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Bargain Wines for Tax Season: Better than Ever
By Michael Franz
Mar 16, 2010
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The deadline for filing income tax returns is looming over us once again, so your financial forecast will soon be coming clear:  Either you’re about to send a check to Uncle Sam or he’s about to send one to you.  This will also clarify your vinous forecast:  Either you’ll be sticking to bargain wines for a while, or you should be considering a celebratory splurge.

This column is the first of two that will continue a string of tax time roundups that I started 16 years ago for The Washington Post, offering pointers to great bargain wines for readers compelled to write checks to the IRS, as well as splurge suggestions for those receiving refunds.  At this time last year, we were all languishing in the Seventh Circle of Recession Hell, with the Dow Jones average at a 12-year nadir.  Under those circumstances, I simply couldn’t bring myself to continue offering splurge suggestions.  Things look notably better now, though “notably better” is a long way from “fabulously flush.”  Accordingly, I’ll resume the splurge suggestions in a tentative way this year, but keep the emphasis squarely centered on bargain wines.

My specific recommendations will appear in my April column, which will be published here on April 14, immediately before the filing deadline.  At the present moment, you may not have your taxes prepared, and may still be in suspense about whether you’ll be getting good or bad news for your wine budget.  However, I’m happy to report that there’s already very good news from the wine front, which is that reasonably affordable wines are now the best that they have ever been.

I’m absolutely certain that I’m correct in this pronouncement, and that’s saying something, since I’m almost never “absolutely certain” of anything due to my personal temperament and training.  This column is devoted to explaining how I know that the pronouncement is true, and examining the reasons why it is true.

I know that the proposition is true because, at the start of each calendar year, I conduct peer-group tastings of over 1,000 wines priced around $12.  I’ve been doing this for a decade along with my WRO colleague Paul Lukacs, with whom I work as a consultant for the Washington, D.C.-based Clyde’s Restaurant Group.  Without getting into all of the particulars of this process (many of which I explained in last year’s tax time column), I can say unequivocally that the wines that we have tasted during this span have increased in quality while also decreasing in cost.

On the quality side, the percentage of flawed wines has decreased markedly, just as the percentage of true contenders has increased.  More countries and regions are producing world-class wines than ever before, and hitherto unknown areas are debuting very strong wines each year.  Pinot Grigio from Transylvania?  I couldn’t believe it either, but the wine was delicious, and I could provide many more examples.

On the cost side, we’ve wondered for years whether we should raise the cost ceiling for the wines that we solicit for this project to account for the effects of inflation.  Yet we’ve always elected against doing this, and though we’ve worried that quality would slip as a result, we’ve discovered to our relief that it has either held constant or risen each year.  Inflation has been almost flat for the past year, but that hasn’t been true during the past decade, and every dollar has significantly less purchasing power than it did at the turn of the millennium.  Nevertheless, it is absolutely clear to me that $10 or $12 will buy you a better bottle of wine today than it did in 2000.

Why is this true?  Multiple factors are at work, but I believe that three are particularly salient:

  • Advances in viticultural and winemaking technology and expertise have enabled vintners to grow better grapes and produce purer, more flavorful wines than ever before
  • The advent of truly global competition has compelled vintners to purchase this technology and adopt advanced production techniques on pain of commercial catastrophe
  • Localized oversupply of wine grapes and a global softness in market demand have compressed profit margins so that wines in this price range are now selling at prices very close to production costs

I’ll address these factors briefly in order.  I spend a lot of time overseas each year checking out the wine scene in other countries, and I’ve made more than 1,000 site visits over the years to producers around the world.  (Yes, I’ve kept track, and yes, I know that’s a little weird.)   In one sense, these visits are becoming a bit less illuminating on account of an important fact:  The layout of vineyards and the working interiors of wineries are now much more uniform around the world than they were 15 years ago.  Today, almost everybody everywhere has access to techniques and equipment that were recently limited to the world’s premier wine estates.  Plenty of boring wines are still being produced, but downright flawed wines are becoming ever rarer, and really good wines are becoming ever more common--even at price points that were formerly perilous.

Second, the increasing uniformity of viticultural techniques and winery equipment has arisen as a direct consequence of the globalization of wine commerce.  I’m sure that lots of investments in vineyards and wineries have been made because vintners have an artistic drive to improve their wines.  But I’m also sure that many more investments have been made because vintners know that competitors in other regions and countries will kick their asses commercially if they don’t.  Fifteen years ago, a lazy guy named Pierre could sell all of his Côtes-du-Rhône without bothering to read journals or buy new barrels or update his lab equipment.  But if Pierre tries that today, the only interesting question about his demise involves the precise order in which he will be deserted by his customers, ignored by his distributors, or dumped by his importer.

The third factor working to boost the quality of relatively affordable wines is the combination of a supply surplus in certain countries coupled with growing price sensitivity among consumers.  For example, overly optimistic expansion strategies led to serious over-planting of vines in places including Australia and New Zealand’s Marlborough region during the past 10 years, and today the imbalance of supply and demand has led to a dramatic lowering of prices.  Two years ago, we saw almost no Sauvignon Blanc from Marlborough beneath the $8 wholesale cost ceiling when scouting for the Clyde’s Group.  This year, we saw more than a dozen of these wines.  Most of them were clearly not being dumped, as their quality was very high and the vintages were current.  The oversupply was simply such that all of them were exerting downward price pressure on one another, as no particular wine could hold onto its 2007 price and still be sold.

The connection between oversupply and consumer cost sensitivity involves some complexity, but is still easy enough to understand.  Sticking with Marlborough Sauvignon Blanc as an example, I’m convinced that the best wines we tasted had slid within our price range because their strong quality wouldn’t save them from stagnation unless they were priced fairly close to comparable wines that weren’t as good but were still solid enough for financially freaked-out consumers.  This past week, a major D.C. store was offering a good-but-not-great Marlborough Sauvignon Blanc, Monkey Bay, for a retail price of $6.66.  With a number like that being published in the newspaper, it becomes extremely difficult to sell significantly better wines like Clifford Bay, Fire Road, Manu, or Oyster Bay even at a reduced price of $12.

Two or three years ago, plenty of consumers didn’t care about spending $3 or $4 more per bottle to get a marginally better wine.  Today, my sense is that most consumers are willing to settle for a marginally lesser wine to save $3 or $4.  That willingness exerts a lot of price pressure not only within but also between product categories.  This is demonstrated by a few other prices in last week’s ad from that same D.C. retailer:  Penfolds “Rawsons Retreat” Shiraz – Cabernet for $4.88; Ruffino Orvieto for $3.99 by the case after a promised rebate, and Cavit Pinot Grigio for $3.49 after a rebate on three bottles.

Cavit Pinot Grigio is a perfectly nice wine, thanks in large part to the advances in technology and expertise noted above.  Nevertheless, a wine like the “Riff” Pinot Grigio from exemplary Alto Adige producer Alois Legader is significantly better, and $12 retail is a very fair price for it.  However, in the current consumer climate, I would not want to rely on sales of $12 Riff to pay my mortgage if that $3.49 Cavit were out there stalking my customers.  And in turn, I wouldn’t be all that confident about selling much Cavit even at $3.49 when it is possible for a consumer to trade up to Monkey Bay for a satanic-seeming number like 6.66.

Readers of this column who are members of the wine trade will know exactly what I’m talking about here.  They’ve been through a very tough 18 months lately, but then, so too have almost all of us.  On the bright side of things, the clear upshot of recent events is that there’s now a lot of very good wine available at lower cost levels, and wine pricing has generally become much more closely related to production costs than to marketing strategy or vintner vanity.  And in the long run, I’m sure that will prove to be good for all of us, and for wine’s chances of becoming a more important part of our culture.

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Questions or comments?  Write to me at mfranz@winereviewonline.com