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'The Wine Glut' Finally Comes Home to Roost…
By Rich Cook
Sep 1, 2020
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Wine doesn’t cost a lot to make – it costs a lot to sell.”   
Cameron Hughes, 2020

It seems like I’ve been hearing about a wine glut for several years now.  Each year more and more land has come to be under vine worldwide thanks to increased demand, and experts have been quick to celebrate the “coming discount prices.”  I don’t know about you, but in my world the celebration seems to have preceded the “coming discounting” for about the same number of years that the coming has been promised.  Yet, here in the chaos of a pandemic that has closed winery tasting rooms—even as demand for wine is slackening as spirits become more popular, the “coming” may finally have arrived.  If, that is, you know where to look….

We begin in Champagne, where market forces and have resulted in 50 million fewer bottles of the famed local product sold in the first six months of 2020 than were sold the previous year.  It is a sure sign of market decay when perhaps the most recognized and revered product in the world of wine takes such a hit.  I’m sure that one of the reasons that so little Champagne crosses my desk—in comparison to other wines—is that kind words from critics are not necessary to help sell the product; its reputation takes care of that problem.  Or so it seemed…until a pandemic swept across the globe.

Yet, seemingly counter-intuitively, Champagne makers have banded together to ensure that they will produce only 75% of what they did in 2019 in order to keep prices at a perceived “proper” level.  This isn’t the first time something like this has happened in the wine world.  If one can create scarcity, real or perceived, one can maintain preciousness.  

Of course, arguments in favor of a steep discounts solution to the “problem” abound (yes, please), but such discounts can negatively impact luxury items like Champagne, where a principal selling point is an elite niche in the upper echelons of the market that makes it desirable precisely because it is less attainable.  The pending debut of the Brad Pitt/Angelina Jolie Champagne project, Fleur du Miraval, is slated for release at north of three hundred dollars per bottle and is clearly aimed at just that elite niche.  Don’t get me wrong – Champagne does generally cost more to produce than still wine, yet it seems to me a chance to bring in a whole new customer base could be being overlooked.

Enter the wild, wild west of wine, where some savvy players have found ways to leverage the glut and serve two, or even three, masters at the same time.  Known as négociants in France (and elsewhere), they see opportunity where others see a problem, and today’s marketplace is tailor-made for their success, and it is often good news for all the players involved.

There are many angles to be played in the négociant game.  Some purchase completely finished bottlings, a.k.a. unlabeled “shiners,” from producers, put their own labels on and sell them.  Some go to the other extreme, purchasing rows in vineyards or unfermented juice and making the wine themselves (négociant éleveur). They can also swoop in somewhere in between these two points just about anywhere along the line and complete the tasks required to make the product market-ready.

What creates these opportunities?  As noted above, market forces can undermine a winery’s or wine grower’s willingness to continue the production process at some point.  As I stated in the teaser line of this column, it costs a lot to sell wine,  and if a producer can’t see a profit or, worst case, a break-even scenario with a particular wine at any point in the process, they’ll likely look to a quick cash solution to stop the expense train from hurtling down the track.

Enter the négociant.  Some, like Louis Jadot in Burgundy, have built their reputations over time and have long term agreements with growers, and they produce highly sought-after wines year after year.  Others might be contacted by a winery that has bottled more product than they can sell, knowing that there will be an outlet that will save them marketing expense and put some cash flow into their business.  Some producing wineries even get into the game, often to fill holes in their tasting room lineups.  I’ve accompanied a winery team on a visit to a large producer to taste through finished white wines that would supplement their red-wine-only production.  To give you an idea of what’s possible, this particular example resulted in purchasing finished bottles – corked, labeled and delivered – for around two dollars a bottle, that were then sold for as much as twenty dollars a bottle.  Nice work if you can get it….

There are a couple of fairly new négociant models out there that are particularly suited to our times.  The first are négociants that have gathered product from around the world that haven’t moved for whatever reason and sort them into sets that they sell on subscription – a mail order wine club.  These often contain labels that you’ve likely never heard of, or that a google search won’t reveal much about, but will satisfy a targeted customer base and potentially introduce them to wines from regions that they’ve never encountered before.  While some of the examples are better than others, the same can be said across the wine spectrum whether the producers are familiar or not.  Here, the négociant is sort of a personal shopper who is aiming at people who aren’t seeking anything particular other than a tasty product in their glass, and it saves their customers extended time in a potentially virus loaded wine aisle at the market.

The second model brings a new twist.  Long time celebrated négociant Cameron Hughes recently debuted a futures-based model that he’s calling de Négoce.  It is an e-mail subscription-based offering service that is specifically focused on high end wine sold by the case at what can seem to be crazily discounted prices.  Customers sign up to receive mailings with no cost or membership terms, and can opt out of the list at any time.  Cameron described the wines offered under the label as all legit – “this isn’t over-cropped, micro-oxygenated, oak chipped wine – there are no shiners, and no doctored product.”  He estimates that his team tastes through about 50 wines for each one that is chosen for the program – a rigorous selection process.  “You’re going to get bottle shocked wines that were bottled last week” – that’s how quickly the process moves.  

The project is off to a quick start.  Hughes was so confident in the model that he contracted seven lots before having a dime to pay for them.  His confidence was rewarded -- five thousand cases were sold in the first 24 hours that the brand was offered.  While the first offerings have no hands-on participation in production, Cameron said that there will be some deeper involvement starting with the 2020 vintage.  There are no plans to offer pre-purchase tasting at this point – it’s a trust-based model offered at prices that make taking the chance very attractive.  I tasted though some of the initial offerings and would share notes with you here if the wines weren’t already sold out.  Suffice it to say that I didn’t score anything lower than 90 points, and when you can get Napa Valley or Diamond Mountain District Cabernet Sauvignons (sometimes from famous vineyards, even if they’re not shown on labels) scoring around 94 points for under twenty dollars a bottle—it’s a program worth looking into.

My takeaway?  The glut is real, and don’t be alarmed when Champagne tells you that a production cut is coming your way.  Instead, consider shifting your buying crosshairs elsewhere, toward sources that can help you build your cellar even in a time of economic uncertainty.  Maybe some Champagne will even find its way into the discounting mix.  I’d drink to that!

More columns:    Rich Cook
Connect with Rich on Twitter at @RichCookOnWine