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Merlot, The Comeback Kid: With Suppliers Pushed to Recast Its Image, Merlot is Still a Force

Posted on  | January 3, 2012   Bookmark and Share
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Last fall, director Alexander Payne finally released a new movie, The Descendants. It’s about Hawaii, which was a relief to wine producers everywhere. Payne’s last movie was Sideways (2004); in that film, one line of dialogue from one character changed some people’s perception of Merlot overnight.

But the “Sideways effect,” though real, was always overstated. California Merlot sales rose 5.2% between 2005 and 2009, according to Impact Databank—though all wine sales rose 18.2% during the
same period.

That said, Merlot is still America’s third-favorite grape, responsible for 12.4% of all varietal-wine sales, according to Impact Databank. Pinot Grigio has roared up into fourth, yet at 7.8%, it’s still far back of Merlot. And there’s still more than 2.5 times as much Merlot sold in this country as Pinot Noir. However, there are plenty of stores that simply can’t sell
much Merlot.

Easy to Drink, Tougher to Sell

“Merlot. It sucks,” says Wilfred Wong, cellarmaster for Beverages & More. “People are so anti-Merlot-ish. We had a wine that we produced just for us. Under the Merlot name, it was not very popular at all. We renamed it without calling it Merlot, and then it sold.”

There seem to be three key factors in Merlot sales: price, brand and region (as in where you are, not where the Merlot is from).

Price is most important. Below $20, Merlot seems to be selling as well as ever. E. & J. Gallo Winery introduced Red Rock Merlot in 2006 and it has taken off quickly, growing to a 106,000-case brand with the 2009 vintage, which has a $13 SRP. Red Rock’s success seems not tied to region at all; a company spokesperson says it sells best on both coasts and in Illinois and Texas—essentially where the most wine drinkers are.

Above $20, having an established brand is crucial—and it may help to not be in a coastal “elitist” city. “Merlot is pretty strong for us,” says Justin Vann, manager of a Central Market in Houston. “At least 25% of our California red sales are Merlot. And to put it in perspective, we have about 300 different Merlots. But there are maybe five of the expensive brands that are doing well. The others are gathering dust.”

Vann came to Central Market from a high-end steakhouse and says, “The high-alcohol Merlots, those are going down a little bit. We do a ton of business with Nickel and Nickel. We can’t keep that on the shelf. Duckhorn and Nickel and Nickel are my two big ones.”

Carol Reber, chief marketing officer for Duckhorn, says despite popular perception, sales of over-$20 Merlots are actually up nationwide by 6.5% over the last 52 weeks. “Merlot sells more than Zinfandel and Syrah combined in the over-$20 price point,” she points out.

And Merlot, once the king of by-the-glass buys, is beginning to reassert itself among the cognoscenti, says Carol Teich, assistant beverage director of the three-state Napa Valley Grille restaurant chain. “We offer St. Francis Merlot as our lower price point at $11 a glass all the way to $17 a glass by Peju,” Teich says. “The mid-priced Merlot at $14 a glass by Sterling Vineyards is our best seller. We are happy Merlot is back.”

Replanting and Recalibrating

Doug Shafer, president of Shafer Vineyards, says his brand’s sales never stopped, but they did slow down. “We’ve always been around eight or nine thousand cases and it stayed there,” Shafer recalls. “Instead of selling out in nine or ten months, it was taking 12 or 13 months. But it never got to a point where it stopped selling. And now it has picked back up. “I talk to a lot of steakhouse guys and they’ve said Merlot is doing well because the guys on expense accounts. They can’t buy wines over $100 sometimes now, and they can get a really good Merlot for $80,” Shafer says. “All they want is a really good wine. Merlot fills the bill.”

Shafer was one of many people to say that the style of Merlot has changed for the better since the pre-Sideways days. Today, California has nearly 7,000 fewer acres of Merlot than it did in 2004, a 13% drop, according to the USDA. Some hot weather counties like Madera (-31%) and San Joaquin (-11%) have grafted over to other varieties, which is good because indifferently grown Merlot was largely responsible for its bad reputation.

“The whole bashing of Merlot really helped the varietal,” Shafer asserts. “All those negociants buying Merlot from all those bad spots—weedy, bad wines—they’ve all gone away. It was a short-term tough deal. Long term, great for the variety.”

It should be noted, however, that San Joaquin County, in the hot Central Valley, still has more Merlot planted than any other county in the state.

Surprisingly, Napa (-10%) and Sonoma (-17%) counties have also dropped in Merlot acreage since 2004, which is a reflection of two things: the big money from there is in Cabernet Sauvignon, and Merlot takes more work to sell.

“We’ve been having modest growth in Merlot since the end of ’08,” says Peter Mondavi Jr., whose family owns Charles Krug Winery. “But it’s definitely not an easy sell.”

Mondavi notes something Duckhorn and Shafer would agree with: that the style of Merlot Charles Krug makes—very Cabernet-like—is a big help. Charles Krug has Merlot vineyards in St. Helena, Yountville and Carneros, and is able to blend each vintage differently to keep the bigger, heavier style consistent.

“In Carneros, you get a little more hang time so it gives you more intensity of fruit,” Mondavi says. “I wouldn’t say it gives you a great vintage every year. It’s on the margin sometimes, but most of the world’s great wine regions are on the margin. Fortunately we do have vineyards in the warmer parts of the valley.”

How does Charles Krug’s sales staff convince skeptical buyers? “They pop the cork,” according to Mondavi. “There’s no substitute for popping the cork. This happens to me all the time: ‘I don’t have a place for Merlot.’ Well, just try it.”

Merlot By Any Other Name

To be fair, many skeptical wine buyers are just speaking for their customers who haven’t gotten past Sideways.

Jennifer Frank is co-owner of California Wine Merchants in lower Manhattan’s Financial District. The store sells 95% California wine, yet Frank says, “When we first opened, nobody wanted anything to do with Merlot. As a California store, we had to represent it, but it was a really tough sell. It might be a New York thing. It’s easier when it’s disguised in a Bordeaux blend.”

Frank says she holds tastings every Friday night and that has helped to change some customers’ minds. But she says she still has better results selling higher-end Merlot-based wines like Blackbird that don’t say “Merlot” on the label.

“Blackbird is really good wine. People love it,” she says. “It’s kind of the same thing for us with Syrah, which is a tough sell, but as soon as it’s part of a Rhône blend, they’re interested.”

Beverages & More’s Wong agrees with Frank: proprietary names sell better in his stores. Wong says the new trendy red varietal is Malbec. But a look at the USDA’s California Grape Acreage report quickly quashes any thoughts that it will replace Merlot anytime soon in California. There are only 1,600 acres of Malbec planted in the entire state. Nine separate counties have more than that much Merlot.

“The hit that Merlot took is history,” says wine industry analyst Vic Motto, CEO of Global Wine Partners. “When you’re looking at premium Merlot, it seems to be doing fine.”


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