Tuesday, August 31, 2004

Mondavi observations, round II

Other thoughts on the Mondavi spin-off

* Can they afford to buy back the Napa assets without Michael Mondavi "buying in"?

* If not, will they have to sell off strategically valuable Napa land to make it work?
* Do they even want all three Napa Vineyards (the Carneros one is 'uneven' at best)?
* How do they handle the ownership of the luxury imports Ornellia, Luce, and Sena?
* Do they buyback their 50% ownership in Opus One (although after the 89 that WS gave the last vintage, maybe its time to get out)?
* How do they cleanly break away from the Private Selection brand which has Robert Mondavi and the arch and tower very prominently displayed, without losing the trade's interest in the brand? Through some type of name-licensing agreement?

And most of all, if the remaining corporate assets (principally Woodbridge and Private Selection/Coastal) have to gradually "use-up" their rights to the Mondavi name, the Peter Mondavi family just had a windfall. That would leave them as the only Mondavi brand selling under $10!!! CKMondavi sales will surge if they play it right....

Friday, August 27, 2004

Riedel and illogic, the perfect pairing.

Call me a trouble maker but I just can't help it. I went to a wine 'seminar' at a large wine festival recently. The presenter was a local Sommelier and was covering the joys of Rhone Valley (North and South) wines. I had no interest but Mrs. Johnson want to go, so we went. The presentation was fine, I drank the samples and took to day dreaming of how much better it would be if Camille Segeshio was making the presentation in a bikini, when I realized the conversation had migrated on the benefits of Riedel to enhancement of particular varietal aromas and FLAVORS. Mrs. Johnson excused herself and wished me luck storming the castle. Fine woman, she knows when I get in the scrapping mood.

I listened to the assertions, all Riedel party line regurgitations, that the specific varietal/type glasses enhanced the aromas and flavors of those specific varietals/types. There were nods, murmurs, and anecdotes of agreement. Of course, I raised my hand and called forth the maelstrom....

HJ: Did the Sommelier know if there was a 'formula' for each of the Riedel glass type shapes?

Answer: No.

HJ: OK, well shouldn't there be? Riedel's assertion is that each glass is specifically shaped to enhance that particular varietal/type?

Answer: Not Sure.

HJ: Well, then wouldn't it follow that if each glass were SPECIFICALLY made for each varietal/type then there would be a specific rim diameter to glass internal shape formula that would have to be followed for each type and that if you changed the rim diameter and internal volume changed, as it does between the 'Sommelier' and the 'Vinum' then the aroma and flavor appreciation would change also? Or simply is 'enhancing aromas' just a matter of aroma concentration?

Answer: Well, I don't know.

HJ: So if these glasses enhance aromas wouldn't the amount of wine poured in the glass be a critical element, drastically affecting the aroma dispersal, and if so, why didn't Riedel etch a 'optimal fill line' on each glass?

Answer: I'm not sure . . .

(At this point the mood in the seminar room was somewhat agitated, obviously I was a heretic, or worse an unrepentant philistine, unable to appreciate the sublime power of Riedel crystal)

HJ: Aromas are one thing but you made the assertion a few minutes ago, backed up by a few people here, that specific glasses enhance FLAVORS too by placing the specific wine on the right part of your tongue. You know that's absurd and prone to 'User Error' because you would have to have you tongue in a correct 'posture' and pour the wine at a specific rate for that to be the case. You can't make assertions of a 'What' without actually knowing the 'How'. No Riedel rep or advocate has ever explained the 'How'.

Answer: I think you're missing the point.

HJ: Oh so the laws of fluid dynamics don't apply to Riedel stemware? Here is my point, rim diameter and glass volume have more to with aroma appreciation than any factors in a wine glass and that Riedel has sold a bill of goods to consumers making them think that their specific shaped glasses. I can tell you that no one from Riedel could give you a technical explanation of the shape difference between the Chablis (Chardonnay) and the Montrachet types in the Sommelier series. And why is one glass labeled Zinfandel /Chianti, and are they actually saying that those two have the exact same characteristics??? And what about Spiegelau, totally different shapes than Riedel? Is Speglieu wrong? Riedel has done a world class marketing job, they should be applauded for it, P.T. Barnum would have loved it.

There verbal back and forth that followed was precious, not one advocate for Riedel could answer any of the questions listed above, no facts were presented only anecdotes, the Sommelier was reduced to simply saying that the glasses enhance the appreciation of aromas, there was no denying that. That's genius, yes, if you have a glass that has a certain rim diameter to volume ratio, the concentration of aromas will be greater. Pure genius, there is a wine snob/sucker born every minute, and their cabinets are jammed with Riedel crystal.

Wednesday, August 25, 2004

Saintsbury 2001 Carneros Pinot Noir

Now the reader, from my previous postings, will understand that I dislike the effects of Brettanomyces yeast. There's no way that I'd ever be pleased placing anything that smells or tastes like manure into my mouth...

...and I'm even more displeased at finding not just one bottle, but two that were fouled by Brett (this is my check to make sure that it wasn't just a bad bottle)...

Saintsbury 2001 Carneros Pinot Noir is the offending wine. Note my use of the present tense.

I'd purchased 2 bottles and found the first bottle lacking any fruit character at all, and filthy with Brett character (well on the horsey-barnyard side, with hints of band-aids).
A friend of mine who also purchased the wine had the same experience with their bottle, and emailed me asking if I also found it "off".

We decided it wasn't worth drinking (or paying for) and contacted the winery.
Being told that we could return the bottles for replacement with another bottling of the 2001 Pinot Noir, we were for the moment quite happy - this winery was taking the wine back without any questions or hassle.

The new bottles were opened at home, and again we conferred about the Brett notes in the wine. It was certainly less offensive that the first bottles, but still lacking fruit and disappointingly tainted with Brett aromas, and certainly not worth my time...

Not recommended [5 bottles (total) opened ]

Monday, August 23, 2004

Mondavi to Split, Merge or Sell

Robert Mondavi announced Friday that the Mondavi family will be trading their 'B' shares for 1.165 'A' shares, adjusting their ownership (after a $30 million buy-back) to just under 40%.

Reasons given were typical and expected: corporate governance, eliminate disparity in voting rights, etc.

However, bearing in mind that the other announcement Friday dealt with creating two business models, one for the high-end wines (Napa) and one for the low-end wines (Woodbridge), let's do a little math to see what the two announcements are really about:

Current MOND Market Cap $670M x 40% = $265M family equity in stock

Napa vineyards: 1,500 acres valued at appx $130,000 per acre (average)
Total value =

Oakville Winery & Brand: Appx $80 million in revenues, value of 4 times revenues (industry average) for a presumed value of $320M.

Total Value of Napa Assets: Approximately $500M.

By assuming that the purchase is financed through 50% debt and 50% equity (also near the industry standard) this would allow the family to retain the Oakville/Napa flagship brand while allowing the remainder of the company to either remain public, be sold to Diageo, or merged with Southcorp.

The layoffs and fallout will be colossal. Stay tuned. . . .

Friday, August 20, 2004

CHEERS, and yet another story of wine pretensions

In bits and pieces it seems that wineries are cutting through the old strictures of marketing wine and putting together fun and appealing products. There is hope.

CHEERS to Neibaum-Coppola with the introduction of their 'Sophia Mini' (
www.sophiamini.com). Putting their sparkling wine, Sophia - Blanc de Blanc, in a neat little red aluminum can. And they did their research well; they are targeting younger affluent drinkers. The creativity and aggressiveness of this should be lauded.

CHEERS to R.H. Philips and their new Chard bottle. New bottle has a nice sleek shape and a screw top that doesn't look like a screw top (see
http://www.corkamnesty.com/). And what's great is that this sophisticated packaging comes in at around $7 at Trader Joes. Well done.

This brings me to this short tale of pretention. I was at a wine shop/bar a few months back and a discussion of wine closures was going on next to me. It was interesting hearing wine drinkers reveal their pretentious distain for non cork closures. The discussion was bereft of facts and dripping with a myriad of traditional wine drinker pretensions.

I kept silent until I heard the woman next to me, who had a glass of LD (late disgorged) sparkling wine, say that at least wineries weren't using bottle caps. At this point I joined the conversation and asked the woman if she detected any bottle cap aromas or flavors from her sparkling wine. She said of course not, this was methode champenoise sparkling wine. I told her I understood, and repeated the question. At this point I had everyone's attention because they thought I had made a horrible blunder in wine knowledge. Before she could respond, I pointed out that secondary fermentation takes place in the bottle, secured with a BOTTLE CAP. I went on to point out that because her sparkling wine was late disgorged, the wine 'sat' on a bottle cap for YEARS. Then I repeated my question to her, did she taste anything synthetic or 'bottle cappy' in the sparkling wine? She said no.

So bottle caps are evil, wine should never be stored with a bottle cap, a bottle cap would ruin the wine, wine is sacred, a bottle cap smacks of haste and industrial efficiency. So go dump out your methode champenoise sparkling because its surely been affected by the evils of the most vile of synthetic closures. The BOTTLE CAP.

Wednesday, August 18, 2004

Now that's what we're talking about!

Well, its a start, but at least this "website for guys" includes wine reviews with their T&A :


See! Wine doesn't have to be pretentious and it can even help get you laid! With some continued progress on packaging, we may actually change the image (a little). . . .

Monday, August 16, 2004

"Let Them Eat Cake"

While the HJWOW realizes that writers need things to write about, one wonders whether some writers really understand such nebulous concepts as capitalism and the free market. Only in this industry do you find people suggesting that consumers should be told what to like. Somewhere, Adam Smith is spinning in his grave:


Let's consider this article for a minute.
While one readily realizes that most wine writers have a limited understanding of the actual wine business, its baffling that pundits like this can malign producers of a consumer product for giving consumers what they want! If consumers aren't buying riper wines, then wineries will stop making them! As with alcohol-removed wines, consumers aren't buying so wineries aren't producing. It's simple enough for a fourth grader to understand.

"Higher alcohol often accompanies the full, ripe, deep qualities that grace some of the most highly prized New World wines. It usually results from ultra-ripe fruit, often picked late into the harvest season, that also yields a taste

Yes, "a taste explosion". A tad overstated, but is this undesirable somehow? Less ripe wines (okay, let's just come out and say it - "French wines") get much of their flavors from oak and Brett. If consumers want a style of wine that tastes like the product was made from a fruit product (and has flavors descriptors associated therewith) then wineries should make wines that these "philistines" will purchase. Why must segments of the wine industry tell consumers what they should drink? Didn't these types of business practices go out with Henry "You can have any color as long as its Black" Ford? And further, if the most popular critics are supporting this view, doesn't that reinforce the need for this style?

"More influential has been the will of the market. Usually big and bold, high alcohol wines can be enjoyed within a year or so of release;"

And this, dear Mr. Bonne, is patently absurd. 99.99999% of wine produced is consumed within days of purchase, irrespective of alcohol levels. Only a very, very small portion of wine is intended for and even purchased for, long-term aging. Further, even with these wines, alcohol level is not the most determining factor in whether a wine can be enjoyed within a year after release. And as for the "will of the market", the will of the market seems to be for better-tasting wine and (again) if that brings consumers to that wine style, why must we denigrate their palettes by implying that they are unsophisticated for liking a tasty product. Higher alcohol levels are a by-product of the style, not the intended result in and of itself.

The times are changing, and producers can either join the French and drown in a sea of unsaleable wine, or actually give consumers what they want. . .

Thursday, August 12, 2004

Wine Marketing Part 3 - WineX Magazine

Since the dawn of marketing, it has been clear that catching a person's eye with an attractive face or body can move product. Pretty simple, right?

Yet the Wine Speculator graces its covers with the likes of Rhea Pearlman and Danny Devito. The only attractive image in the last issue was an ad for one of Shanken's other rags - "Cigar Afficianado" that had a hot Cuban Model on the cover. . . . Why are they not getting it? Can't a wine magazine have tasteful hotness without clouding its stuffy image? Are we doomed to look at Shanken and Matthews in yet another pose with wine glasses (
Riedel, I'm sure) in every issue? Thank God I don't pay for it at $60 or whatever they're charging now for a subscription.

On the other hand, Wine X actually has pictures of good looking people on the cover of their magazine, both male and female. Somebody over there actually understands that the human brain (particularly the ones lodged in young adults) is more likely to notice advertising or magazine covers when they have something worth looking at. Further, if the wine industry's latest noise about marketing to Gen-X & Millennials is anything more than just lip service, they should be committing some serious ad dollars to this magazine. Yet, we expect more "trendy" ads like "Wine, since 6,000 B.C." Yeah, that's going to bring in new drinkers....

Great Article on Direct Shipping

Carol Emert has a great article in today's SF Chronicle.

Among the gems: "Myth No. 1 -- Liquor distributors are the defenders of America's youth
Let's review a basic fact: WSWA members make a living delivering alcoholic beverages to bars, stores and restaurants. The Colt 45 sold in a Tenderloin hovel, the icy cold Bud available at gas stations, the Jagermeister pushed by scantily clad women in college-town bars are all transported by WSWA members. " - very nicely put.

And we all know that underage drinkers always plan their alcohol purchases weeks in advance don't we? (sarcasm). The worst part of it was that I couldn't find the drunken orgy slideshow!

Tuesday, August 10, 2004

Where are brother Bluto and the Deltas when you need them?

Its guys like this that give college students a bad name. What happened to irresponsibility? What of debauchery? Who will stand up for the right to increase one's alcohol tolerance?


Perhaps they could start with the prosecution of the students, who willfully and knowingly violated the law. . . .

Monday, August 09, 2004

Why Does Wine Cost So Much? - Part II

Let's make a wine the way we did pre-2001. We'll make 20,000 cases of Napa Cabernet for an existing program. We don't have a winery or a tasting room (to simplify what's already a complex exercise).

  • Vintage 2000 Napa Cabernet cost $3,100 for a ton of grapes. We will crush 300 tons at a local winery that has some excess capacity for $300 per ton. By January, we have 20,000 cases worth of Cabernet wine sitting in a tank that has cost us $3,400 per ton or (at 65 cases per ton) $53 per case or $4.42 per bottle.

  • Now, we need some oak to age our wine in. Assuming that our wine needs 50% new French Oak, we will need approximately 400 new barrels and 400 old barrels to hold our wine. Further assuming that these barrels will be with us for three years before we kick them out, we will absorb $9.33 per case for the new oak and $1.69 per case for the older oak (trust me on that one, I'm not going to write out the calculation!) for a total of $11 per case.

  • We will also incur storage costs for these barrels. Let's assume that its about $3.50 per barrel per month - this will also cover some of the barrel work such as racking and topping. If we age our Cabernet for 18 months, we will incur an additional $2.50 per case.

  • Now, we're ready to bottle. Let's figure that we'll use a fairly conservative package that costs us $12.00 per case including labels, corks, bottles, etc. The use of someone else's bottling line will run us about $2.00 per case, so we're now down another $14.00 per case.
  • We still have to bottle age our wine and pay taxes. Assume $1.50 for warehousing and $3.00 (average) for excise taxes.

  • Total costs to date are as follows: $53 per case for fruit and crushing, $11 for barrels, $2.50 for aging, $14 for packaging and bottling, and $4.50 for storage and taxes. Total costs to date = $85 per case or $7 per bottle.

  • Now, let's sell our wine. We want it to have a price of $25 per bottle at retail which will put us on the low end of Napa Cabernet (remember this is vintage 2000, before the bulk wine market drove prices down) so we will establish our wholesale prices as follows: We don't have a sales force, so we will use a broker/sales and marketing firm to sell our wine. They will take a 25% fee for their services. Therefore, working backwards, if the consumer pays $25, the retailer wants to pay $18.75 per bottle to get their 33% margin, the wholesaler wants to pay $15.00 per bottle to get their 25% margin, and the broker will pay $12.00 to get their 25% fee. So, we sell the wine for $12 and it cost us $7 to make. That's a profit of $5 per bottle or $60 per case.

  • Nice, huh? Unfortunately, that $1.2 million is only gross profit. We haven't paid any of our overhead, employees, interest, taxes, or ourselves yet. We also need to have money available to buy next year's grapes and barrels somehow.

  • Winery overhead for a "virtual" winery like ours would probably be pretty low, around 5% of revenues or $150,000. We probably have a pretty big loan for our barrels and grapes, maybe as much as $1 million if we financed almost all of it - that would require an interest payment of $140,000 at 7% interest (for the two years we held the wine before selling it). We will pay around $350,000 in taxes as well. Leaving us with cash of around $550,000 to pay ourselves. Sweet! Except for one thing. We still owe the bank $1 million and we need to borrow for the next vintage.

  • So what do we do? Several things: We should have borrowed less money and started with more of our own, that lowers our return, but the bank probably won't loan us $1 million without some coin of our own at stake. We can raise our prices to the consumer or we look for ways to sell direct via tasting rooms and mailing lists. This gets us from a wholesale price of $12 per bottle to a retail price of $25 per bottle. Provided we don't take on too much overhead, this should help our profitability considerably.

  • The bottom line is that two axioms in the wine business hold true: "To make a small fortune in the wine business, start with a large one" and "you don't make money in the wine business, you build equity".

Thursday, August 05, 2004

EXTRA! EXTRA! CA Supreme Court Overturns Wine Labeling Ruling

Reports that Fred Franzia held a dinner where he bludgeoned his chief counsel with a baseball bat are completely unfounded:


Tuesday, August 03, 2004

Wine Marketing Part 2 - Female Winemakers - should being HOT be a requirement?

Now this might seem trivial or even sexist question but with labels like Cleavage Creek and Pin Up Wines should we not have HOT women making the wine and not just on the bottle? Requiring female winemakers to be HOT would be for the good of the industry and wine recognition in US culture.

I mean really, if Helen Turley had to get out there personally and sell her wine she'd actually have to charge a reasonable price, and give away free hats or something. I suppose some people are best left in the cellar to do their work.

Dawnine Dwyer made some nice sparkling wine at Chandon but she wasn't lighting fires among drinking age male consumers. Not that Gina Gallo isn't attractive and I'm sure putting her in Gallo ads might work in one form or another but I'm talking about recruiting total Hotties into the winemaking field. Currently there are no such programs. And I'm not talking about Maria Sharpova or Britney Spears, these women don't have to be recognizable world-wide, just attractive enough to get the attention of potential customers. We're talking about expanding our demographic here people! We're not after NASCAR yet, but there's no reason Beringer couldn't sponsor a car!

We may even have a 'Hot Winemaker Gap' with Europe. I find that unacceptable. I'm talking about making Camille Seghesio 'Winemaker of the Year'! Ok, so she's not even a winemaker, what does that matter really? We can't keep wine hotties hidden from public view. How many years do we have to wait before the 'Women of Wine' Playboy pictorial. Too long I think. Is wine's image in the U.S., so rarified that there cannot be the equivalent of the Bud Light Girls? The wine industry could have the 'Wine Wenches', a traveling band of female pulchritude singing the praises of wine (as a BEVERAGE).

Unfortunately I don't think that the U.S. will lead the way in getting Hotties to the forefront of winemaking or wine marketing, the puritanical underpinning of this country and our misguided deference to French wine culture will hinder us. I predict the Australians or the South Americans will lead the way. A new era for the wine industry awaits, we have but to embrace it.

Wine Business Part 1 - Duckhorn Article

(This is the first of a series of posts about the business side of the wine business or "why does wine cost so damn much?")

The Caffaro article seemed to go over better than "My Pet Goat", so I thought I'd post a link to another great wine article, particularly the first few pages ("cash in, cash out" is the first page)


Bear in mind however, that since writing this article (circa 1999, I believe), Duckhorn has increased cases shipped by 50% and doubled their average retail price. Needless to say, they're doing okay and not "struggling" the way they once were. . . .

"Waiter! There's a horse in my glass..."

A Short Discourse on the Evils of Brett (Brettanomyces yeast)

One wonders why anyone would ever seek out a wine described as "horsey", "barnyard", "manure", "fecal", "band-aid", "animal", "leather" or "medicinal".

I'm not sure where (or when) those descriptors even become desireable.

I'll be honest - I'm a prude - my parents raised me not to think of ever putting manure into my mouth. I can't imagine after avoiding such an experience for all my life, why I'd fall off the wagon now.
And what a marketing "holy grail" they've hit upon ~ your product literally tastes like shit and you've convinced people they want to drink it - for astronomical prices, no less!
Next they'll be selling ordinary tap-water in fancy bottles...oh, wait...they're already doing that.

In the US, we avoid making wines with Brett, though some winemakers feel they're paying tribute to European wines by having some Brett character in their wines (or perhaps they're just lazy about their sanitation). Believe it or not, both Robert Parker and the Wine Spectator routinely give wines contaminated with Brett high marks! What's up with this?

In European wines, more than 40% of wines on the market are typically at the threshold level of detection for half the population! And many are well above the threshold. It's usually harder for most people to pick it out in heavier wines, though wines infected tend to taste the same no matter their origin or varietal (from research by M.Malfeito-Ferreira, Instituto Superior de Agronomia, Lisbon, Portugal).
So when purchasing a european wine, almost half the time, I'll get a bottle that tastes like a barnyard just on chance alone. What am I putting up with this for?

Check out the following from
Tom Ostler (link to the full article) in which he has the following from a 1994 tasting:

"...[A] presentation made by Erik Olsen of Chateau Ste. Michelle Winery, Washington was accompanied by a tasting of three wines with varying levels of 4-ethyl phenol, which is a byproduct of Brettanomyces.

1989 Chateau Pichon Longueville Comtess de Lalande, Pauillac: This wine differed greatly from the Washington State wine, showing a classic round Bordeaux bouquet, where the berry character might be described as 'cassis', with just a hint of burnt wet wood offering complexity; this wine had less fruit and had distinctive barnyard aroma, though desirable -- it was quite harmonious. Tests showed this wine to have 15,800 ng/ml of 4-ethyl phenol. The Wine Spectator gave this wine a score of 92 points. "

...eeewwwwww! Yet another problem of Brett infections is that they tend to depress the overall intensity of the fruit aromas in the wine....and then this:

"1992 Cabernet Sauvignon: This was plummy, jammy and 'juice-like' -- it did not have a vinous quality about it. It was tested for Brett, but no 4-ethyl phenol was found.

1989 Cabernet Sauvignon, Chateau Ste. Michelle, Washington: This wine had a beautiful black currant nose, showing lots of fruit and very attractive varietal characteristics. Laboratory tests revealed 4-ethyl phenol to be 3 ng/ml. The Wine Spectator gave this wine a score of 88 points. "

So what's with the inflated scores for wines that have less fruit aromas and vile off odors of large farm animals?
The answer is two-fold.

First, we largely learn about wine from the culture we're in. In the US, the wine culture (viniculture) is rather "Puritanical" (read "abstinance and temperance"). People who start to taste wine, and find they enjoy it tend to embrace those cultures which include wine in their daily routine. These cultures (European mostly) also tend to have a large proportion of their wines infected with Brett, and the acceptance of Brett's effect on wine is taught as well.
(It's the this-is-the-way-wines-are-supposed-to-be syndrome...they tend not to see any problem with it at all.)

Second, people have a wide variation in their ability to detect Brett. To some it's vile at less than 50 ppt (parts-per-trillion), while others don't seem to be able to distinguish it at levels almost a thousand times higher (though they do report that some decrease in the fruit aromas takes place). It won't come as much surprise to the readers that I fall into that special - dare I say gifted? - hypersensitive group which can't stand Brett at any level above ~50 ppt.

To those of you who can't smell it, I'll clue you in that it truly is like a barnyard full of manure, or sometimes heavily medicinal just like a newly opened box of Johnson&Johnson band-aids....and I hope you don't think me rude if I snicker while you quaff.

Monday, August 02, 2004

The Marketing of "Gay" Wines - out of the closet for good?

It started with La Crema going after the gay market (sponsoring San Francisco's Gay Men's Chorus) in a rather quiet way. A demographic that (reportedly) drinks much more wine than average and is (also reportedly) very brand loyal.

Now, Fat Bastard is starting a launch of sales materials that are specifically targeting gay men in a very direct way. Although their website materials are not geared toward a specific orientation, they do reveal the new spin that the phrase "Fat Bastard" will be getting. . .


Word is that promotions in bars will include a free condom with a Chardonnay-by-the-glass program. The condom has the FB logo and will say "wrap your fat bastard".

This leads the HJWOW to wonder, will there be other tie-ins?

  • "Buy a used barrel, get a free bung."
  • Grocery cross branding with personal lubricants?
  • With proof of purchase, enter to win a spot as a cast member on next season's "Queer Eye..."