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:
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.