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Is “Sanity” Returning To The Market?

Is “Sanity” is returning to the market?  Recently I have received offers on 2006 Petrus and Ausone that are down about two-thirds in price from the peak.  These are wines that received scores “only” in the low to mid-90s.  So far, four figure pricing only holds in Robert Parker-anointed, best of the century (frequently twice, thrice a decade) vintages.  Let’s wait and see how long this lasts.

Super cult California prices have crashed.  Harlan has dropped from its peak in auctions by 30-50%, depending on the vintage, in the last two years. Araujo is down close to 50% — as the “new reality” sets in.  Hopefully, their business model will allow them to survive.  Other high profile cults appear to be in the same situation as Harlan.  And, I am not certain where Screaming Eagle, Shafer Hillside, and a few others lie.  However, if the precipitous increase in pricing  experienced in “direct purchases from the winery” over the last five years was motivated by wanting to share in the speculation, then they can survive.  If the rise was based on covering costs of building wineries, green cropping, development and management costs, then they are in trouble.  Current pricing is not sustainable.

So far, the successful outlier in the field is Fred Schrader who has been absolutely brilliant in marketing his, super ripe wines that are in the 15-16% alcohol range.  He built a buzz by tightly restricting distribution, used the Colgin, formerly Colgin-Schrader, label style, started low, controlled distribution by rarely offering more than a bottle from one vineyard per order, built tremendous buzz in the auction market through Zachy’s selling large bottle sizes and limited selections of his highly-rated wines, has held a few limited high profile tastings and was the subject  of a huge story in Wine Spectator leaving one the impression that he is the current golden boy, the Great Gatsby replete with vintage roadster in modern winemaking.  He acknowledges that his wines and those of others are so high in alcohol that he dare not drive himself (the roadster stays garaged that night)  to a restaurant to enjoy them.  He needs a driver. How sad, although safe, is that?

There are individuals in the old crowd, that are still making wine the old way, and when you pull the cork on a 10-20 year-old-bottle of Mayacamas and Ridge Monte Bello, they still give pleasure.  One family that rode the rollercoaster and seems to have adjusted comfortably back into a sustainable sales mode is Caymus.  The regular bottling can be had for $50 and the Special Selection for $100.  The latter is not twice as good, but is a bit more complex.  These are very interesting times in winemaking regions of the “New World.”  A whole generation, the 20-30 year- olds, have been lost to colored martinis, because the winemakers never produced an interesting entry product for them.  The interest in Pinot Noir came from the movie industry via “Sideways,” not from the wine industry, and  the push for ever higher prices has resulted in wine being viewed as an elitist product rather than a beverage to consume with dinner.

Counter-productive price escalation is not limited to “New World” wine regions. The “Old World,” specifically the highest echelons of Bordeaux, where several years ago accountants figured the actual cost of producing a bottle of wine was under $20, has had massive price increases. And, now  their products are selling for four figures in dollars, Euros and even pounds!  The unintended consequence of this stratospheric pricing is that a whole generation of wine sales personnel and sommeliers has never tasted a First Growth wine, because wine shops and restaurants cannot afford to open a bottle for the staff to sample.  This individual, whom the customer relies on for expert advice, has never tasted the wine; thus, recommends purchasing wines from other regions.  First Growth Bordeaux is becoming a museum piece, a collectible, a luxurious product enjoyed only in the most elite, moneyed circles.  With no shortage of purchasers seeking the best of the best in the finest years, owners of the Grand Chateaux do not seem to be worried. They have plenty of wiggle room to adjust down their releases prices in lesser years, a practice that is new to California and only now being observed at the retail level, but not seen in the “direct to consumer” purchases from wineries, a frankly odd way of treating your most loyal customers and the ones whom the wineries have relied on to build and support their brands.  The entire world wide wine industry needs to review its practices from top to bottom.  There are dark clouds on the horizon. The future of the industry is potentially at risk.  We’ll see how things pan out over the next few years.