Archive for the 'business of wine' Category

Wine economics: How much does that bottle cost?

economics wine Have you ever wondered about wine economics–what are the costs of a bottle of wine? While the industry, made up mostly of private companies, often keeps margins shrouded in mystery, I spoke with one vintner who broke down the price of barrels, corks, grapes as well as the three tiers for me. And since that vintner was Bo Barrett of Chateau Montelena and Barrett & Barrett, he offers perspective on a range of (higher-end) wines. I also dig up some info on lower-end wines.

Margins are something that always pique the interest of consumers. So check out the piece over on wine-searcher.com and let us know your thoughts.

Who will be the Elon Musk of the wine industry?

tesla model s

Elon Musk is an innovator–probably everyone who’s picked up the business pages recently knows that. Not that I’ve ever driven a Tesla, but I am a huge fan of everything he’s doing. While the gigafactory, the hyperloop and the electronic car that goes 0 – 60 in 5.6 seconds may have gotten most of the attention, he’s also taking on a lot of entrenched interests.

First and foremost is how cars get sold in America. States regulate the sale Read more…

No, NYC doesn’t have too many wine shops

nyc wine store

Crain’s New York ran a piece over the weekend pointing to a 14% rise in wine shops in NYC since 2010. Will the proliferation of shops “bottle up profit” they wondered?

The short answer is: no.

There’s a huge thirst for wine in America right now and especially in New York City. The city has some terrific shops and, throwing in the knowledge and offerings at the city’s restaurants and wine bars, it is today the best wine destination on the planet (here’s looking at you, Paris). Sure, the existing 1,368 wine shops can serve the city’s residents and tourists. But a growing market that’s relatively protected (grocery stores can’t sell wine) will probably mean more stores in the coming years.

Today, there are discounters and full-service shops. There are ones focusing in small estate wines and others with lots of well-known brands. There are shops with particular slants such as selling wines made by women, wines from California or Chile, wines from a single importer, shops that sell wine by occasion or food pairing rather than region, or shops that have tastings every day of the week.

Not all of them will succeed. But the more the merrier. While some of the unsuccessful approaches may be reoriented in another four years, I’d venture to say that, barring economic collapse or a shift to allow chains or wine in grocery stores, the number of wine shops will be higher still, by a similar measure as over the last four years.

One thing that could improve the finances of these small shops (chains are not allowed in NY), is if they could also sell craft beer. That happens in Connecticut and levels of social unrest are not higher as a result. In places like Illinois or New Jersey, wine shops can even sell gourmet comestibles, such as cheese. Imagine!

Map of my favorite NYC wine shops

Sommeliers can be “surprisingly” highly paid

Bloomberg TV has a quick hit on five “surprisingly high-paying jobs.” Number five on their list is a “master sommelier,” who, they say, citing nobody in particular, can earn “up to $125,000 a year.”

But keep putting the nose to the limestone, somms: the piece says phone sex operators can earn $160k.

Would Amazon Drones give a lift to wine?

amazon drone Jeff Bezos had some crazy talk for Charlie Rose at the end of a 60 Minutes segment: Amazon is working to deliver some items in 30 minutes or less via unmanned, aerial drones.

It’s not April Fool’s Day; Amazon tweeted a link to a picture of the “octocopter” delivery vehicle and published this futuristic video on YouTube. Bezos did concede to Charlie Rose that the plan, possibly 4-5 years off, “requires more safety testing and FAA approvals.”

If Amazon drones were approved, this delivery method would have enormous implications. But since we’re a wine blog, we’ll focus on the wine angle here: getting wine in 30 minutes would give a lift to your Friday night. And since the Octocopter delivers to GPS coordinates, it could conceivably track your phone and deliver your whole picnic right to where you are. Hopefully, there will also be a robotic sommelier to pop and pour.

Or is it so futuristic, unworkably weather- and regulation-dependent, that the main triumph is just to give a lot of buzz (without rotors) during the busiest shopping time of the year?

Why do champagne prices decline during the holidays?

champagne sale Why do Champagne prices often decrease during the holidays? Economic logic might hold that as demand increases–a huge amount of bubbly is put away during the last few weeks of the year–that prices should also increase.

A recent article in the Times mounts a parallel quest in understanding why turkey prices fall as Thanksgiving approaches and rose prices rise into Valentine’s Day.

As with frozen turkeys supermarkets, well-known champagne brands can be used as a loss-leader. Come for the Veuve Clicquot and leave with a few bottles of malbec and other full-priced items for your party. And as with frozen turkeys, there’s a vast supply of champagne brands ready to fill sales channels for this busy time of the year. Also, as with the article’s example of low-priced tuna contributing to price compression of canned tuna during Lent, the presence of perfectly serviceable other sorts of lower-priced bubbles may act to compress the prices of champagne brands. Finally, a supermarket probably doesn’t want to devote space to frozen turkey after Thanksgiving so they might be inclined to cut prices to clear out inventory. Similarly, a large wine shop might want to reduce their stock of bubbly post-New Year’s Eve.

The article points out the different market dynamic with the price of roses at Valentine’s Day: with more demand, rose prices surge. There’s a limited supply of fresh roses and flower shops can’t benefit from a loss leader as the Valentine shopper wants only roses. In the wine world, a small shop may not stock big-label champagne, so may not have loss-leaders to flog in newspaper ads. Also, if the shop focuses on grower champagne, the supply, while not as limited as fresh roses at Valentine’s Day, is more limited than the grandes marques, which could lead to price stability at a time of discounting.

When it comes to champagne shopping this holiday season, think about are you getting a frozen turkey or a rose and shop accordingly.

Vineyard prices in Burgundy

How much does that vineyard cost? In the video of the day, Alex Gambal, American in Burgundy, discusses vineyard prices in Burgundy and why he and his investors paid $10 million/acre for a sliver of land in Batard-Montrachet.

“It’s a way to preserve capital…You’re buying Treasury bonds today at 2%. What would you rather buy, US treasury bonds or a piece of grand cru in Burgundy where you’re getting 1%–and the dividend is bottles of wine! So it’s not a bad deal!”

I get the scarcity argument but there certainly are carrying costs associated with this type of investment. And weather may wreak havoc with a vintage as parts of the Cote de Beaune saw so dramatically this year so it’s not without risks. What do you think: is he oversimplifying things? Does it make you cry a little bit on the inside to see Burgundy land discussed as a functional equivalent of Treasury bonds?

Chart: Where is wine venture capital flowing?

wine venture capital There has been a spate of articles about a new gadget for preserving wine called the Coravin. What’s not been widely commented on is the fact that the founders raised a lot of money, notably almost $11.5 million in the last round.

The company, based in Burlington, Massachusetts, raised these funds from 106 equity investors, including restaurateur Joe Bastianich who had tested the product–formerly known as the Wine Mosquito–at his restaurant, Del Posto. The CEO, Nicholas Lazaris, ran Keurig before and after it was sold to Green Mountain Coffee Rasters.

Where does that put Coravin in terms of recent rounds of wine venture capital in apps and gadgets? At the top.

Two days ago, the team behind the label-recognition app Delectable announced a $2 million placement with angel investors. According to venturebeat.com, Club W has raised $3.1 million for their “personalized” wine club. The Danish company behind Vivino, also a label recognition app, has raised $10.3 million.

In previous non-winery M&A news, Lot18 raised $44 million though their last-completed round was in 2011. In December 2012, an anonymous group of investors from Singapore purchased a controlling stake in the Wine Advocate reportedly for $15 million.


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