Google plays a centerpiece role with wine enthusiasts searching the web for quality wine content.  Google is not always efficient though, since wine sites figuring neatly into the search engine’s algorithms are too often commercial content aggregation sites. It’s predictable and annoying.  These sites are more suited to sell you a wine than tell you what you’re trying to find out about it. Because of ongoing content aggregation and new offering updates, these sites build authority with Google and dominate page one returns.  Search Monbousquet and see what I mean.

Guys like Doug Cook hint at solving this challenge, working on behalf of the greater wine community with his ablegrape vertical search project.  His site distills the valuable from the commercial. So if Google’s algorithms can’t and don’t, and continue to challenge wine enthusiasts by understandably returning content rich commercial sites, what is going to happen now that they are in the wine business?

Last month, in case you missed it, Google acquired Zagat.  Zagat has just announced their new wine club. Will this commercial venture, and the wines they sell, figure “preferably” into search returns? Google denies AdWords clients receive preferential organic search treatment to reward their spend with the search engine.  I have seen strong examples to challenge that claim, yet it is impossible to prove.  Some media experts suggest Google might have big ideas about the content business and the Zagat deal feeds their progress. Is it so crazy to also speculate about tainted organic wine search results in the instances where it might benefit Google’s new commercial wine venture?

Wine clubs don’t sit well with me in the first place.  I’ll pick my own wines, thank you.  They get in the way of personal preference and touch that figures into the unique organic growth of my cellar.  With Zagat now in the Google portfolio, is the opportunity to sell wine to the world of internet users large enough to further obfuscate the discovery of relevant wine content on the web? Between the plethora of commercial seller content added to the web every day and now Google’s (first?) commercial investment in wine, will the best wine content suffer from deeper organic search suppression when it benefits Google economically?

Google controls the largest online shopping center in the world.  I have to believe that I am not alone contemplating Google’s investment in offline commercial ventures like Zagat and their new wine club might be unfair to competitors, content creators, and consumers reliant on organic search discovery?  I can’t imagine Google would undermine their search experience to sell a few extra bottles of wine, but would anyone ever really know? Certainly, the one thing I can do in response now that Google is in wine business is to boycott their Zagat Wine Club.  Not only because I hate wine clubs in general.  For me, it’s a satisfying way to register my complaint about the weak search experience that already exists for wine content searchers and creators before they decided to get into the wine business themselves.

Last week Steve Heimoff published a post called “California Needs To Be Careful It Doesn’t Price Itself Out Of The Market.”  I become confused when I read things like this because the fact of the matter is California violated my personal quality to price ratio (QPR) tolerance more than a decade ago.  For me, California stopped being a compelling wine region for these four reasons:

(1) Top quality Cabernet Sauvignons I bought and laid down in the eighties for $18-$25 are now $80-$175

(2) There is an overabundance of mediocre to bad California wines leaning on their historical brand strength and continuing blind luxury consumer support to maintain $100+ price points

(3) Since the late 1990′s, California wines in the $10-$25 range have almost always been unrewarding and are not competitive on a quality level with European imports in the same price range

(4) California wines taste different than European wines (call it old world vs. new world, fruit forward vs. earthiness, or whatever distinctions make you most comfortable) and my palate has changed by the training it received exploring substitutes for the California wines I once coveted

A lot of great wine is still produced in California.  Occasionally I am poured a bottle of newly released head turning Cabernet, old world styled Syrah, silky Pinot Noir, mind-blowing restrained Grenache, old-style low alcohol Zinfandel, and even some well balanced, under-oaked, Chardonnay.  Still, If I am going to buy the occasional $100+ bottles, I turn to Bordeaux, Rhone, and cult-like wines produced in less popular appellations in France, Spain, and Italy.  They serve my palate preference and QPR sensibility better than a Joseph Phelps Insignia might, for example, at $175.  And when I want every day magical drinking, it’s always imports for me.

I read Steve Heimoff’s blog almost every day.  As editor at Wine Enthusiast, he does a great job lobbing issues of the day out and his blog has become a place where California winemakers and trade weigh in. Occasionally I feel strongly enough about Steve’s topic and think sharing my point of view can be useful to the conversation.  I have no agenda except to add to the conversation in a meaningful way.  But last week Adam Lee of Siduri wines, whose Pinot’s I have really enjoyed over the years, took me head on regarding my agreement with Steve that California wines are too expensive.  You can click on the link in the first sentence of this post to see what I mean.  He and others dismissed me with excuses that are certain realities, but have contributed to my lack of serious focus on our domestic wine region since the 1995 vintage. Some other folks, including Adam, told me I was just wrong; California wines are not too expensive and have tracked appropriately with inflation.  The Sediment Blog tried to come to my rescue, but the introspection of the winemakers and trade weighing in on Steve’s post either offered all the market and economic realities that drive them to raise price or simply chose to ignore me.

A few days before Heimoff’s missive, I wrote a post here at WineZag called ” What’s Going On With The Price of  Wine?” I referenced Rob McMillan’s annual report for the Silicon Valley Bank’s wine practice to bring attention to the ongoing price increases and lack of recognition given to European imports that better serve the value segment.  Rob commented and also gave me the list of reasons I was wrong, pointing to the reasons why European wine producers can sell quality hand made artisan wines at low price points and Californians can’t.

In the comment section of both posts, some really valid points were raised.  European producers benefit from government subsidies.  Luxury goods enjoy price elasticity and price escalation is to be expected.  The US’ antiquated three tier distribution system prevents small production, value wines sometimes seen in California wine shops to make it into east coast markets.  A plethora of small importers maintain direct ties to east coast retailers making it easy and economical for them to supply this market with top quality value imports. California wine makers have a high COGS and it is challenging to produce wines and make a profit at $25 or less. Etienne Terlinden said:

Dont blame the producers for the high price of their wine. They are just trying to make a living. This business is tuff and getting harder to succede in. Here are a few costs that go into over inflated CA wine. Land purchase, farming cost, labor cost, insurance, overinflated permit costs, random fines by local agencies,shipping cost, compliance costs, EPA and waste water costs, federal/sate/local taxes and additional fees just because you’re an idiot and want to start your own business. Oh, and you better have a lawyer handy because you are human and will make mistakes.

I get all that, am sympathetic to it, and don’t blame anyone.  California wine sales are growing at an attractive pace once again and prices are expected to continue to rise. Don’t get me wrong, I am happy that California winemakers can make a living inside a very challenging business model.  I am just disheartened that so many wine drinkers are paying the price by drinking unexciting wines because they don’t know any better. They like wine and often don’t have the experience with imports that have hard to pronounce strange names and originating regions, and may not have the impetus or channels to explore these better priced, higher quality alternatives.

California only gets about 2% of my wine budget and for some reason nobody that can do anything about that really cares to listen. Since sales continue to rise, I assume I am part of a very small irrelevant market segment of fine wine drinkers that chase information and knowledge to support a buying and drinking strategy that offers the highest reward at competitive price points.  I may be wrong that California is on a path to competitive irrelevance in the face of better and more sensibly priced imports. For me, California is nothing more than a wine category just like Bordeaux, Rioja, Rhone, Burgundy, Loire, etc. is.  And as a consumer I have the freedom to choose where I want to invest my wine dollars.  California loses out in my calculus and nobody in the domestic wine trade really seems to care and is happy to ignore my reality, tell me I am wrong, and repeat the litany of challenges inherent to their business model.  They have lost  me as a customer and it’s just not an important issue for them.

This past week shed interesting light in two areas for me.  First, California wine producers close their eyes on the irrelevant small group of wine aware consumers, like me, that strayed in the face of average to low quality overpriced releases and the absence of high quality value wines.  We just don’t appear to matter because when we stop buying California wine there is not any noticeable impact on sales volume.  Producers simply eschew naysayers like me weighing into trade discussions for the lack of sympathy or understanding for producers’ challenges.  Second, with California winemakers abandoning the sub $25 market vis a vis European imports, consumers like me stop focusing, learning, and staying abreast of the entire category. Our attention and research shifts to other global regions as we virtually abandon California wines. Underserving the value segment has the ability to spook consumers like me just enough to ignore all California wines.  But is anybody listening?  I don’t think so and it is turning out to not be my problem or theirs.

I finally caught up with a replay of Rob McMillan’s Silicon Valley Bank (SVB) webinar presentation of their own 2011-2012 State of the Wine Industry report. Rob is founder of SVB’s Wine division.  His presentation was not really a state of the wine industry report since the bank and its research are only concerned with the U.S., west coast, fine wine industry.  Moving beyond the fact that the report title smacks of US arrogance and an insularity associated with the George Bush presidency, the data is very encouraging if you are a domestic wine producer; price increases, reduced discounts, increasing demand, settled inventories, stable fruit prices, and increasing margins. Here is the summary look:

Domestic US wineries lowered prices in 2010 using various allowance and promotional tactics to balance inventory.  SVB’s research indicates a bifurcation in the market with anticipated 2011 price increases in the $41+ categories and continued price decreases in the $15-$40 end of the market.  SVB points to general spending strength by affluent consumers and the steady unfazed demand in the cult/limited inventory category to support this bullish pricing outlook at the high end.

But the domestic focus and global arrogance of the SVB report fails to address a core issue that is creating lasting systemic problems for their domestic wine constituency: COMPETITION.

I just finished looking over Robert Parker’s report on “Top Values” in the 8/31/11 issue #196 of the Wine Advocate.  It contains separate lists of American and European value wines, all selling for <$25, that he tasted over the last six months. Parker supplied a preamble and perspective to the lists:

“One thing that has been on a clear upward trajectory over the last three decades has been the increasing number of interesting wines that can be found for under $25, some at remarkably low price points of $8-$15. Such bargains rarely existed years ago, but today they are abundantly available. If you want to prove their value, insert one in a blind tasting against wines made from the same grape or grapes that cost five to ten times more per bottle and see what the results are in your tasting group.”  —Robert Parker

With the emergence of smart importers like Eric Solomon, Neal Rosenthal, Louis/Dressner, Terry Theise, and so many others, small winemakers that never dreamed their wines would be discovered outside their villages or countries are now blending exclusively for their importers and the US market. They are selling a lot of this wine for less than $20.  Parker did not do a complete job in his report on the international value list since the wines were limited to Europe and primarily two importers; David Shiverick and Peter Weygandt.  Still, the report tells a story that the US wine industry needs to come to grips with:

Of the 78 domestic wines reviewed by Parker, 13 (15%) scored 89 points or higher

 Of the 90 international wines reviewed by Parker, 51 (56%) scored 89 points or higher

While Parker’s report is not scientific nor conclusive, it is completely reflective of what savvy wine drinkers have discovered; the US industry has done a poor job producing quality value wine while importers have flooded the US market with once undiscovered high quality value European wines.  SVB says the ongoing price pressures at the low end of the market is symptomatic of ongoing economic woes of the category’s target consumers.  SVB points out the current irrelevance of the over-hyped millennial generation that plays mostly at this lower market level, and urges the fine wine market to refocus on boomer and Gen-X consumers who are more prone to purchase at the higher end of the market.

As long as California and Washington fail to produce authentic quality wines in the $10-$20 category there will be price and inventory problems.  The bank ought to advise their clients this way.  Of course, it’s not their job to tell their clients how to make their wine.  Even if it was, how would a bank that only operates in a slice of the US market and refers to their report as the “State of the Wine Industry” be able to comprehend the global impact on the health of the California wine industry?  I have not found a sub $20 California wine that I would prefer over equally priced wine from Cotes du Rhone, Muscadet, Vouvray, Bierzo, Languedoc, Beaujolais, Provence, Friuli, Suditrol, and elsewhere.  SVB should stick that opinion in their reports.

Overhead, market structure, and farming economics attached to West Coast winemaking appear to get in the way of low cost/high quality wine success.  The idea that failure in the low end can be offset at the market’s top end with continued growth and price escalation appears unsustainable.  Runaway Cabernet prices since the mid 90′s took me out of the domestic market as I refocused on higher quality, more attractively priced international luxury wines. The US wine industry needs to admit their failure in the quality value market segment and start figuring their way out of that before they price their golden geese to unsustainable levels.

I just received an interesting email from the Wine Australia representative I met at the Wine Bloggers Conference last month. Antonia Muir is memorable because, among other things, she gave me a very cool grey promotional t-shirt with only one line across the chest proclaiming “Everyone Has A Story.” While I am happy to fly that flag of individuality, I also made a mental note that it was the perfect campaign slogan for a sagging Australian wine export business. Antonia’s email advanced the marketing initiative announcing a third year of a nine US city wine immersion program and makes me think the Aussies just might be savvy enough to rekindle US export growth.

My encouraging viewpoint is product of an intense debate that regularly rears its head in our Boston tasting group; “How much wine knowledge is required to enjoy the beverage?”  The debate always eases with default agreement that wine can be intensely appreciated on multiple levels, depending on how much you want out of it, and that all levels require different amounts of knowledge.  Several members of our group study wine through formal educational training and carry a lot chemistry and technical production knowledge.  They can link a wine aroma or flavor to a process in the winemaking.

Similar to not really caring to understand what happens under the hood of my car when I turn the key, I don’t really need to know about the wine’s chemistry as long as I enjoy the ride. While it’s fun to pick up bits of insight from my fellow tasters, my interest is focused on palate learning and a developed connection with the winemaker and region of origin.

I like to create stories.  I secretly run little wine movies in my head about the winery’s closest village, sunshine and rainfalls, soil underfoot, vistas, paths made by its winemaker walking through the same vineyard rows for months, workers picking clusters, sorting, crush, fermentation, cellar aging vessels, and finally bottling.  The mysteries and stories about the transformation of grapes into a beverage with flavors and aromas that can hint at anything but grapes has held my imagination for more than 25 years now.  For me, it’s the stories about humans, place, and consumption.

That’s why I was so taken by Wine Australia’s recent campaign.  They need it.  Australian wine exports have been slumping and I fully believe it’s because we don’t have enough information or stories to build those movies in our heads.  Think about the specifc information we have about Piedmont, Bordeaux, Burgundy, and the Loire Valley’s appellations, vineyards, and growers.  Do you know the difference between New South Wales and Tasmania?  Probably not, and as a result value per litre and total export dollar value has been declining for three straight years following a period of double digit volume growth in the nineties and early 2000′s. Here is the supporting data from Winebiz, Australia’s wine industry portal site:

The locals in Australia, closer to the stories and research we need so badly in the US, have not slowed their consumption of Australian wine and have driven consumption while the rest of the wine drinking world turned their heads:

These opposing trends seem to have created what is possibly the most useful and interesting national wine campaign I have seen since I started following this kind of stuff.

The program consists of six two-hour sessions, hosted by Wine Australia’s Market Development Managers: Mark Davidson, Suzanne Barros and Martin Korson. Each session is designed to compare the regional expressions of the major grape varieties and to explore the less well- known corners of Australia’s viticultural landscape. Throughout the series, participants are supplied with up-to-date, detailed and relevant information on the varietal topic, followed by tastings of benchmark, artisanal and older vintage wines.

This highly successful program concludes with an “all-expenses paid” two-week trip to Australia for the top two participants from each city. The success of this program is evidenced in previous participants’ wine lists and completely altered perceptions of what they thought Australian wine to be.

Program figures, results and numbers, over the past 2 years, include:

 Approximately 300 members of the trade have participated  14 markets covered around US (some repeats in 1st and 2nd year due to demand)  200+ Australian wines tasted and discussed in each market  Over 2,000 bottles poured  Hundreds of wine list placements, a recent survey of just 22 participants from 2010/11 yielded 200 Australian wine additions as a direct result of the program  Hundreds of hours of talking!

There are plenty of good Australian wines, but the market statistics prove that a lot of wine professionals and consumers on other sides of oceans don’t have enough information to fuel ongoing learning or interest.  This immersion program is taking exactly the right step towards planting the geeky specifics that earn interest. And the Australian wine folks are smart enough to know the answers are not going to present themselves through the usual random trade tastings, sampling, or other tired wine propaganda tactics.  It’s time to connect the rest of the world with the geography, vineyard histories, and people that make Australian wine unique and interesting.  The email continues:

This program is the cornerstone of Wine Australia’s programs in the US and signals a proactive and important move to re-energize and re-engage with the important gatekeepers within the US market. Australia has much to be proud of with its 200+ years of winemaking, historic old vines, diversity, quality and innovation. We invite you to re-visit Australia, come along to a session and join the A+ Australian Wine conversation.

Sounds like the Australian wine marketing folks have gotten pretty smart…and not a moment too soon.

]]> http://wine-zag.com/2011/08/23/wine-knowledge-and-australia/feed/ 1 http://wine-zag.com/2011/04/05/bordeaux-first-growths-fund-alternative-wines/ http://wine-zag.com/2011/04/05/bordeaux-first-growths-fund-alternative-wines/#comments Tue, 05 Apr 2011 10:30:46 +0000 adamjapko http://wine-zag.com/?p=6243

In early 2006 the Bordeaux price-value line was breached and began its transgression towards complete collapse, erasing all justification for drinking the first growths and other similarly coveted wines that sat in my cellar for decades.  Just look at the blue line to the right, representing relative fine wine price escalation compared to the major equities indexes over the same period.  My first growth clarets, Sassacaia, Grange Hermitage, “La La’s”…the whole lot…. are now officially fair game on the open wine markets; and isn’t it a shame I will miss tasting those wines?  It’s a sad development with a serious silver lining.

I don’t need the money; that’s not why I am putting these wines out to auction, consignment, and up for private sale.  I will reinvest every penny of return in different fine wines. With so much world class wine on the market (both newly released and bottle aged) not being chased by the Chinese nor deemed worthy enough on secondary markets to play into arbitrage investment schemes, is it even remotely possible that $100+ a glass wine can really hold its own in a sensible wine enthusiast’s collecting and drinking strategy?

I swore never to participate in the collection of wine as an investment endeavor, loathing those that treated fine wine as a tradable commodity just to tighten supply chains and run prices skyward for those of us that relish the drinking experience.  If you share this sentiment, our only payback is to sell speculators and label crazy luxury market consumers the wines they want at their own rip off prices.  In turn, you can own 5-6X more wine than you will sell them without any real sacrifice in total drinking pleasure.  I am done telling myself “but wait, you acquired that 1985 Sassacaia for $40 in the late eighties, don’t worry that you can sell it now for close to $2,000 a bottle, just drink it.  That 1991 La Landonne you bought for oldest son Alex’s birth year at $100 a bottle is now worth $700 a bottle, but give him the case anyway so he can enjoy it on his wedding day.  And that 1986 Lafite Rothschild that you were smart enough to buy on release is now selling for $1,500-$2,000 a bottle was a bargain, so drink away.” It is simply time to unload and reload.

Paul Gregutt had a recent piece in the Seattle Times bemoaning that the senseless Bordeaux price inflation focused consumer attention on the category’s unattainable labels and  is “muddling the marketability” of producers in relative reach of price/value conscious connoisseurs.  It is a sad statement when a region’s best products, the ones that define greatness in Bordeaux, are completely off the table for enthusiastic wine consumers just now entering the market.  My advice is to steer clear and find the wines that I will search for to replace the Bordeaux I will sell at unfortunately inflated prices that can no longer be supported by the supreme drinking experiences they represent.

Just this month I drank 1983 Chave Hermitage that can be purchased for 1/8th the cost of a bottle of 1986 Lafite.  The wine was complete magic, full of secondary sweet fruit flavor and aromatics.  I carried it from my cellar and opened it in a deserving restaurant, gave the chef and his wife a taste, and they came back to our table whispering that across the room a collector was celebrating a special occasion opening a group of cellar aged, top growth Bordeaux and none of them matched the beauty of the 1983 Chave.  I am ready, without even the slightest regret, to exchange a bottle of my Lafite Rothschild for 6-8 bottles of that Chave. Or maybe I will buy 3 bottles of the Chave and a case of the ethereal newly released Clos Rougeard?  Who knows, but the world will be my oyster.

I sent some 1985 Sassacaia to Winebid for appraisal.  I bought the wine for $50, it is now worth somewhere between $1200 and $2,000 a bottle.  If I can sell even one bottle, it will fund the the entire case of other worldly 2005 Rayas Chateauneuf du Pape Reserve I tasted and acquired last month.  Some of my 1982 Penfolds Grange is up for sale as well.  If I can sell two bottles that I paid less than $100 each for, I will buy a case of outstanding 2009 Northern Rhones.  Why drink one bottle of mind blowing wine when you can repeat the experience 12X at the same price?  And my 2004 Latour, a weaker vintage, that I bought on futures for less than $100 is now selling for $500-$600 a bottle.  I think I will sell three bottles and replace that with two cases of top Loire Chenin Blancs.  I have a lot of work to do, but it will be liberating and completely satisfying.

I get a monthly update from Liv-ex on their Fine Wine 100 index.  It tracks the price movement of 100 sought after wines on the secondary market.  It is a constant reminder of why I don’t buy these wines, how regrettable it is that I can afford them and would like to drink them, but refuse to play the investor’s game when I just want to enjoy drinking them.  The trend of unsupportable price escalation continues. The index value stood at 125 in April of 2006 and as of March 31, 2011 it reached 359, up 0.44% on the previous month and 34.26% year over year.  Liv-ex has helped contribute to the average connoisseur’s dilemma with their creation and tracking of a secondary trading market.  I understand there are collectors and investors that are totally fine with this whole picture.  Now, finally, so am I.  I think I will use some of the silly money I get back from these less wine appreciative market makers to expand my wine cellar in order to accomodate the new volume of great wine I will cherish drinking.