The Wine Economist 200

This is The Wine Economist’s 200th post since it began a little more than three years ago under the name “Grape Expectations” –  a good opportunity to reflect briefly on readership trends, just as I did when we passed milepost 100.

Not that kind of list!

Milepost 200

The Wine Economist has an unusually broad readership given its focus (wine economics), content (no wine reviews, no ratings) and style (most posts are way longer than is typical for weblogs).

I never expected to get millions of visitors like Dr. Vino or Gary V. and other popular wine critic sites, so I’m surprised by how many people have found this page and come back to read and re-read.

About 200,000 visitors have clicked on these links, sometimes with surprising intensity. The Wine Economist has been ranked as high as #6 in the big “Food”  category where wine blogs are filed in Technorati‘s daily ratings and as high as the top 30 in the even broader “Living” group.

Reader Favorites

The most-read articles of the last few days are always listed in the right-hand column on this page, so it is easy to see track reader behavior. I thought you might be interested in readership trends since the blog began. Here are the top ten Wine Economist articles of all time.

  1. Costco and Global Wine — about America’s #1 wine retailer, Costco.
  2. Wine’s Future: It’s in the Bag (in the Bag in the Box) — why “box wine” should be taken seriously.
  3. The World’s Best Wine Magazine? Is it Decanter?
  4. [Yellow Tail] Tales or how business professors explain Yellow Tail’s success.
  5. Olive Garden and the Future of American Wine or how Olive Garden came to be #1 in American restaurant wine sales.
  6. Australia at the Tipping Point — one of many posts about the continuing crisis in Oz.
  7. No Wine Before Its Time explains the difference between fine wine and a flat-pack  antique finish Ikea Aspelund bedside table.
  8. How will the Economic Crisis affect Wine — one of many posts on wine and the recession. Can you believe that some people said that wine sales would rise?
  9. Wine Distribution Bottleneck — damned three tier system!
  10. Curse of the Blue Nun or the rise and fall and rise again of German wine.

As you can see, it is a pretty eclectic mix of topics reflecting, I think, both the quite diverse interests of wine enthusiasts and wine’s inherently complex nature.

My Back Pages

What are my favorite posts? Unsurprisingly, they are columns that connected most directly to people. Wine is a relationship business; building and honoring relationships is what it is all about.

KW’s report on the wine scene in Kabul, Afghanistan has to be near the top of my personal list, for example. I am looking forward to following this friend’s exploits in and out of wine for many years to come. (Afghan authorities found KW’s report so threatening that they blocked access to The Wine Economist in that country!)

Matt Ferchen and Steve Burkhalter (both former students of mine now based in China) reported on Portugal’s efforts to break into the wine market there. The commentaries by Matt, Steve and KW received a lot of attention inside the wine trade, but their thoughtful, fresh approaches also drew links, re-posts and readers from the far corners of the web world.

Looking back, I think my favorite post was probably the very first one, a report on my experiences working with the all-volunteer  bottling crew at Fielding Hills winery. I learned a lot that day about the real world of wine and I continue to benefit from my association with Mike and Karen Wade (and their daughter, Robin, another former student) who have taught me a lot about wine, wine making and wine markets.

Look for another report like this when The Wine Economist turns 300. Cheers!

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Thanks to everyone who’s helped me in various ways with these first 200 posts. I couldn’t have done it without you! (Special thanks to Sue, my #1 research assistant!)

Restaurant Wine: A Double-Sided Puzzle

If there is one thing that wine enthusiasts have in common (maybe the only thing?) it is their frustration with wine in restaurants. I was reminded of this fact as I read through the weekend newspaper wine columns. Lettie Teague’s Wall Street Journal piece is an extended rant (or maybe she’s venting and not ranting) about wine-by-the glass in restaurants.

The Confidence Game

Teague can’t decide which is worse in restaurant wine-by-the glass programs — the price or the quality. The rule of thumb is that restaurants charge as much per glass of wine as they actually paid for the whole bottle (and sometimes even more). This makes her feel ripped off. At the same time, the wine has been sitting around open for who knows how long, losing some or all of its freshness.  Fancy wine storage systems can help with this, but still it’s difficult to order a glass of wine (sometimes for $25 or more) with much confidence.

Over at the Financial Times Nicholas Lander approaches the issue from the business side and  looks for a solution in cooperative arrangements between wine collectors (who are willing to sell off some of their stash at market prices) and restaurants who offer these wines to their customers at reduced mark-ups.  The collectors get a fair price on their investment, the restaurants get a middle man return without big up-front costs and customers get access to special wines at lower prices. A great idea, but perhaps hard to scale-up.

Restaurant wine is like a double-sided jigsaw puzzle. The same pieces have to fit together to form two different appealing pictures — one for the customers and another for the business. If any of the pieces are upside down or missing, the whole experience is ruined.

Putting the Pieces Together

Not that it is impossible to put it all together. One of my most completely satisfying wine experiences of recent years was a dinner at The Black Rabbit Restaurant at Edgefield, a funky old  hotel in Troutdale, just outside of Portland, Oregon. A bottle of  the stellar 2006 Fielding Hills Cabernet Sauvignon sold for the same price that the winery was charging at that time — what a deal! It wasn’t the only good value on the menu, either. (The current wine list on the Black Rabbit website lists a 2007 Ken Wright Cellars McCrone Vineyard Pinot Noir for $60. I saw the same wine on another wine list for about $200. Where are my car keys?)

How can they do it? Well, Edgefield is an unusual operation.  It is an affordable destination hotel housed in a former Depression-era poor farm (really!) with its own movie theater, winery, brewery and distillery.  The owners can afford to sell their own wine at good prices and the rest of the list falls into place around those wines. Edgefield is part of a regional chain of restaurants and hotels, so some scale economies may exist, too.

Constantly Disappointed?

Edgefield shows that it is possible to put the pieces together to everyone’s satisfaction. But is it the model for restaurant wine programs generally?  Obviously not. Like Lander’s proposal it is too much of a special case, but it shows that there is hope for constantly disappointed wine enthusiasts. Unlike a real jigsaw puzzle, which has just one solution, I think there are probably many different ways to put the pieces together to improve the restaurant wine experience.

Flemming’s Steak House offers 100 wines by the glass at its restaurants, for example. Although Lettie Teague is appalled by this for the price and quality reasons noted above, the broad choice may please many customers.  After all, we are accustomed to choosing from a huge wine selection at competitive prices at supermarkets and wine shops. Even a very large restaurant wine list (say, 300 choices) is tiny compared with your local upscale supermarket, which may have 2000 or more wines on the shelves.

The fact that the restaurant charges a semi-monopoly price (hard to get a competitive bid once you’ve been seated) makes the situation more frustrating.

One solution is to loosen the monopoly hold on price, which some restaurants are doing right now by reducing or eliminating corkage fees. Bring your own wine (purchased at normal retail prices) and enjoy dinner and a wine experience. Since wine is typically the highest priced item on a restaurant bill (more expensive than the entree, for example), reducing the wine cost removes a disincentive to dine out.

I don’t think many customers take up the “no corkage fee”  offer, but some do and if treated well they are likely to return to dine again. If there are conditions on free corkage (the wine cannot be on our list, for example, or free corkage on one bottle if you purchase a bottle from us) they need to be clearly stated to avoid misunderstanding and hard feelings.

Wine-by-the Keg?

The continuing recession is putting more strain on restaurant wine programs, which is unfortunate for everyone involved. But perhaps it will also spur the search for creative solutions to the double-sided puzzle problem.

One interesting approach to the wine-by-the-glass problem, for example, is keg wine — wine packaged in reusable steel containers. Cheaper per unit than bottled wine (assuming that the keg can be returned and refilled efficiently) with a reasonably long quality shelf life if properly tapped, keg wine may be the rosy  future of restaurant wine-by-the-glass.

Someone should tell Lettie Teague the good news.

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Thanks to Michael and Nancy Morrell for their assistance with this report.

Wine’s Future: It’s in the Bag (in the Box)

One of my favorite globalization books is The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger by Marc Levinson. It is the story of how the invention of the standard shipping container (those 20-foot steel boxes you see on ships, rail cars and truck beds) made international trade much cheaper, more efficient and more secure. Now it looks like another kind of box is about to shake up the wine world.

Cheap and Nasty

I’m talking about box wines or bag-in-box (BIB) wines (the Australians call them cask wines) that feature an airtight wine-filled plastic bladder inside a cardboard box. You use a built-in spigot to get to the wine. They can be found on the bottom shelf of the wine wall and behind the bar and out of sight at your local restaurant. They come in several sizes — 3 liter and 5 liter containers are the most common.

Box wines have a bad reputation. They first appeared in the 1970s and were filled with generic bulk wines.  They were one step down from the popular 1.5 liter “magnum” bottles of  “Burgundy,” “Chabils” and the notorious “Rhine” wine. Box wine was cheap, nasty stuff that acquired a frequently deserved bad reputation.

[Re]-Thinking Inside the Box

It’s time to reconsider box wine. Screw caps had a bad reputation, too, until quite recently. We associated them with low grade swill until fine wines appeared under screw cap (the New Zealand producers were in the vanguard) and we began to appreciate that that screw caps have many advantages. Now screw caps are actually associated with quality for some types of wine, especially youthful whites, and no one expects to pay less or get less because of the screw-top closure.

The technology of box wine is very solid. The airtight bladder is a neutral container that is well suited to holding wine for relatively short periods of time. (Don’t cellar box wine — consume within a year of production — check out the “drink by” date on the box.) The bladder and spigot do in fact protect the wine from oxygen in the short run, so it will last longer once opened (especially if the box is stored in the fridge) than similar leftover wine in bottles.

Bladders are so good at the particular thing that they do that they have become an industry standard technology for bulk  imported wines, which are shipped in huge bladders inside steel shipping containers (big bag in big box) and then bottled in the import market. So you may already be drinking box wine and not know it.

The Box Also Rises

The most recent Nielsen retail wine sales figures (reported in the October 2009 issues of Wine Business Monthly) suggest that box wine sales are growing. Wine sold in 3, 4 and 5 liter containers (most of it is box wine, I think) accounts for just under 10 percent of US supermarket wine sales, according to the Nielsen data (compared to 65% for standard bottles with the remainder in 1.5 liter and other formats). Sales are rising in this category, with 3 liter packages up 8.7% in the last year on a dollar basis, for example, and 5 liter packages are up 9.3% by value.

The total market for box wines rises if we include on-premises sales. Recent data (see previous posts) indicate that box wines (served to customers in carafes and by the glass) are strong sellers in casual dining establishments.

The rise of box wine is part of the trading down effect, clearly, since most box wines fall into the two price categories that are experiencing the highest growth. Sales of wines that are less than $3 per 750ml bottle equivalent have risen 7.1 percent according to Nielsen and by 10% for wines between $3 and  $5.99. Supermarket sales of $20+ wines, on the other hand, have fallen by 3.4%.

Nasty, Brutish and Short?

Does this mean that Americans have traded down all the way to the bottom, back to the nasty box wines of the 1970s? The answer, incredibly, is no. Or at least not necessarily, according to the October 15 issue of Wine Spectator.  You can’t miss this issue on the newsstand — it features a cover story on “500 Values for $20 or Less” and includes a set of box wine reviews that make interesting reading.

Wine Spectator purchased 39 box wines in packages that ranged from 1 liter to 5 liters. Twenty seven wines were rated as “good” (a score of 80-84) and ten “very good” (85-89). The names of the 2 wines that scored below 80 were not reported.

The top box wine, going by the rating numbers, is a white: Wine Cube California Chardonnay, which sells in Target Stores for $17 per 3 liter box, which is $4.25 per standard bottle equivalent. It earned a very respectable 88 points. Wine Cube is a partnership between Target and Trinchero, the maker of a wide range of wines including Sutter Home.

The best red wine (at 87 points) is the Black Box Cabernet Sauvignon Paso Robles 2006, which costs $20 for 3 liters or $5 per standard bottle equivalent. Black Box is a widely distributed Constellation Brands product.

Good and Cheap?

Some box wine, apparently, is both pretty good and pretty cheap. Perhaps just to show that they really do rate wines blind, Wine Spectator gave a pretty good 84-point score to a non-vintage Carlo Rossi Cabernet Sauvignon California “Reserve” wine. Five liters for $13, in case you are interested,  That’s $1.97 per standard bottle equivalent.

How can decent wine be this cheap? One answer, of course, is that you can choose to make the wine itself less expensive by economizing in the cellar in many ways (less oak or none at all for red wines, for example). But to a considerable degree the box itself is responsible for the savings.

The bag in box container costs less than $1, according to the Wine Spectator article, which automatically saves $4 to $8 compared with a similar quantity of wine in standard glass bottles and the box they come in. Shipping costs are also less since the boxes weigh much less than glass bottles for the same quantity of wine and are less likely to be damaged in transit.  There are environmental benefits too, especially in areas where glass bottle recycling is problematic because the sour economy has undermined the market for recycled glass.

Is box wine the future of wine? No. The wine market is too complex to be dominated by any single trend. But with better wine in better boxes (and with consumers embracing a more relaxed idea of wine) box wine deserves to play a bigger role in the future of wine. Another triumph for The Box!

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November 1, 2009: I was recently interviewed about box wines by Simon Morton of Radio New Zealand’s  This Way Up . Click on the link to listen to the interview.

Restaurant Wines: Good, Bad and Ugly

Many people have written to me over the years expressing their dismay at the sorry state of restaurant wine. Usually they complain about high restaurant prices and ask how they can possibly be justified. They are seldom satisfied with my answer — restaurants charge high prices because people will pay them. Now, however, the critique has shifted to the wines themselves and what they reveal about wine in America.

What Does American Really Drink?

My recent post on “Olive Garden and the Future of American Wine” (see previous post) seemed to catch many wine enthusiasts by surprise. It reported data from Restaurant Wine magazine for the best-selling wines in American restaurants as determined by distributor “on-premises” shipments. This data, based on volumes shipped to all “on-premises” establishments in 2008, reveals that when America goes out it drinks a lot of White Zinfandel, Pinot Grigio and (gasp!) “Chablis.” Only one red wine made the top 20 list: Yellow Tail Shiraz.

The list changes only a little if we look at the data for wine brands (as opposed to specific wines):

  1. Kendall-Jackson
  2. Sutter Home
  3. Beringer Vineyards
  4. Franzia Winetaps
  5. Inglenook
  6. Yellow Tail
  7. Copper Ridge
  8. Cavit
  9. Woodbridge
  10. Salmon Creek (Bronco)

The complete list of the top 20 brands is dominated by America’s three largest wine companies with three brands each from Constellation Brands (Woodbridge, Taylor California Cellars and La Terre), Gallo (Copper Ridge, Barefoot Cellars and Ecco Domani) and The Wine Group (Franzia, Inglenook and Almaden). These three giants have large brand portfolios and strong distribution machines. They get their wines into every nook and cranny, both retail and on-premises sales. You can see the results virtually everywhere.

Only 4 of top 20 are international brands (Yellow Tail, Cavit, Ecco Domani and Mezzacorona). I think the fact that three of these four are Italian wine brands says something about the importance of Italian restaurants, including especially Olive Garden, in the American wine market.

Another Picture: The Wine & Spirit Rankings

The Restaurant Wine data give us one picture of the market, Wine & Spirits magazine’s annual restaurant report (April 2009 issue) provides a different (and perhaps more comforting) image. W&S asks a group of wine-focused restaurants to report which wines are on their lists — now how much they sell, but which ones are on offer. Since wines don’t stay on lists long if they don’t sell, this is an indirect measure of availability and popularity, although it isn’t the same as as volume rankings. Here is the W&S top 10 for 2008.

  1. Sonoma-Cutrer Vineyards
  2. Cakebread Cellars
  3. Jordan Vineyard & Winery
  4. Silver Oak Wine Cellars
  5. Ferrari-Carano Winery
  6. Robert Mondavi Winery
  7. Veuve Cliquot
  8. Chateau Ste. Michelle
  9. Rombauer Vineyards
  10. Kendall-Jackson Vineyards

Sonoma-Cutrer is #1 on this list, yet it appeared on only about 14% of the surveyed wine lists (and, as noted above, there is no indication of how much was sold).  Only one winery appears in both top 10 lists – Kendall-Jackson. Only two other wineries appears in both top 20s – Beringer and Chateau Ste. Michelle. Gallo and The Wine Group are missing from the W&S top 20, although Constellation Brands makes the list through Robert Mondavi.

Looking over the data, I find myself especially impressed by the performance of Kendall-Jackson and Chateau Ste. Michelle. Both makers seem to combine wide distribution with a range of wines at attractive price points. It isn’t surprising that they rank high on both lists. Perhaps other producers will try to emulate K-J and CSM, especially given this tough economic climate.

Good, Bad or Ugly?

If the first list of restaurant wine brands depresses you, then ignore it and focus on the second list, where White Zin is much harder to find, but don’t get too smug. Remember that there are many markets for wine and that the US is no different from other countries in this regard. Compared to Germany, in fact, much more fine wine is sold here and proportionately less of the bulk product.

For myself, I see a glass half full. My experience working with college students who study wine is that the inexpensive wines serve a really useful function of introducing students to wine and diverting them from beverages that are more closely associated with binge drinking.

Although some White Zin drinkers suffer from arrested development and never move beyond it, I am persuaded that many do. Every staircase, no matter how high it reaches, needs a bottom step.  We have a broad first step in America — no surprise there — but I think it is a step up.

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