a customer will say,
“Did you read my email yet? I need
an answer right away.” When did
you send it? “This morning.”
Chasing trends and
taking the right price
Too often we are all chasing the
next trend. What do we plant?
What is the next “hot” variety?
Wow, Moscato sales were on fire
in summer 2010. Turrentine Wine
Brokerage cannot find enough supply.
Let’s plant Muscat. Better yet,
let’s graft over to Muscat in Spring
2011. I am seeing Gruener Veltliner
on every restaurant wine list these
days; I am sure we can hang 8 tons
per acre of that stuff.
Maybe you can, but can you make
any money? For those who are trying
to guess the next trend, my advice is
not to bother. You cannot do it.
Far more important is that when
you see the trend developing, move
on it. But first you need to ask yourself,
“Does this fit my vision of our
brand?” “What is my reason for my
brand existing?” With my grower hat
on, “Can I make any money on this
This is why understanding the
market and accepting its reality is so
critical. I believe the hardest decision
to make in the wine business is to
recognize your mistake and cut your
losses — immediately.
There are good and compelling
reasons for why this decision is so
tough. The bank wants to see a
profit. We all want to make a profit.
Our loans are dependent upon it.
How many times have I been in
meetings and heard, “Well, I have $8
per gallon in this wine, I cannot sell
it for $6.” Then six months later in
another meeting, “Well, I have $9.50
per gallon in this wine (it accrues
$0.25 per month); I cannot sell it for
$5.” Believe me, the first loss you
take will be the cheapest.
“The hardest decision to make
in the wine business is to
recognize your mistake and cut
your losses — immediately.”
The old formula for determining the
relationship between grape pricing
and retail bottle price is still pretty
accurate — add two zeros. However,
in these days of discounters, grapes
purchased at $1,600 per ton will go
into wines that may front-line at $16
per bottle retail, but actually sell at
under $15 per bottle.
The new reality of the market is that
major wine companies with major volume
programs must sell their wine for
under $15 per bottle retail. Once you
move above that price point, the volume
drops significantly. Over $20 per
bottle these days is slim pickings.
Two years ago we sold our Hahn
Arroyo Secco Pinot Noir grapes for
$2,500 per ton. In 2009, we sold the
same Pinot Noir grapes for $1,600 per
ton, because I was foolish and did not
take the $1,800 per ton offer early in
the year. In 2010, the same large winery
approached us, stating that our
Pinot Noir had to go into programs
that sold for under $15 per bottle
retail. We had offers between $1,200
and $1,400 per ton. I jumped on them.
That is the new reality of the market.
Selling for half the price of
two years ago hurt, but not nearly
as much hurt as rolling into harvest-
2010 with unsold fruit because I
held out for some price that just was
not realistic today.
Here is how the scenario plays out
all over California:
1) We did not sell the fruit because
we could not receive our price;
2) Well, we will crush and sell as
3) Nine months later: Well, we can
sell as bulk wine at a loss of $3 per
4) Hmmm, nope, cannot do that …
let’s put it in a negociant program;
5) Well, we bottled 10,000 cases of
Bill’s Best Red, but no one wants it
because the market is flooded with
negociant wines from all the other
growers with unsold fruit that they
crushed and put into bulk wine. These
brands have no real story and no real
6) Two years later, Bill’s Best Red is
getting pretty tired in the bottle;
7) Three years later, a distributor
calls; they are really happy. They just
made a deal with Grocery Outlet to
take all of your Bill’s Dead Red for $24
per case. In fact, they will take more if
you have it. If we could make this an
ongoing program, we can sell the hell
out of it.
Believe me, the first loss is the
best. Or in the case of our Pinot
Noir, we made a profit selling as
grapes at a realistic price, rather
than holding out for an unrealistic
price in today’s environment.
The reality of the market has
changed. As growers, we need to concentrate
on mechanization in the vineyards,
reducing costs, water issues,
etc., so that we can weather the tight
times and still be profitable. We cannot
afford to ignore the signs of the
market and hold out for unrealistic
prices for our grapes.
Watch trends and react quickly
As winemakers, we also need
to watch the trends and then react
quickly. When I first entered the wine
business in the early 1970s, the largest
selling California white wine by far
was Chenin Blanc.