TN: Last nights Syrah/Shiraz and Tokaj

OK I got it. I think I understand and it makes some sense, and indeed it seems it is pretty bad.

If as a retailer you need a 50% markup to survive and you cannot sell the wine at that price you decide not to carry it at all. And since this (retailer markup) is the biggest chunk where prices can be cut, then it makes even more sense not to carry it. I mean even if the producer cuts the price by 5EUR still won't make such a big difference as a major reduction in the markup.

I propose a new business model for the wine business: a centralized exchange where potential buyers can list their willingness to pay for the wines they are interested in, and the quantities they want to buy at those prices. All sellers should be able to see this information and whoever is able to service that demand in a profitable way contacts and sells to the buyer. This, I think, might be particularly helpful if it is about new releases, as it might help importers and wholesalers plan accordingly.
 
originally posted by VLM:
That also means that on lower cost wines, you should take a higher margin, although almost no one does.
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This is exactly what I was thinking and I am wondering why not? I mean it is such an obvious thing to try at least. What is so special about a 50% or whatever markup across the board?
 
originally posted by VLM:
originally posted by Nicolas Mestre:
So you might find someone in VA selling it for $70 and somebody in Colorado selling it for $54. It is less likely that someone is ripping you off and more likely that someone is losing money.
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This is the essence. For the price of that wine to be that low, someone is working a an unsustainable margin, unless there is high volume.
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Which calls for some sort of coordination - if someone in the chain is not making enough money the chain for that wine is gone, which is bad for everybody. Why not coordinate somehow and all the links in the chain are making less money rather than concentrating the losses on one particular link. I am wondering whether this will lead to more vertical integration in the chain, where such coordination might be occur easier.
 
originally posted by Cristian Dezso:
OK I got it. I think I understand and it makes some sense, and indeed it seems it is pretty bad.

If as a retailer you need a 50% markup to survive and you cannot sell the wine at that price you decide not to carry it at all. And since this (retailer markup) is the biggest chunk where prices can be cut, then it makes even more sense not to carry it. I mean even if the producer cuts the price by 5EUR still won't make such a big difference as a major reduction in the markup.

I propose a new business model for the wine business: a centralized exchange where potential buyers can list their willingness to pay for the wines they are interested in, and the quantities they want to buy at those prices. All sellers should be able to see this information and whoever is able to service that demand in a profitable way contacts and sells to the buyer. This, I think, might be particularly helpful if it is about new releases, as it might help importers and wholesalers plan accordingly.
Click to expand...

I think a retailer can thrive at less than 50%, but you certainly do understand the points I was making and your idea for an exchange would be fantastic, if it were remotely possible. Alcohol is a state issue and it would take a lot of mountains moving to change that, but it could happen, unfortunately, it would be the big chains and distributors who would do it because they are the only ones with the clout and political connections. So, if laws change, it might end up pushing down prices for the average wine consumer, but the fine wine consumer will probably get screwed. Either that or a niche business flourishes in the shadows, it's hard to tell.

The future could be buying co-ops, buying ex-cellar, who knows.
 
originally posted by Cristian Dezso:
originally posted by VLM:
That also means that on lower cost wines, you should take a higher margin, although almost no one does.
Click to expand...

This is exactly what I was thinking and I am wondering why not? I mean it is such an obvious thing to try at least. What is so special about a 50% or whatever markup across the board?
Click to expand...

1.5 is easy, plain and simple. No real good reason.

It is a matter of fact what the lower bound on the income generated per bottle of wine and it should be priced accordingly. This would be the lower asymptote. You could also put an upper asymptote on what you think a maximum profit per bottle should be. Govern this with a 3 or 4 parameter logistic model and you have your pricing model which looks a hell of a lot like data from experimental economics.
 
originally posted by Cristian Dezso:
originally posted by VLM:
originally posted by Nicolas Mestre:
So you might find someone in VA selling it for $70 and somebody in Colorado selling it for $54. It is less likely that someone is ripping you off and more likely that someone is losing money.
Click to expand...
This is the essence. For the price of that wine to be that low, someone is working a an unsustainable margin, unless there is high volume.
Click to expand...

Which calls for some sort of coordination - if someone in the chain is not making enough money the chain for that wine is gone, which is bad for everybody. Why not coordinate somehow and all the links in the chain are making less money rather than concentrating the losses on one particular link. I am wondering whether this will lead to more vertical integration in the chain, where such coordination might be occur easier.
Click to expand...

I think vertical integration could make for a stronger model, but it would lead to a more fractured market, given laws, etc. Not many retailers have the cash flow to float a container; thus, one will be left with a few dominant players in the market and decreased competition.
 
Saw that. Never bought the wine, but I am very curious if it will sell at that price. I would assume yes. If not, then the market is pulverized indeed for many of these wines.

Could this tough market have anything to do with Giacosa's decision not to produce 2006s, and Produttori del barabaresco not to bottle their 2006 crus (from what I read)?
 
originally posted by Cristian Dezso:
Saw that. Never bought the wine, but I am very curious if it will sell at that price. I would assume yes. If not, then the market is pulverized indeed for many of these wines.

Could this tough market have anything to do with Giacosa's decision not to produce 2006s, and Produttori del barabaresco not to bottle their 2006 crus (from what I read)?
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Ratti has been around a long time and was one of the first domain bottlers. This is one of the folks you were talking about. If I wasn't on such a restricted budget, I may have bit on that wine. Shit, good Barolo for $35? However, I am convinced this is just the beginning.

I didn't hear about Produttori. That is a big deal given how good the vintage is purported to be.

There was a cellar issue at Giacosa.
 
originally posted by Yixin:
The Rooenfeldt is available at a HK broker (Altaya Wines). They have cases of it.
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There is plenty around here as well.

It won't sell at half price, under $200. I think it'll have to drop to $50 to sell.

If it were me, I'd sell it to some steak house for $40/btl and be done with it.
 
I just read someone writing on the other board about the Produttori. I am not sure how true it is.

Well, you want another deal? 2003 Vietti Rocche - $39.99 at Calvert Woodley. I did not buy it either, even though it sounds like a steal compared to $90 for the 2006 (or $110 if you consider the web advertised prices)
 
originally posted by VLM:
originally posted by Yixin:
The Rooenfeldt is available at a HK broker (Altaya Wines). They have cases of it.
Click to expand...

There is plenty around here as well.

It won't sell at half price, under $200. I think it'll have to drop to $50 to sell.

If it were me, I'd sell it to some steak house for $40/btl and be done with it.
Click to expand...

Now that would be the kind of discount that would tempt the likes of me to buy it!

Greetings from Switzerland, David.
_________________

J'ai gch vingt ans de mes plus belles annes au billard. Si c'tait refaire, je recommencerais. Roger Conti
 
originally posted by Cristian Dezso:
originally posted by VLM:
That also means that on lower cost wines, you should take a higher margin, although almost no one does.
Click to expand...

This is exactly what I was thinking and I am wondering why not? I mean it is such an obvious thing to try at least. What is so special about a 50% or whatever markup across the board?
Click to expand...

No one goes 50% retail out here in WA. 35% is considered standard with some places maybe going a little higher.

Then again, if you want to compete nationally, and you have Foillard Morgon wholesaling for $22 Puffney Trousseau for $25, and Capellano chinato for $70 (!) what can you do...besides buy them from Chambers like I do.
 
originally posted by Brian C:
originally posted by Cristian Dezso:
originally posted by VLM:
That also means that on lower cost wines, you should take a higher margin, although almost no one does.
Click to expand...

This is exactly what I was thinking and I am wondering why not? I mean it is such an obvious thing to try at least. What is so special about a 50% or whatever markup across the board?
Click to expand...

No one goes 50% retail out here in WA. 35% is considered standard with some places maybe going a little higher.

Then again, if you want to compete nationally, and you have Foillard Morgon wholesaling for $22 Puffney Trousseau for $25, and Capellano chinato for $70 (!) what can you do...besides buy them from Chambers like I do.
Click to expand...

Nevermind, I was thinking margin not markup...50% markup = 35ish% margin. Duh.
 
I doubt that the extra $40 had anything to do with covering new investments, or that it would reflect a more desirable brand.
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It might. It's a case-by-case basis sort of thing. There's a lot of shiny newness to certain facilities in certain Old World regions. Add that to currency fluctuations and other pricing issues (fuel, for example), and it's not hard to get from one number to another.

To me, at least, when the discussion turned to the oceans of unsold barolo and barbaresco, I - probably wrongly - was taking a personal perspective and was thinking about the producers I mostly follow.
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Perhaps more wrongly personal in assuming that "oceans of unsold whatever" means that that ocean is about to be offered to you, the regular consumer, at your usual retail venues. For any number of reasons, you might never see it.

I highly highly doubt any of them will go under.
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I'm not so sanguine. I don't know if I agree with VLM that fundamental changes have occurred, but if he's right, I'd be surprised if some names everyone thought solid didn't go under.

Re: Giacosa's '06s, it was not a market issue, for sure. They're extremely unwilling to talk about it, from which you are free to draw your own conclusions. No one else in the region that I spoke to can (or is willing to) explain it except by rumor and innuendo, which of course isn't very useful. The only thing that I can say with confidence is that Alder Yarrow remains persona non grata in many parts of the Langhe, and I don't see that changing soon.

Re: Produttori, Vacca didn't mention anything about his '06s, other than to say that he was as surprised as anyone by Giacosa's choice, because it was a good vintage. I didn't hear him say anything else suggesting non-release on his own part, but I'm sure others know more than me.
 
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