sending shiploads of Malbec, was down
more than 20% in 2012.
“There seems to be a worldwide
shortage of the varieties that are most
desirable,” says Joel Peterson, a senior
vice president at Constellation Wines.
“Everybody brought in bulk wines from
various places, whether it was Malbec
from Argentina or stuff from southern
France. Quantities are down, and that
forced up prices for grapes. Those prices
are more likely to be reflected in bottle
prices for smaller wineries than in larger
wineries. The strategy for larger wineries
will be to work on market share.”
Peterson doesn’t foresee many private
labels this year, though he says if 2013
is another large California harvest, that
may “open the floodgates.” However,
he does expect the trend of new brands
from big companies like Constellation to
accelerate.
“Every large winery has decided that
much of the growth in the market is com-
ing from NPD—new product develop-
ment,” Peterson says. “As a consequence,
you’re seeing more new brands that are
in the $10 to $12 range. That will con-
tinue because they’re looking for the next
Cupcake, they’re looking for the next
Apothic Red. This isn’t necessarily tied
to available volumes [of grapes]. They can
shift volume from less successful products
to more successful products.”
Pricing Sweet Spots
All the large companies seem to be licking
their lips about the continuing sales
growth in the $10 to $20 market, and the
$20 to $30 market as well. Treasury Wine
Estates just announced a major “Project
Uplift” intiative, including buying more
vineyards, to take more of its wines into
those price brackets.
Persson says that owning vineyards
allows larger companies to ladder their
wine pricing much the way Detroit once
priced automobiles, with the Cadillac
above the Buick above the Chevy.
“We control the fruit that we use, so
we can control the quality,” Persson says.
“That incentivizes us to get consumers
to trade up. We want to increase the
percentage of revenue we get and the way
to do that is to increase the percentage of
higher-end wines.”
And he’s not worried about consumers
being there. The task for larger wineries is
to build brand loyalty; capitalizing on it
will take care of itself.
“In the last five years we’ve seen
consumers seeking more value for money,”
Persson says. “But with the recovery of
the economy, you’ll see people trading
up. They may use the same consumer
tendencies they’ve used over the last five
years, but they will trade up.”
At the very high end, though, most
experts expect that this is not an era for
$75+ wines from little-known California
wineries. Consellation’s Peterson expects
that $30 to $40 is the price ceiling for
new wines from smaller wineries.
Insel says, “Smaller brands have
had a hard time getting traction in this
market. It’s a very conservative market.
If consumers are going to pay $75, they
want to know what they’re getting.”
In that price bracket, Napa Cab re-
mains the king, according to Insel. “If they
can’t get something from Caymus or some
other known brand, they’ll look for anoth-
er Napa Cab rather than something else,
because they know Napa,” Insel says. “Ev-
ery time we do any wine research, the only
wine region people really recognize is Napa.
Somebody will look at a wine list and say,
‘What do you have in a Napa Cab?’”
To Fred Franzia’s chagrin, those 500 PR
workers are clearly doing something right.
n
Former wine editor for the
San Francisco Chronicle
and
food editor for
SF Weekly
, W. Blake Gray has won multiple
writing awards, most recently Best Industry Blog for The
Gray Report. He lives in San Francisco.
Pinot Grigio growing in the Tehachapi Vineyard,
destined for the Forest Glen label
this is not an era
for $75+ wines
from little-known
California wineries.
Napa may be the best-known California wine
region, but 85% of the state’s wine grapes come
from the San Joaquin Valley, says Bronco Wine
Company CEO Fred Franzia.
Hand-harvesting at
Hess Collection’s
Veeder Hills vineyard
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