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WINE AND FOOD WEDNESDAY
10/07/2015
Sic Transit Gloria—Will High Prices Kill California Wine?

By Charles Olken

You may have noticed that I have been out of action for a few weeks now. No problem. Mrs. Olken finally got the long European vacation she has been promised. And while this vacation was spent in England where very few good wines are grown and thus the landscape on wine lists and in retail stores is dotted with the bottlings from everywhere in the world, the thing that stood out most clearly for me is that the English no longer drink a lot of Burgundy and Bordeaux. Those fancy bottlings are just too expensive.

The alternatives to which they have turned looked a lot like the alternatives to which we have turned here in California—absent the California selections of course. Southern Rhones, the Languedoc, Savoie, the Loire, Spain, Italy. It’s the same thing—only different—but the same thing nonetheless. High prices drive people to other choices for their everyday tipple.

But California is not all Bordeaux and Burgundy any more than Europe is now, or ever has been. The days when great wines were semi-affordable are long gone. And the days when folks turned to the Loire or the southern Rhône have been around forever. This “wine is too expensive” is not exactly a new phenomenon, and it is not exactly unpredictable that the best wines in California, having achieved world-class status in Cabernet and Chardonnay for decades ago and in Pinot Noir for the last two decades, would also become expensive for every day service.

And that brings us to the worries of experienced commentators like Jon Bonne and Steve Heimoff, both of whom have lately noted that California wine is pricey and that the Napa Valley is crowded and expensive. They are quite right. Very good wine and top wine destinations are expensive. So are Mercedes cars and trips to London. Ever try to buy a Burberry raincoat? Chateau Margaux is less costly.

Prices for almost any good in this world reflect first the cost of production and secondly a response to demand. Ch. Margaux, whose futures I bought in the early 80s for under $50, and $28 for the good ‘81s, now cost up to fifty times those amounts. That is demand talking, but, eventually demand does drive up the cost of production as land costs and marketing schemes get more challenging. Ask the Champenoise about how they sell their top products.

Napa Cabernet is expensive because it is so good. Back when CGCW was in baby clothes, we did an interview with Robert Mondavi. He predicted that Napa Valley land would one day rival the prices for fancy European vineyards based on demand for the product that world-class quality would bring.

When learned folks like Bonne and Heimoff worry about “too expensive” they miss the big picture. It is the buyers, not the sellers, who have caused wine prices around the world to escalate wildly. And, yes, some consumers have been squeezed out in the process. I understand the issue. I am one of those who no longer fills his cellar with first and second growth Bordeaux and the top Napa producers. A bottle here and there is all I collect these days. Three-digits wines are not the tipple of the everyday drinkers and not even of most wine-knowledgeable folk.

We have long gone elsewhere. But, that has not stopped prices from continuing to escalate or discouraged the crowds from clogging the roads in Napa and Tuscany. Friend Heimoff is concerned that a weekend in the Napa Valley can cost upwards of a thousand dollars. Has he tried to go to a Golden State Warriors game or a Broadway show? Multiple hundreds for starters, and that is before dinner and lodging.

So, let’s get this straight. Prices are not going to come down geometrically. The bubble, if it bursts at all, will be long in coming and will not stay burst unless global warming turns Burgundy into the southern Rhône and Napa in Lodi. And then we will all head to Alsace and Oregon and change the economics there. It is consumption that is driving this engine, not greed, and all the handwringing in the world cannot change that equation.


 

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Comments

Napa Valley "cult" Cabs and Cab-blends
by Bob Henry
Posted on:10/14/2015 10:57:20 PM

"... It is the buyers, not the sellers, who have caused wine prices around the world to escalate wildly. And, yes, some consumers have been squeezed out in the process. I understand the issue.

Expensive California "cult" Cabs and Cab-blends
by Bob Henry
Posted on:10/14/2015 11:04:03 PM

The text of my query was cut-off.  Once again, with clarity.

"... It is the buyers, not the sellers, who have caused wine prices around the world to escalate wildly. And, yes, some consumers have been squeezed out in the process. ... I am one of those who no longer fills his cellar with first and second growth Bordeaux and the top Napa producers. A bottle here and there is all I collect these days."

Charlie, do you review expensive Napa Valley "cult" Cabs and Cab-blends for CGWC?

Or are they outside of your editorial budget?

Consumers switching from expensive Napa Valley producers to other wines is explained by economists through the concept of an "indifference [preference] curve."

 

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