Tag Archive - pricing

Bordeaux: the biggest joke in the wine world?

Norman Wisdom Laughing

Image via Wikipedia

Something about the 2011 campaign told me that the Mea Culpas would come out this year – and I have a feeling I might be right. ‘We were arrogant,’ says Chateau Lafite MD Christophe Salin of last year’s wine pricing (and ‘timing’ – for which read ‘handling’).

And I think we can expect more of this in the run-up to the 2011 barrel tastings. Lots of hand-wringing and apologies and staunch, almost stoic, approaches to the current release. Yes, we behaved like greedy pigs, we’re sorry, we were shown the errors of our ways, now we can all look at the 2011 vintage with clean, clear, tear-dried eyes and tell the world that it needs to buy it. Fine, life as usual – only a little bit cheaper and with a bit more sober reflection.

But to those Chinese (I keep being told it was them that snapped up all the Bordeaux over the last few years but I’ll happily accept they weren’t the only dupes) and let’s also include all those billionaires, bankers and moneyed social pariahs from all continents, will you indulge me while I stick your noses in the H-word and rub you around in it?

The H-word is, of course, History. It’s out of fashion these days – and vastly underrated – but think about some of what the past now tells us:

1 - All this talk about Bordeaux En Primeur pricing reflecting the market is nonsense. If this year’s En Primeur campaign has already started with apologies, it isn’t because the Bordelais think that people will be less willing to part with stupid money for a bottle of wine, it’s because previous pricing has got them into a sticky and delayed situation. If – as lots of people used to claim – Bordeaux pricing (through the tranche system, etc.) simply adjusted to the market at the time of release, no one would be apologising and so publically self-flagellating in Bordeaux right now (see also John Kolasa’s bizarre ‘I have to follow the line’ statement – was that really passed by his bosses or was this a cry from the depths of the Bordeaux beast’s bowels?). No, this is happening because something from the past (ie. pricing policy) has come back to haunt them. Bordeaux pricing bears no reality to the real world – otherwise how could they be ‘arrogant’? And even if, in your tiny little mind, you think Bordeaux pricing reflects the market and is a perfect system, you surely must admit it’s quite clearly a very delayed system.

2 - Also think back to this time (and quite before) last year. Remember the Bordelais were already talking up the 2010 vintage. Not so this year. If one was exceptionally cynical, one might draw the conclusion that perhaps all this talk of past arrogance and inflated prices is only a ruse to sell a less-than-stellar vintage to an already bored/saturated market. But who would be so ungracious as to believe that?

3 - But it’s not just those in Bordeaux whose history we shouldn’t ignore. Look at the journalists and wine writers. They too are likely to re-hash a lot of this château-owner apologise-to-sell stuff. In fact I wouldn’t be surprised if a lot of stringent opinions about past Bordeaux pricing policy come out of the woodwork over the next few weeks (to be fair to some writers, concerns were already being voiced last year). At this rate, my past writings and rants on wine-life.co.uk will soon take on what can only be called the blandness of the self-evident. But attacking Bordeaux pricing policy a few years ago felt like the occupation of a lonely and disenfranchised minority. Sure, a lot of wine writers weren’t happy with the prices many châteaux were charging, but they weren’t doing anything about it. Some were even encouraging you to buy this over-priced plonk. If these Mea Culpas from the châteaux continue, expect it to sound like wine critics were on the side of the consumer all along – that they always thought Bordeaux pricing was greedy and were doing everything in their power to tell the consumer, to let him or her know, and to fight the good fight. As I have illustrated many times on my blog before, they weren’t – and if they start to make such pronouncements, they should be held to account. At the very least, many were complicit in their silence. And if, on the back of their previous huge points and ravings, you bought several cases of greedily over-priced claret from them, pray ask yourself what you think their job is and whether you should be following them.

I don’t think we should forget this notion of using the past to inform the present (and even the future) – and I’m not talking about this kind of glossy “we were greedy last year but let’s move on and try the sensibly priced 2011″. I’m talking about actually taking some lessons from it.

Paul Pontallier said Margaux 2011 was ‘excellent’. Which is fine – he can say that and mean it at the time – (so can journalists…Parker can distribute 100 points to wines a case of which is more than many peoples’ salaries and then later – or in some cases even at the same time – tell people it’s overpriced).

But if, say, these qualifications somehow change over time, you then have to ask how much importance is to be attributed to their words in the future. I, for instance, doubt Pontallier means 2011 is ‘excellent’ like 2010 was ‘excellent’ but that’s not really the point; the point is that while we would probably forgive him if he changed his mind over the next few months, we have to then ask why we are giving his pronouncements (if they turn out to be untrue) any credence now and in the future.

Bordeaux is now basically a joke – not funny ha-ha – but a travesty of the wine world. It’s a joke that everyone bar the person who buys the wine is in on. And all it takes to realise this is a half-decent memory, a questioning nature and a look at the facts. In fact, a longer-term memory tells you that this kind of thing happens in Bordeaux in almost perfect 10 year cycles. Some more regular cycles have taken on the regularity of tradition, namely that of wine merchants ask for a reduction in Bordeaux prices in the run up to En Primeur. Strangely, though, they still put the stuff up for sale.

A final point: I can be attacked (quite fairly and justly) along the lines of not understanding that in today’s ‘western’ society what something is worth is up to the consumer (a sort of ‘if they’re rich enough and stupid enough to buy it, let them’). I have a great deal of sympathy for this line of thought. However, if you want to stop speculation (as, apparently, lots of wine lovers do) you don’t do it by thinking (or even saying) these wines are too expensive while at the same time adding to their cachet by covering them in drooling press, gushing video interviews and slapping a huge score on them. No one has the excuse to be so short-sighted anymore.

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Can a cheap wine be too good?

I attended a “Spanish Wine on the High Street” tasting recently. The idea was to showcase the best, or most popular, Spanish wines in the ranges of the UK’s top supermarkets and high street wine retailers (or what’s left of them), as selected by their buyers. There were wines of many styles and prices there, including very expensive ones (and lots of Rioja). I have published some of my thoughts from that tasting on my Posterous blog, but I want to explore a separate question here.

What would you expect for 61p?

Supermarket wine shelves UK
Image by casavides via Flickr

We all want a deal. We all love finding a bargain, where the value for money, the “bang for your buck”, is great – especially if we are the ones to discover it and tell our friends and gain ‘kudos’. But sometimes, things might also look, and taste, too good to be true.

One of the wines was from a region already known to make decent, uncomplicated and good value wines. It was not stunning, but it was certainly drinkable, with nice fruit and a clean finish. The surprise was that it was selling for only £2.70 a bottle.**

Normally, if I even tasted a wine that cost this much, I’d expect something virtually undrinkable, simply because it is not possible to make a wine and sell it at this price. So, what does it mean?

I should say I know NOTHING about the deal that got this wine listed in this retailer, but let’s face some basic facts:

In the UK, on a retail price of £2.70 there is £0.40 of VAT and £1.69 of Duty (which is fixed for ALL wine bottles, of any price). That leaves £0.61

That 61p has to cover the cost of:

  • the glass bottle
  • printing the label
  • cork
  • capsule
  • cardboard cases
  • shipping (from the producer to the UK)
  • distribution (within the UK to all the shops)
  • PLUS the retailer’s margin (the supermarket has to make some money!)**

oh, wait …

  • growing the grapes
  • picking the grapes
  • crushing the grapes
  • fermenting the juice and storing it for a period of time
  • all the processes of ‘filtering’ and ‘preparing’ the wine
  • bottling, corking and labelling the wine
  • getting through a great deal of administration and bureaucracy
  • staff to do all this stuff
  • … and maybe leave some money for the winery?

Does that sound likely?

Wineries do their utmost to make a good wine in such a volume that they can make economies of scale and sell it at a reasonable price, but this is extreme. So what are the implications?

These deals are driven by a certain level of desperation. No winery can make money on it, but there are circumstances where “moving” a wine even if it is for almost nothing, is cheaper than the alternative. If your tanks are full of a good wine you have not been able to sell from last year, and you NEED those tanks for this year’s wine, and you can’t simply pour it down the drain … what can you do?

Retailers will gladly take it off your hand if they can make money from it. They’ll sell it cheap and get folks flocking to their shops.

The knock on problem is that we consumers say “Hurrah!” as the value for money is apparently very high, and we love spending so little.

We are then entitled to think, “well, if that wine tastes THAT good for £2.70 then why should I pay £4, £5 or £6, or even £10+?” But it isn’t economic. Wineries and regions will not survive selling wine at that price level.

All the good work by wine lovers to explain the agricultural, artisanal, low-margin, high unique value proposition of wines is lost in a storm of price discounting.

Selling decent wine at throw-away prices changes the expectations about wine as a whole, and particularly the country that it is associated with. It associates it with “cheap” wine, a moniker that is VERY hard to get rid of later (just ask Bulgaria, Portugal, and even Chile).

Too often they become, and remain the “best wines for not a lot of money” instead of the “best value for money” which they aim for.

I totally understand why wineries can end up in this situation in the short term, and that supermarkets are also commercially driven, but it does wine no good. If this becomes the norm (as, arguably, it has), good wineries that have to sell at properly commercial prices will not find space for their wines and are forced to compromise as well, or go out of business.

At the end of the day, cheap wine is usually terrible, undrinkable, nothing more than slightly flavoured, acidic alcohol. You get what you pay for … generally.

But if you buy that wine, and it actually tastes good, then what incentive do you have for spending more? After all, if we keep spending at this level, more wineries will be desperate enough to sell wine at these prices. Until they all close.

How can we change this situation, if retailers don’t care? Whose responsibility is it? Well, the government is poised to create a “law” to stop selling “below cost” … but how do you define that, and where does the money go? A topic for another day.

I think that good wine CAN be too cheap.

Do you agree? Do those who cannot afford more expensive wine ‘deserve’ good wine at cheaper prices despite what it does to the industry – is it just a case of survival-of-the-fittest?

By the way, for a variety of reasons, I am not mentioning the wine, producer or retailer that occasioned this thought. It is a general point I am making.

** I discovered that the £2.70 was a promotional price during a 25% off promotion. However, as this simply removed one aspect (the retailer’s margin), the general point remains although it would have to be taken into account

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Enough is Enough: a pricing rant

I was working on how to write this properly, then realised I have yet to try to use video more effectively (and it was faster!), so I recorded some thoughts (woefully unprepared) on Seesmic instead.

Here is the video. I think you need to register to leave a video comment (please do, I’d love to get some) but you can also leave me your written thoughts on this post.

If you want to join the OLN “Enough is Enough” campaign, text ‘Enough’ to 82055 (in the UK)

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bursting the expensive bubble?

As a further follow up post on the subject of better wines in supermarkets, I see that The Telegraph (online at least) has recycled their previous news story with a funny, and unintended, contrast:

Quote from today’s article – exactly as per the page:

“Sales of bottles costing £10 or more are up 74 per cent in the past two years, said Tesco. The chain is stocking bottles of wine priced at up to £100 each for the first time.

[...] The supermarket’s beer, wine and spirits category manager, Jason Godley, said more shoppers are treating themselves to expensive wines.

“This would never have happened in a British supermarket even a few years ago and it suggests that Brits are fast shaking off their reputation, especially with our European neighbours, as a nation of plonk drinkers,” he said.

• South African brand Arniston Bay is launching wine in resealable pouches.

The pouches will launch in Britain this month, according to The Grocer magazine.”

Presumably those pouches are full of ‘quality’ non-plonk at over £10 then?

Jancis and the Blue Nun again

Although she fails to go with the Blue Nun part of the story, Jancis Robinson MW has also written about the spurious data about wine sales above £10.

It must be said that spreading the rumour about others spending a lot on wine could be useful. As Mark Earls points out on his ‘Herd’ blog, we are heavily influenced by what others think and do, so “if everyone else is paying £10, then maybe I should too” might have an effect.

Maybe some independent merchants could do a follow up on this story and recommend a series of £10 wines that would demonstrate how much better wine was at this price.

I quite like the idea of copying the diamond marketing concept, you know the one … “everyone knows you should be spending at least the equivalent of one month’s salary on your diamond engagement ring” (I noticed that a few years back they tried a campaign that said two months!!). If style mags and newspapers picked up on Decanter editor Guy Woodward’s comments and established £10 as the minimum to spend on a wines as a present or for a dinner party, it would at least raise the bar (so to speak).

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