In late October an interesting article/opinion was posted by Robert Parker that followed up his assessment of the 2012 through 2014 vintages from Napa. The theme of the last paragraph was one of concern with the dramatic increases in pricing we are seeing in the Napa area for the upper tier of wines that are being produced. No doubt many of you have noticed that Napa Cabernet or Bordeaux-style blends no longer sit anywhere near the price point they once were. Many have pushed the triple digit mark or well past it. While there has been a decent amount of backlash I am not totally convinced that it is a cause for concern (depending on the producer anyway).
A discussion is definitely needed… so let’s get started!
Are Napa’s, or any regions, expensive wines a problem? It depends… One of my biggest problems with Napa when I moved back home six years ago was that there were a lot of new producers on the block who had made their fortunes elsewhere and where now digging into the wine industry. The result seemed to be that a ton of new $100+ wines were produced with no real pedigree or rational for those prices other than the notion that they “deserved” to be priced that way because they were boutique or cult or hired “X” consultant and sourced from “Y” vineyard with a brand new production facility that now needed to be paid off.
And here I am six vintages into my own project with a $105 bottle of Merlot and eating my very delicious own words… Moving on! I promise I will cover the Single Barrel though.
I tend to understand high price points from producers that have been making not just good wine but AWESOME wine for decades or centuries (based on peer or crowd-sourced driven reviews. I put zero emphasis on ratings). That kind of quality eventually leads to some prestige. As a result demand goes up along with the price more often than not. If demand outweighs the supply then it probably makes even more sense to move the price up. Look at the boom that bourbon has had over the last couple years. When was the last time you saw an affordable bottle of Pappy laying around? With a sudden boom in demand and no supply to back it up prices rose to state: “If you want a certain quality of bourbon from a certain producer you have to pay a premium.”
So… is Napa’s demand and prestige to that point where it can charge any price? Or do we have so much demand on our hands that we simply don’t make enough wine to go around? I believe the answer to both of these questions is “yes” for certain producers. For producers that made their money elsewhere and are now jumping into wine as a hobby these businesses could just be the hobby that becomes a solid tax write-off so the price really doesn’t matter. They will sell some, never make their money back but that isn’t the point. I doubt anyone would be that honest about their company though. There are plenty of small producers that see overwhelming success who have taken price increases simply because there is so much demand. Personally I have no problem with that, it is the Pappy Effect in action. Kudos to those producers making awesome wine that people love!
Just to shake things up I will share how MTGA works and why it is priced the way it is (which I think is very reasonable for a small Napa producer):
$48 per bottle for the Merlot allows my business to be almost sustainable, maybe grow a little bit as long as I sell out of each vintage which has almost happened. Same goes for the $32 bottle of Riesling. Both of these wines are geared to be the bottomline. Those prices allow me to pay for the most of the production costs (as long as I sell enough of it) and possibly have some extra left over to invest back into the company to make more wine. Have I ever seen a paycheck from MTGA? No, I have not. Quite the opposite actually. The vast majority of disposable income I make via my day job, which isn’t a lot, goes into MTGA as well. The problem I face as a small producer is that I am too small. The production simply isn’t big enough to truly sustain itself unless I raise prices further OR make more wine and sell it at my current price points.
So where does that Single Barrel Merlot fit in? I started ramping up to make a higher end wine after I proved to myself that I could make a good wine. Once I hit that benchmark it was time to make a great wine which comes at an added cost in the form of time and money. All that work and money was only for 22 cases of wine which means the average cost to make each bottle goes up. the end result is that the wine itself is more expensive. The same theory applies to this wine as it does the others. If I am going to continue the Single Barrel program and grow it to include other varieties I simply have price it in a way that allows me to do so.
My biggest objective was not to come screaming out of the gate with the 2010 vintage, my first vintage, and have it be hundreds or thousands of dollars followed by this statement:
I wanted it to be reasonable. Something that I would buy a few bottles of if I liked it. I didn’t want to be another new-ish guy on the block making a $100+ bottle of wine just because I felt like I deserved to have it priced that way. I wanted it to make sense and I wanted my clients, friends, family etc. to trust me when I decide to make that jump. I believe I have accomplished just that.
I have no idea what goes into the pricing structure of other producers. It might be just for faux-prestige and exclusivity. It could be that they have been in the wine game long enough that there is enough demand/prestige to rationalize their prices. It might be because it is truly a passion project they are trying to make work. I know that mine is geared towards the latter. I wanted the focus to be on the wine itself, not the price tag or how exclusive it must be. I wanted to to tell the story of how I tripped and fell into this passion nearly 25 or so years after my parents and grandparents did. I believe I have accomplished that as well.
I think my portion of this discussion really begins and ends with this when it comes to the rising tide of wine prices in Napa:
Backlash against high prices or not, if there is a demand for these wines this is a non-issue. If there is a glut of supply with no demand then a very serious discussion need to happen within each company who finds themselves with a whole lot of wine to sell without any buyers.