Dumping Inventory: How It Works
The owner of a serious wine store explains the deals that are coming across his desk. He’s been in the wine business a long time and he’s never seen anything like it. For wine buyers, this is a golden age.
The example he gives is Beringer Private Reserve Cabernet, but he’s seeing the same things from big-deal wineries who’ve thrived in the now-belabored $40 – 100 price range. Beringer Private Reserve Cab is one of the wines that made California respectable. It ages beautifully and runs about $100 a bottle, plus or minus 20 bucks depending on what market you’re in. It’s a world-class wine, but it’s also an old-line wine that doesn’t have the rock-star sexiness of some of the newer names. So, like a lot of wineries, Beringer has inventory it needs to move before the wine passes its prime.
The deal goes like this: retailers who buy two bottles each of the ’96, ’97 and ’98 vintages will get three bottles of the current release for free. Doing simplest possible math, that’s a 33% reduction in the wholesale price — and simplest possible math is conservative because in a normal market the already-aged wines would be more valuable than wine that needs to spend a few years in the cellar. The three back vintages, according to my friend, are drinking wonderfully. They’re perfectly aged and in their prime.
Again, it’s not just Beringer. Similar deals are being structured all over the wine business as reputable wineries face the grim reality of declining orders, unsold inventories and new vintages about to go from barrel to bottle. To survive they have to cut margins and increase volume, just like Wal Mart. Beringer has an advantage, of sorts, in that they’ve been around for decades and most of their vineyards were bought at pre-boom prices. Pity the new wineries built on million-dollar-an-acre land and a $200-a-bottle pricing model, wineries that don’t have a lot of back inventory to sell.
And keep your eyes open. The wines that have been so comfortable in that super-premium tier are starting to pour out onto the market at prices that are going to seem literally fantastic.
Kevin Zraly, founder of the Wndows on the World Wine School, puts it this way: “$100 bottles of wine just are not selling.”
Robert Smiley, the director of wine industry programs of the University of California, Davis, Graduate School of Management, predicts that the buyers market will persist even when the recession goes away. “For the next two to three years, the consumer can expect deals on higher-priced wines,” Smiley said, noting that those wines usually start at about $15 a bottle.
December 9th, 2009 at 8:59 PM
All I can say is that it is nice to finally see prices go down… I love it when the consumer wines.. I mean, wins!