The National Wine
UnClub
Newsletter
May 2008
Holy Wine Deals Batman!
If ever there was a time in the wine world when it was a buyers' market now would be it! The economic climate for luxury goods is getting pinched by stock market gyrations, housing woes, and high fuel and food prices causing most Americans to review their list of must-have goods and services. The situation is dire in some sectors where deciding whether one should pay the mortgage or buy food is the driving question.
Much has been said and written lately about this current state of affairs in the United States; the pontifications have been loudly broadcasted across our nation's airwaves but this is also a topic for small town cafes. In the wine marketplace things certainly aren't business as usual. Value hunting has become the sport of choice for those wine enthusiasts who have measureably less disposable income for their favorite labels.
In our opinion, the fiscally smart buyer of wine is connected to a source that represents wholesale pricing; cutting out the middle-man whenever possible. That could prove to be difficult if not virtually impossible when you're purchasing wine in three-tier (supplier-wholesaler-retailer) states like California, Illinois, New York, Florida, or Texas. These states have enacted laws that prescribe this monopolized system of accessing your favorite brands.
The wholesale/importer tier of this system is where the high cost of wine (and spirits) lies typically. Why? One word: monopoly. Not the game, but the real life scenario found in the control-of-access post-Prohibition wine laws of these states. The producer/supplier tier knows the consumer has a choice, as does the retailer tier, and consequently these two tiers have fairly low mark-ups on their wines.
If a wine shop in Texas wants a certain popular label like Cakebread Cabernet Sauvignon for instance they must literally beg for a meager allocation from a tight-fisted wholesaler who is more likely to hold the coveted brands in his stock for high-end restaurants that certainly will set astronomical prices on those labels. The wholesaler also typically inflates the price on those brands when they are sold to retail shops.
One answer that wine enthusiasts have for this draconian situation in local wine markets is to by-pass the whole mess by ordering their favorite wine through an internet source. And certain popular wineries that have no problem with the immensity of red tape their fans must go through to buy that label in a three-tier state have the audacity to sell their wines directly via the internet. While this is perhaps a boon to those people following such brands, it represents the ultimate of business hypocrisy adding insult to injury to the wine shops who helped build their brand image.
The way in which quality retail wine operations get around the funny business of the wholesale monopolies is to make deals with the producer/supplier (called DIs/direct import) and have these orders cleared by a wholesaler at nomimal mark-ups to satisfy the state laws regarding three-tier distribution in the above-mentioned states. This form of buying is eye-opening in its ability to offer the wine enthusiast a great price on excellent wines from around the globe. The retail on such wines can often be half the price of a wine bought normally through the prescribed three-tier system.
Our concluding remark here would be: "Power to the People!" An informed wine enthusiast has the power to make wise buying decisions. If the price of a wine looks (or feels) too high to you then it probably is! Ask your favorite wine source to explain their pricing strategies and you should hear a coherent statement that represents the truth of the matter. If that explanation falls flat and is unbelievable then you know you need to find a new, more informed/better connected source.
Cheers!
Donald W. White