Drinking Beyond My Budget

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The Wine Institute, the leading wine trade organization in the U.S., just released a report detailing some interesting statistics about the growth of the industry in the country that, since 2010, has been the world's largest wine market. One thing that caught my eye is strictly jargon, but very telling jargon indeed.

The Premium Problem

Those of us who taste and write about wine professionally live in a rarefied atmosphere, where an inexpensive wine sells for $15 a bottle. That’s not the real world of the wine industry however, where anything selling for more than $10 a bottle is considered a “premium” wine. This isn't just some press agent's hyperbole - the wine trade formally categorizes wines by price, and over $10 is considered "premium." This shouldn't be surprising in a world where even clubs for frequent fliers use "gold" as a lower tier (second from the bottom at Delta Airlines' Skymiles) or the entry level tier (American Airlines' AAdvantage program, but what do you expect from a company that spells "advantage" with four A's?). For a while "Platinum" was top level, but now it's mid-level and I imagine it's only a matter of time until Plutonium is the new norm.

Premium. There is little that is premium to me about most wines hovering around $10 retail - it is the very rare wine at this price level that has much to offer, and that's understandable if you do the math: to retail for $10 in the U.S., a wine has to wholesale to the retailer for $6.60, which means the wholesaler or distributor had to pick it up for around $5. If it's an imported wine, figure another $1 to $2 for the importer and suddenly the winemaker has to release the wine for, say, $3.50. More math: a good cork cost at least 50 cents, a bottle costs at least that much and often close to $1, so at what price is the winemaker selling his "juice"? I don't even want to think about the cost profile of some 1.5 liter bottles I see for under $10. 

Doing the Math

I understand the math, and I certainly understand why quality comes at a price, yet I also understand that it's hard to spend $20 on a bottle of wine when you drink wine with every meal (super-premium, ultra-premium … we run out of categories very quickly). According to the Wine Institute report, wines that sell for less than $10 accounted for 75% of the volume of California table wine sold in 2014. Since California is far and away the leader in U.S. wine production, the just released figures are telling. We writers and wine educators can talk all we want about elegant wines with stratospheric price tags but that's not what most people are drinking most of the time. Building a better audience for wine, creating a thirst for quality, is going to take a concerted effort to build the quality of wine to bridge the gap from $10 to $20 a bottle.

The Overview

How are we doing? Here is the distilled view of the just-released statistics:

  • California wine sales in the U.S. grew by 4.4% in volume in 2014
  • California wine sales in the U.S. grew by 6.7% in value in 2014 (in other words, Americans are spending more on wine and, one hopes, drinking “better,” whatever that means)
  • The total retail value of 2014 California wine sales in the U.S. was $24.6 billion (in the U.S. a billion is a thousand million). 

Increasing wine consumption, and increasing consumption of higher priced wine, both look good to the wine industry but what does it mean for us consumers? I think it points, in part, to a wine culture clash. The wine industry has a vested interest in having consumers become regular consumers, rather than occasional wine drinkers, so it makes sense to push the "premium" concept, making consumers feel good about getting a wine for $10 so we have a bottle on the table every night and get into the habit of having wine with every meal.

It won't thrill the higher end producers but the industry would prefer we spend $10 a bottle every night rather than $70 on a bottle once a week. And yet, I can tell you that I'm not pouring $10 bottles in my WSET Classes. When I teach classes for WSET (Wine & Spirit Education Trust) certification and help educate upcoming wine professionals and consumers who want to have a good sense of what they are drinking (and how to find even more good things to drink), I pour wines that are emblematic of their type, their grape variety and their region ... and those are almost never available for $10 a bottle.

Wine is a major commodity in the U.S. now - not only the enormous amount of our own wine that we consume but wine from others as well: the U.S. is the world’s largest wine market (and has been since 2010). It is also clear that while we Americans consume a good deal of wine (and continue to increase our consumption), we have a long way to go persuading others that our wines are worth drinking - the U.S. is a much more open market to wines produced by other countries than those countries are to our wines. While total U.S. winery sales were $24.6 billion, only $1.5 billion of that, or about 6%, were from exports. The European Union accounted for about 35% of those exports, with Canada accounting for 30%. Clearly, there is a lot of the world that has yet to get hooked on zinfandel or persuaded by pinot noir from Oregon.

The International View

I just participated in a symposium on wines from Turkey, a country struggling to gain a foothold in the international wine market. Turkey wants desperately to get recognition for its production of high quality wines but it’s an uphill fight. That fight is not helped by the fact that Turkey has prohibitive tariff barriers to non-Turkish wines coming into the country but wants no barriers to its wines going to other countries. This is hypocrisy, of course, but very common in the international wine market as more and more countries struggle to gain acceptance with consumers. The French are much happier to have me try a new wine from the Languedoc than to have a group of their consumers discover my new favorite Oregon pinot noir.

What wines would we be drinking if the wine world were truly open, if you could taste anything, any time? Every wine-producing country loves its own wines, and can't fathom why others don't like them as well. To me, the key to really understanding wine is to understand a lot more than the wine from your own corner of the world. But that's another topic, for another day.