Monday, January 20, 2014

Is the glass falling?

This was the news of the day in December, 2010.

In old-fashioned novels, old-fashioned characters will look at the barometer when a storm approaches, and they will say the "glass" is falling. (If you would like to hack your way through the counter-intuitive yet fourth-grade-science-level complexities of air pressure, storms, and what barometers measure, do go to the site You Ask Andy, where the answers are both elegantly written and designed for ten-year-olds.) My question for the day is: when it comes to the California wine industry, specifically the Napa industry, is the glass falling?

You might remember the bad news as announced on Vinography back in April, in a post that author Alder Yarrow called "The Coming Carnage in the California Wine Industry." I took up the issue myself, having learned what Mr. Yarrow had to say. The storm was coming. The great recession had hit people's pocketbooks, and too much high-end wine was sitting even then in warehouses in Napa, worthless to the consumer and worthless even as collateral to the banks which had loaned the money to the wineries to stay in business in the first place. As vintage after vintage came in, got made, and went into storage, there was no way the wine was going to become more valuable, except in taste, which doesn't matter to the banks. We know what happens to businesses whose products aren't wanted.

And how did Mr. Yarrow know all this? He had sources, as well he should, being a respected wine writer and the most prominent wine blogger in the English language. Deep Tank, he called one of them. The sources said the "carnage," the "shitstorm," the foreclosures were coming in the next eighteen months. Bad enough, Deep Tank said, for the wineries which actually sat on real estate valuable enough to be foreclosed upon. Many custom-crush wine companies, which make wine in large facilities but own no land, were simply going to "vaporize."

It's been six months. And now meet our own brand X, a fine Napa cabernet "reserve," the best and most expensive wine in the store. We try to sell it for $150, and we put it "on sale" for $99. Suddenly our most recent shipment came in at $67 per bottle, cost. This means we could drop its regular price to about $88 or $89, while still making, in theory, a decent profit margin. 

Theoretical profits. I'll bet banks don't like those, either. Is the glass falling?

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