Wine Talk

Snooth User: jamessulis

Searching for a Resonable Pinot Noir

Original post by jamessulis, Nov 19, 2016.

Being aware of price points for most of the other varietals I have always wondered why the Pinot Noirs are always priced way ahead of the other varietals.

It is almost impossible to purchase a Pinot Noir at the same price point/quality as a Cabernet Sauvignon for under $20

Now I live in a region where both Cabernet Sauvignon (Washington State) and Pinot Noir (Oregon) have some of the finest selections available on the market anywhere.

Pinot Noir doesn't have more expensive bottles, corks, labels,shipping or labor. So is it the mystique of Pinot Noir or the Snobbery?

Lefty - The Great Pacific Northwest

Replies

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Reply by outthere, Feb 6, 2017.

Colin, can you give me some examples of what unnecessary costs you are referring to? Name names where possible for context. I live in Forestville, have access to all the same wineries as you and have lots of friends ITB. I find them constantly looking for ways to reduce costs, but most costs are set. Help me see your side of the argument.

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Reply by rckr1951, Feb 6, 2017.

This turning into a great discussion and I'd like to hear that also OT/COLIN.

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Reply by Colin Talcroft, Feb 6, 2017.

Well, the example that comes most quickly to mind is VJB Cellars. Since I moved here, the prices of their wines have gone up steadily (roughly doubling) and I wonder if the quality of the wine has improved as much over the last ten years. During the same period, the company has spent how many millions building their hewn-stone tasting room and event space on Highway 12, in Kenwood? I think the consumer, ultimately, is the one paying for that extravagance. How much did Hamel Family Wines pay for their lavish facilities, also on Highway 12? What did it cost to build the new tasting room at Macrostie, on Westside Rd., in Healdsburg? The Castello di Amoroso? the Quintessa facility?

In contrast, and just off the top of my head, I remember visiting Domaine Dujac in Burgundy. Very modest facilities and wine celebrated around the world. I remember visiting Vieux Télégraphe in Chateauneuf-du-Pape. We tasted in the basement of the owner's house on the head of a barrel. World class wine with virtually no spending on anything ancillary to the wine.  

[Edit: And an additional thought: it's very unusual in Europe to be charged for a tasting. Some Napa wineries are now charging $50–$100 just for a tasting—places like Odette and Chimney Rock.]

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Reply by outthere, Feb 6, 2017.

Thanks for the examples. The consumer pays for everything business does, that's a given. As far as an extravagant tasting rooms go I imagine they are playing towards their desired customer bases.  The Macrostie site is a production facility as well as a tasting room and is quite appealing to the eye. Hamel spent a fortune but I don't think it is going to hinder sales for them. Same with VJB. Do I think some of these places are over the top? Most definitely. It's so not Sonoma County but Sonoma County is changing. Land is too sparse and expensive in the Napa Valley. Big money is moving over the hill. I wish it wouldn't but you can't stop progress. Castello di Amorosa is a joke. Disneyland. I don't see Disneyland going bankrupt anytime soon though.

I defend every winery's right to charge for tastings. Wine tasting has turned into sporting events with people seeing how many wineries they can hit in a day and how drunk they can get. The tasting room is there to sell wine. If people just come to slurp and race to the next winery they should have to pay to play. I support waiving tasting fees when there is a purchase. A bottle per person minimum should be a hard rule. It costs money to do tastings. Employees need to be paid, rent/mortgage needs to be paid, wine isn't free to produce.

I do private tastings for a small production high end winery in Calistoga. Average bottle price is about $150. I open 8 bottles for a party of 4. If they don't buy anything should I just let them walk out free of charge? If I do they will tell all their friends to come for tastings because they can drink $150 wine for free. Guess how long that business model works? Probably 90% of the wineries out there are small production, under 1,500 cases. Don't let the actions of the few with big bucks to speak for the industry.

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Reply by jackwerickson, Feb 6, 2017.

Outthere I agree the type of tasting you do should not be free. I would assume these tasters are carefully selected. Not living in a wine producing area I don't know about people just going from one place to the next just to drink wine not taste. I took a two week tasting trip to Oregon and Washington, would go to 4-5 wineries a day to taste and the end of the day had not consumed much more than a glass of wine. We do have wine tasting at the club I belong to, quit participating because people were just to drink,not to learn or drink different wines.

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Reply by rckr1951, Feb 6, 2017.

JACK - You are welcome to come over to my place any time.  We get together every 2 weeks.

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Reply by outthere, Feb 6, 2017.

People show up to tastings rooms drunk with a Groupon discount 10 minutes before closing and want to taste everything. They buy nothing. That's not an uncommon occurrence at the typical tasting room. 

Then where I pour they read about the 100pt scores the wines got last year and want to come in and taste 100pt wine. Never spent more than $40 on a bottle. They don't realize that when the scores came out the wines sold out in a matter of a couple weeks. When the new vintage released people jumped on last years 100pt bottlings and they sold out early. "You're not pouring all four ToKalon wines?"  they ask as you open $500-$600 in retail for them.  Like they could afford to buy a couple bottles in the first place. These get mixed in with good customers. If you don't charge a tasting you are short for this industry.

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Reply by Andrew46, Feb 6, 2017.

Good discussion.  I like your examples, Colin.  Tasting rooms that appear over the top to me don't make the wine taste any better.  It is about hype, glitz/sizzle and image.  Not my style.

I am not sure where the cutoff is, but I am guessing that somewhere in the $30-60 range there starts to be a complete disconnect between necessary production costs and bottle price.  

On the other hand, some people don't understand that making small batch wines from hand farmed hand harvested grapes can be done for $9/bottle.

We host tastings on the porch of a rustic outbuilding near the winery.  We charge $10-15 and waive with a 2 bottle purchase.  Our bottles range from $18-50 with the majority being under $30.  

I don't think it is wrong/bad that some people charge a lot more for tastings or bottles, but it kind of makes it seem like wine is only for the very rich at some point.  Also, it costs a lot to market to (fight over) those top earners, so in the end, even selling at a much higher price, profits may not be much more.

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Reply by Stephen Harvey, Feb 6, 2017.

We have similar issues in Australia

Main concerns for most wine companies is the "bus load of drunks" that turn up drink rather than taste buy nothing remember nothing and put off those who are there to genuinely sample.

Napa probably leads the world in extravagant facilities but given you have have a bunch of movie stars/rock stars/corporate big egos all trying to outdo each other probably not surprising.

Similarly I visited Failla WInes 3530 Silverado Trail N, St Helena when I was doing so consulting work for Berringer in 2014 [they are part of Treasury Wines which own Penfolds Wolf Blass etc]

Their facility [Failla] was a house and you sat at a dining room table with about a dozen others and did a tasting of about 10 of their wines.  $20 for the tasting and if you bought wine it was deducted from the price

I was very impressed by the tasting and bought 2 bottles of their Pinot to take back to Australia

I thought their pricing of $60 a bottle was good for the quality of the wine and the experience was certainly very enjoyable

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Reply by Colin Talcroft, Feb 6, 2017.

Well, I don't have any problem with people charging enough money for tasting 1) to discourage those simply taking advantage; and 2) to attempt to cover some of their costs. However, it often seems that tasting rooms are set up not to cover some of the cost of acquainting potential customers with their wines--a cost of doing business that surely is tax deductible--but instead to make substantial profit from tastings, as if they're running a wine bar. Those are two different things. And it's especially discouraging when the wine seems priced to cover unnecessary costs to begin with. 

I get the point that there is a segment of the wine-buying public that is more interested in the wine-tasting "experience" at a fancy venue than they are in the wine. It's a shame that others of us have to pay for that. But, then, perhaps this philosophical divide should keep me away from such wineries. 

I did want to clarify one thing. Macrostie is, indeed, a lovely setting. The wines are good. The people in the tasting room are very gracious. I didn't mean to bad-mouth Macrostie. I was just trying to make the point that the large expenditure on facilities that is common in California--especially in Napa--is anomalous from a global perspective. It's not really the norm. 

I wish there were a place here in California I could drive to with my gallon jug to get it filled for about $9 with decent wine that's reflective of the place it's produced--good, everyday wine of character for the equivalent of about $2 a bottle. This isn't a fantasy. In many parts of the world, that's normal. (And yes, I know the difference between this kind of wine and, say, Pichon Lalande.)  

 

 

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Reply by Stephen Harvey, Feb 6, 2017.

Colin

I think the big difference between the US and Australia from France is that 

  1. We both have significant taxes on anything alcoholic and VAT/GST/ type taxes on top whereas France has very little
  2. France have subsidies for agricultural producers

Also I do a lot of consulting work for wine companies big and small and to actually grow grapes, convert to wine, give any form of oak treatment and then pack into a bottle will cost the winery at least AUD or USD +$2 a bottle before our tax hungry governments take their share.

I did a very detailed analysis of this in a post some years ago and if you are paying under $4 a bottle then the winery is only generating cashflow from excess stock/inventory.

It is almost impossible to grow grapes for under $500 per ton which is about 75c per litre and that does not cover the capital cost of establishing the vineyard.

Sure if you are Gallo's and you have a 500,000 tonne facility and you are paying growers $250/ton for their grapes you can make cheap wine but I will leave it to the US residents to tell me their thoughts on Gallo Jug Wine

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Reply by outthere, Feb 6, 2017.

"I wish there were a place here in California I could drive to with my gallon jug to get it filled for about $9 with decent wine that's reflective of the place it's produced--good, everyday wine of character for the equivalent of about $2 a bottle."

Go north on Westside to DaVero. It's across from the intersection of Westside and West Dry Creek Rds. While it is not a gallon it is a liter and it's about $12 to refill and you get to pick which charity gets $2 of each purchase. Good everyday Italian table wine.

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Reply by Stephen Harvey, Feb 6, 2017.

$12 per Litre makes economic sense [even after the $2 donation]

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Reply by Colin Talcroft, Feb 6, 2017.

To Stephen: I've always wondered what the REAL cost of producing a bottle of wine is in this area (granted that there surely is a range). I have 34 vines in my back yard (Cabernet Sauvignon, Cabernet Franc, and Sangiovese). I once calculated that, even at the outrageous per-bottle cost I incur (because I make only about 60 bottles a year), I could make a bottle of wine (corked, labeled, finished with a capsule) for about $20/bottle even if I included amortization of my entire property (a 1/4 acre suburban lot in Santa Rosa), which is a bit ridiculous, as only a small part of my garage and about 1/5th of the property is actually used exclusively for winemaking purposes. If an "operation" like mine can do that, it seems a property making even a thousand cases, or 12,000 bottles a year, ought to be able to do it for much, much less. I don't know. I'd love to see a detailed breakdown of what wineries actually pay for: grapes (whether grown or bought in), chemistry (a minor cost), vineyard maintenance, barrels, compliance, packaging, marketing, overheads, etc. I've learned, however, that wineries get extremely defensive very quickly if you start asking questions.  

I guess, in the end, it may just be that I find relatively few California wines that are sufficiently compelling to me to make me feel good about paying what's being asked. One exceptional winery I would mention is Wellington, on Dunbar Rd., just off Highway 12. They have a long history of making truly good wines and selling them at reasonable prices relative to the quality--for example, charging only $50 for their outstanding Victory bottling. (Alas, they have just been bought out by VJB).

Don't misunderstand me: I'm happy to pay quite a lot for a very good bottle of wine. I love the Joseph Phelps Insignia, for example, and Delia Viader's wines, but these are no longer good values. I used to buy Viader IN TOKYO for less than $25 a bottle. Granted, that was 20 years ago, but it now goes for an average of $105/bottle, according to Wine Searcher, which means some retailers are charging even more for it. If we take plain inflation into account, $25 bottle should cost only $50 today IN TOKYO (underlying inflation is usually said to roughly double prices every 20 years). Here, it ought to be somewhat less than that and I'd pay that for it if I wanted to splurge once in a while, but not $105+ It doesn't seem worth that to me. And there are numerous wines, more Napa than Sonoma, that have risen in price in a similar fashion. At some point, I just said forget it. I now look for bargains at Grocery Outlet, and sometimes the bargains are astounding. 

To Outthere: I know about Da Vero, but didn't know they sold bulk wine like that. Thanks for the tip. I'd point out, however, that your $12/liter example is considerably more than my $9/gallon example (which works out to $2.37/liter). Even that's on the expensive side. During a summer in southern France a few years back, we were buying a five-liter fill for €7 at a local winemaker's garage--or less than €1 a liter (roughly a dollar a liter). Not grand vin, no, but decent everyday rosé perfect for summer quaffing. In local supermarkets, somewhat better wines, in bottles, were selling for €4-6 a bottle (a little over $7 at most). There is no California equivalent.   

This is the kind of conversation I'd enjoy having sitting around a table with a few bottles of wine and a few wine enthusiasts. :)

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Reply by Stephen Harvey, Feb 6, 2017.

Colin

A couple of points

I have been involved in benchmarking winery cost structures for nearly 20 years, including a small amount of US and French experience

All of the research i have done points too wineries needing to make an average gross margin of 50%

This is if it costs them $3 a bottle to make then they need to sell it for $6 before any government taxes.

You may ask why but many of the costs for a wine business are fixed.  eg

If you have a 100 Acre [40 Hectare] vineyard you costs are relatively fixed at say $2,000 per acre plus variables of maybe $1-3,000 per acre.  The yield off that vineyard - particularly for Pinot Noir could vary from 1 ton an acres to maybe 4 tons an acres

If you get say 2 tons and it costs you $3,000 then you have a cost of $1,500 per ton.  If you can say extract 600 litres per ton then you are looking at $2.50 a litre for juice. 

Smaller wineries say less than 1,000 ton capacity will usually have a production cost ex Oak of $2-$10 per litre [sounds a large range but it does work out that way.] but lets $3  per litre

SO without Oak $5.50 a litre

330 Litre Oak Barrels vary depending on Oak type exchange rates and other factors but lets call it $990 per barrell and you use a combination of new and old plus some unaoked in the final blend and you get to $1.50 a litre

Finished wine in Barrel = $7 litre

to allow for wastage a standard 12 x 750ml [26fl oz] bottles will cost 66 plus around $15 for bottling and packaging = $81 case packaged which is about 6.75 a bottle.

So if the winery needs to make 50% margin then their ex tax price is 13.50 a bottle then add taxes at around 25% minimum you get $16 per bottle if you have no channel costs [eg via a retailer etc]

As you can see even for a winery that sells all ofits wine direct to customers $16 is still not easy if they sell there wine to a distributor and then into the retail chain the price will quickly balloon to over $30 as the distributor and retailer make their margins.

You can do SHiraz and Chardonnay cheaper as they yield higher require less costs to grow etc but if you up the oak content and cut yields to get more intense flavour you get much higher prices

Hope that helps a bit

I can do a more detailed analysis if anyone is interested

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Reply by outthere, Feb 6, 2017.

"There is no California equivalent."

All we can do is try to get close. $12 for a liter is about as cheap as it gets around here. I think I buy liters of Grüner at Bottle Barn for $10.99.

"This is the kind of conversation I'd enjoy having sitting around a table with a few bottles of wine and a few wine enthusiasts. :)"

Stick around. I do offlines often. In fact we're about due for one.

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Reply by outthere, Feb 6, 2017.

Here's a link to a video made by a friend of mine about production cost for wine. Hs example is for a Napa Cab he retails for $150 but the formula is true. Put in your raw material costs and the rest is fairly standard.

 

https://vimeo.com/151466168

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Reply by GregT, Feb 6, 2017.

I remember that video. He did a good job.

But as to clearance - as a New Yorker, I don't want to pay full retail, ever. You always ask for a deal. It's what you do. People have made fortunes clearing out inventory of various products, including clothes, electronics, household goods, etc. In the Village there's a store that specializes in picking up all the off-vintage wines and distributor close-outs it can. Then there are the flash sites like WTSO.

But of course I realize that people can't make a living selling at a loss. And I don't make moral judgements about the profits people make or the discounts they have to offer - it's all business. Apple makes a lot of money on every phone and people line up to buy them. That's OK but I don't own an Apple phone.

There are cost differentials between the US and much of Europe regarding wine, and Andrew mentioned some of them. If great grandpa was farming a vineyard and it devolved to me, I'm not amortizing a new purchase or new plantings. Maybe the family sold grapes to a co-op for a few generations and now I'm going to try bottling and selling the wine myself. I may save some money if I don't hire a consultant, etc., but I still have to pay for bottles, labels, storage, packaging, marketing, etc. If I'm a small producer, whether in the US, Europe, South America or Australia, it's unlikely that I will be making any money at all selling for $6.99 a bottle.

But sometimes you make a deal to cut your losses. For example, a number of years ago I was told that a winemaker needed cash so wanted to sell some futures. He didn't want word to get out and only sold to a few people but I figured he was one of the world's best and I could score some good wine while helping out. Probably wouldn't have been legal in the US. Many years later I found out he needed the money because a few parcels had come on the market. Now, fifteen years later, he's one of the largest landowners in the region, still works like a dog, and I have more wine than I might have had otherwise.

A few years after that I was trying to get some wine into a NYC restaurant. They didn't have a glass program but instead sold half bottles. Every wine was at no more than retail markup, far less than any other restaurant. Other restaurant owners openly wished he would fail, although customers loved him and today he has several restaurants. We wanted our wine in there and his wine buyer hemmed and hawed and finally said we needed to bring him some halves. We didn't have any, and we had no written commitment, but one of our producers went ahead and bottled a few pallets and we imported them and tried to sell them.

The restaurant decided they weren't really interested and we were stuck with many cases of half bottles. In NYC space is rented out by the inch and nobody was interested in stocking halves. Most retailers hated them. While there's only half the wine in the bottle, the cost is not only related to the liquid - the bottling, packaging, storage etc., all has costs involved. Stores didn't want something that they'd have to make a special place for, that wouldn't fit in their racks, and that was going to be more than half the price of a 750, since customers weren't going to feel paying more than half price for half the wine was fair.

So what to do?

Offer them at cost to our best customers. At some point the deal becomes compelling enough that initial objections disappear. The same retailers that couldn't possibly find a way to keep and display them suddenly found hidden areas right up front. Customers made out and got to try some wine they probably wouldn't have tried otherwise.

A few continued to buy. How many? I don't know. Was it a good return on investment? Hell no. Is it good for the brand to deeply discount? Not at all. A sustainable business model? Of course not.

But at least we didn't have to dump the wine down the drain and we mitigated the loss to some degree. Our customers felt that we were taking care of them and their customers in turn got some pretty good deals. We couldn't begrudge them - it was our miscalculation. The producer? He was having so many political problems in his country that he would have been grateful to have simple economic and business issues to deal with.

Last weekend I saw cases and cases of various Cline half bottles at that same grocery store with the PN. Don't know the story there either. It's a crappy store overall that I just discovered. I actually stopped in because the name made me think they'd have some decent cheese. Not even.

I don't really need any wine so these days I check out the selection at stores more out of curiosity than anything else, but no matter how they get their wine, the discounters are still providing a service. If you like wine but don't have a huge income and you have kids with all the associated expenses, it's nice to be able to pick up a decent bottle for a bargain price once in a while.

As far as tasting rooms - that's its own business model. In Temecula they make a lot of mediocre wine and sell it all for way more than a decent bottle of something else. They have sufficient tourists who care about the experience more than the wine, so that's what they go with. In Napa if they didn't charge for tasting, they'd have nothing to sell. Napa pioneered wine tourism, so they're better at it than most. In Bordeaux they're pushing it and sooner or later in Burgundy they'll have Napa-like congestion and crowds and tasting room fees.

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Reply by Colin Talcroft, Feb 7, 2017.

I looked at the video. Thanks. Interesting.

But isn't he starting out with a rather bold assumption that people are paying $10,000 to $15,000 a ton for grapes? That may happen in a few cases, but a lot of high-quality Napa/Sonoma grapes are trading at closer to half of that or less, I would say, and quite a lot of good grapes sell for still less. And it's kind of a vicious cycle. Growers can charge that much, when they do, because they know the people buying them know that there are ultra-rich people out there who will buy the very expensive wines that result from such grapes, pretty much regardless of the true quality of the wine. 

And is it necessary to keep a big-name, highly paid consultant on the payroll? Given high-quality grapes, even I can make good wine. If I've learned anything in the 15 years I've been making wine in the backyard, it's that wine essentially makes itself. It's a shepherding process, not an engineering project. 

Maybe a lot of local wineries do, in fact, incur high costs that require them to charge high prices for their wines. I just can't help feeling that it could be done much more simply and more economically, particularly, as I say in earlier posts here, on the marketing/presentation side.

As always, I'm entirely open to the idea that I'm wrong here, but I feel that that video fairly substantially overstates costs. Or, at least, it's important to understand that he's talking about a very, very slim segment of the upper end of the market. 

 

 

 

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Reply by Andrew46, Feb 7, 2017.

There are costs and there are necessary costs. Some use million dollar optical sorters. Does that justify the 200/bottle that they charge?

i think that the point of the video is that even at the higher end, the seller argues that the costs are valid. 



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