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Monoculture in American Wine Regions

Bud Break

My favorite industry source, Wines and Vines had an interesting article on Napa Valley Cabernet Sauvignon prices. Napa Valley Cabernet Sauvignon owns the entirety of the valley these days.

They’re high.  Really. Really. Damn. High.

Much along the same lines, in Sonoma, Pinot Noir drives the bus.  

I can’t help but think, what happens in a wine region that has become something of a monoculture.  Quite frankly, it’s foolhardy for anyone with a vineyard in Napa Valley to grow anything other than Cabernet.

Given a standard Cabernet vineyard, you might make $7,000 per ton selling Cabernet. If you grew Merlot, you might get $2,000 of that these days.

Who in their right mind would grow Merlot or really, anything other than Cabernet in that scenario?

Really the only group who might be able to handle keeping other grapes in the vineyard, would be a winery with an estate vineyard.  At times your estate wine program grows what they know damn well will be nothing other than blending grapes.  But, if your winemaker hits on their blends consistently and those tend to go for the highest prices and keep the most consistent style year to year, it behooves you to make very sure that there’s enough of those blending grapes sitting around.

But, if you’re just a grower?

You graft vines over. You pull older ones out.  You get your vineyard over to Cabernet as quickly as you’re able to (after all, it still does cost you about $50,000 to get a single acre of vines online, grape growing isn’t a cheap endeavor).

What happens to regions that become monocultures?

Frankly, we don’t know. In the wine industry, we tend to look at old world wine regions to see how they do things.  In Bordeaux and really the rest of France, there are strict laws governing what grapes are in the ground. Bordeaux is known for blends and most vineyards have at least 3 of the 5 main varietals planted in the vineyard.  In Italy, it’s much the same, with the added focus on keeping a wider array of varietals because Sangiovese and Barbera take a long time to mature, while Dolcetto matures immediately. In Spain, Portugal and Germany there are blends and ying and yang wine grapes, some that need time, others that can be released immediately.

If you ask me to guess? I think vintners in Napa Valley and their counterparts in western Sonoma county will be concerned over both the long and the short term.  There’s been plenty of recent examples of regions where a specific varietal got decimated during a specific event.  As an example, Walla Walla lost a complete crop of fruit because of hail very late in a warm spring.

Not all grapes have bud break at the same time. Cabernet has bud break later.  That’s generally a damn good thing, you don’t lose an entire vintage like Walla Walla did.

But, it also ripens later.  If it has bud break a week or two later, it might ripen 6 weeks later.

In Napa Valley, hanging on the vine is a good thing.  But, October brings something that can kill off both the amount of fruit, as well as, the quality. Rain. In some years, it’s pretty nice to have some over ripened Merlot to add to your under ripened Cabernet Sauvignon to get to your normal mix, right?

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Sonoma Square Tasting Rooms

Wine Glasses

One of the most contentious aspects of the wine trade, one that the general public is basically utterly unaware of overall, is the push and pull between local communities and wineries opening tasting rooms.

There’s a common process that happens.  At the beginning, many a quaint downtown has been happy to see the previously vacant storefronts filled with businesses.  After some time, people start showing up.  Wine tourism is very real and a strong driver of tourist visits in a number of areas.  I wrote about the Sierra Foothills and how wineries in the region are working to life towns that look in some ways, like they might cease to exist if folks aren’t careful.

For a while, the locals tend to be THRILLED.  I was in Walla Walla two summer’s ago and saw the next steps.  Those increased dollars and foot traffic bring in a ton of businesses that the locals have always wanted.  Good food, a hotel or two and even more dollars for the local economy.

Eventually though, competition starts to grate on people.  Sonoma Square is probably my family’s favorite place to spend a day in wine country.  It has all the trappings of a wine country destination.  Yes, there’s plenty to drink.  But, there’s good food, really good food.  The kids park is awesome and centrally located.  The Barracks and walkable museum shows where California became a country and my school aged son, loves this kind of stuff.  It’s a great place to spend a day.

However, as Sonoma News reports, at some point the prices that are driven by the increasing appetite of the wine industry for space can drive out other smaller local business.  I’ve seen part of this in Los Olivos and other spots, but there’s a very real concern that wine country destinations, need to continue providing stores like children’s toy stores, clothing stores with reasonable prices and the type of spots that we all shop on a monthly basis.  Those are exactly the type of spots that simply cannot compete with a winery selling $75 Pinot Noir.

So what’s a region to do? Quite clearly, all the steps before the last one are great for local taxpayers in terms of the type of community that they live in, but also for their local government and its tax base.  But, how do you control the death spiral of local business that can result?

I think there’s a very real onus on local officials to have clear strategies on growth and how winery tasting rooms are considered part of the fabric of a town and not the only thing that’s going to exist.  Some cities try to do it, like Los Olivos has, by limiting the number of local tasting rooms.  Others allow a set percentage of alcohol permits as part of local business licenses.

I don’t think there’s a right or wrong answer, other than to note that cities and wider municipalities, need to try.

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Some Basics on Land Prices & Their Effect on Wine Price

dollar signs and prices in the wine industry

Over on Wine Business, there’s a section for real estate for sale.  Pretty much you see two general categories, wineries and undeveloped land.

Some extra background, it costs approximately $50,000 per acre to bring an acre of wine grapes fully online and into production.  That’s one part planting cost and another couple parts of the simple fact that it does cost money to farm grapes and it takes 5 years for a grape vine to be ready to produce high end wine grapes.

Let’s take this listing, a 12 acre parcel just outside Placerville in the Sierra Foothills.  The Foothills is an interesting region on a few levels and I can see Placerville being a draw for someone who wants some small town, with access to snow in the winter and warm summer temperatures.

I’ll assume that on that 12 acre parcel, that you can plant about 10 acres.  Gives you some space for a home, driveway and some other goodies that you’d expect at a working winery, like a barn.

Let’s also assume that since those vines are young, that you’re getting about 4 tons of grapes per acre. That gives you about 40 tons of fruit per vintage. Assuming some high quality fruit, I’ll go on the high end and assume you could sell the fruit for $2,000 per ton.

In essence you have an initial investment of $875,000 for about $80,000 in yearly revenue.

I mean it’s up to you to consider how that seems to work, but I’m guessing for most, those numbers don’t make much sense.

Thus is the continued and often exasperating financials of the wine industry.

BTW though, those numbers do work much better if you’re winery produces $50 Syrah from those grapes and is able to consistently sell that wine with an employee or two.

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Why are Wine Glasses Made of Glass?

Wine Glasses

It’s something that struck me during the Super Bowl when my 1 year old was entertaining himself by leaving the living room and coming back, in an attempt to grab any of the glasses that were on the coffee table (some wine, some beer, some water and even a kids juice mixed in) I wondered, why are wine glasses made of glass? I mean, as a parent, this isn’t exactly the perfect setup is it?  Sure we need them to be out of reach at all times, but occasionally spills happen even outside of little hands and cleaning up a broken glass with little feet around, is never a fun task.

I thought that there were two likely reasons for wine’s long love affair with glass.  First, glass lasts forever and much of what we do today, we do because it’s what always has been done.  For millennia we’ve been able to make glass, so as a species we continue to do so.  Secondly, glass is inert so it doesn’t change the flavor of your wine, which is a good thing.

After having a look a bit deeper, first impressions can be good ones.  There’s really only one real reason why we drink wine from a glass.  It’s inert and yes, we’ve done so as a species for an awfully long time.

According to Wikipedia, the history of glass-making dates to somewhere between 3500 BCE and ancient Egypt in the years before. While the history of wine is much debated, there’s plenty of evidence to show that Armenia, Egypt and Greece could make decent arguments that they invented wine.  If you noticed, that’s around the same region of world, even if it isn’t exactly a day trip in antiquity.

As an aside, it seems that in ancient Greece, wine was consumed in what looks an awful lot like a bowl.  Khan Academy with some good info, as always here. I noted that this doesn’t sit, if you put it down when full (much like a beer in the Czech Republic and how it gets refilled, until you say otherwise, but I digress) but even many years BC, glass was already the standard. For me, that felt important to note.  I also do think, we’ve drunk wine out of glass for thousands of years, now glass is simply more easily accessible for average people everywhere.

As far as my second point, I do think there’s some interesting stuff being done with different, eco friendly, inert (or at least largely so) wood’s, but glass is truly inert.  There’s no time frame to losing smells etc.  Glass just “is”.  It’s a vessel to get the wine from the bottle to your mouth, sometimes what works simply works and we shouldn’t mess with it too much.

In any case, that’s a powerful combination isn’t it? Wine glasses are made from glass because glass continues to be the best material to drink from and also because we’re able to produce them cheaply and easily for every human on the planet and have been doing so for quite some time.

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Another Day, Another Wine Algorithm

Machine learning image in wine

I was greeted by news this morning that a Master Sommelier, thinks that algorithm’s are better at predicting which wines you’ll like than are people.

So first and foremost, I have absolutely ZERO issue with the rise of machine learning either in a wider cultural context, or in the wine industry specifically.

That being said, there is one aspect of wine algorithm’s that no one is talking about: at their core, an algorithm needs good inputs to be able to make any firm conclusions.

So many of the computer learning processes out there rely on tasting notes.  They combine place or origin and then a set of inputted tasting notes, to make some conclusions about how similar a bottle of wine happens to be.

Quite honestly, that’s not good enough or specific enough data, so the outputs are corrupted.

Others in our space are trying to fix the issue of inputs.  There’s a local startup taking wine into the laboratory and measuring every individual compound in wine, to compare people’s reactions when you remove generic tasting notes and actually use science.

The startup mentioned above, gives folks a one on one quiz with a Sommelier.  Interesting but again, what’s unique about the input?

To me, a more scientific approach seems like something that has a higher chance of success over the longer term. People often ask if I think my wine club will eventually lose business to this type of machine learning and it’s something I’ve considered.  We know a few things, as people drink more wine they tend to want to try new and different things.  Plus, people just like the computer algorithm’s above need inputs.  Is it possible to know if you like Graciano, or something similar if you’ve never tried it before? While there is going to be more pressure on online wine businesses like mine to deliver the unique and different, or to compete solely on price alone.

So the next time you see a wine club advertising that they give you a few simple questions and then tell you everything you’d ever need to know about your palate, ask yourself is that enough information? What’s unique the inputs?

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Wine Country, Good, Bad and Different

School Bus Image

I saw an article today in the Napa Valley Register, about Napa Valley schools needing to cut about 9% of their budget and it got me thinking about a few things.

First, the full disclosure, my wife is a high school counselor, so the K-12 education system in California isn’t new to me and I do have more than a passing interest in this stuff as a father of boys and generally, as a California resident.

Ok, so the level of outside investment into Napa Valley is huge right? How many folks buying houses in Napa, especially the upper valley made their money somewhere in Napa, or even the North Bay itself? The numbers I’m certain are pretty small.

Outside investment is a good thing right? The problem for a school district, which makes an inordinate amount of cash from kids actually showing up at school is that folks that have made their millions already, don’t have school aged kids any longer. In California, the price per day that the state pays a school district for a child to attend school works out to about $40. In Orange County in Southern California, a school district asks for $40 if your child misses school.

Anyway, so there’s less kids per capita in Napa Valley than there would be elsewhere given the wider demographics at play.

The good of course, is that housing, like much of California, is expensive and is getting more expensive. There’s plenty of unmet demand as well.

Another issue that comes up with the Napa Valley schools is that it is still a rural district. Having kids coming from such varied parts of the valley adds an entirely different challenge that is consistent across much of the country of course, but we all have that idyllic image of walking the kids to school right?  I mean, Napa might have more schools than it otherwise would want largely based on how rural it happens to be.  Plus, that land is worth a ton these days.

Anyway, there’s a lot to talk about in terms of how the wine industry effects local communities.  Los Olivos and others across the west coast have already grappled, or are beginning to, with the idea of limiting the number of tasting rooms in small, rural areas.

No one, as it currently stands is looking at how a vibrant economy that’s being created, effects schools because that economy is based on a combination of empty nest early retirees and tourists.

The dollars are nice, but they’re going into the general coffers and not into the school district necessarily.

Every economy has built in winners and losers.  It seems in Napa, the school district might be on the losing side of how things are playing out, which is certainly unusual.

 

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An AVA Complaint

An AVA complaint

For those whom aren’t familiar, AVA stands for American Viticultural Area.  The entire concept was conceived some time ago to help explain the types of wines being produced in different regions.  Interestingly, the very first AVA granted in the United States happened in 1980, in that great hotbed of wine……Missouri. The main idea is that the AVA should tell you a bit about the quality and type of wine in the bottle.

So here’s my complaint.  Too often right now, I’m running into wines marked as simply California and not something more specific because of the way the AVA system is handled.

When you see a wine marked as California, it often means the cheap vineyards in California’s Central Valley. It’s usually the cheapest wine being produced in the state.

Not always.

Take the Kinero Grenache I shipped last month.  Perhaps the best Grenache in the state of California, but the vineyard sits too far west to be contained within the Paso Robles AVA.

The winemaker, who owns the label, didn’t have any choice but to label the wine as California.

Cheap, not even close….but the AVA approval process can take up to a decade. Seriously. Government red tape when it comes to alcohol and wine specifically is very real.

Another great example.  The wine I made myself, Aselstine Family Cellars.  I originally thought of making a 100% Grenache Blanc since that’s my favorite white wine grape.

But the only real vineyard sources that I had available to me, were from different parts of the state and there was not enough grapes at either site to make enough of the wine.  One was located in the Russian River Valley and one was in Ballard Canyon in Santa Barbara.

Both sites are highly prized and the AVA’s often garner around $40 for a bottle of white wine.

Put the wine together though and what do you end up with…..a wine that simply says California and that people assume, is cheap.

Look, there isn’t an easy answer here. Far from it.  I don’t even have a suggestion, it’s not like stuff as complicated as this can be explained by a label, often limited to about 40 words, with 30 of these prescribed by the state of California.

But, the number of wineries using the natural wine label, since they can’t access the term organic is emblematic of a wider issue.  Labeling requirements are pretty straight forward, but too many wines are falling through the cracks.

How do we fix it? I have no clue, but unlike a lot of people, I see it as an issue.  It’s starting to change the very choices that winemakers make and that’s something that labeling and federal law requirements and how they effect marketing, should never do.

I do know a good place to start. When wine regions want to apply for new AVA’s, there should be a straight forward and articulated process.  Look, the regions and the folks running the viticulture associations know what works.  They know that soil specialists and geologists are among a wide swatch of about 10 categories that need to weigh in on any proposed AVA.  Outline it for people. Make sure people considering new AVA’s know the rules of the game before they start playing as an example.

Secondly, don’t make them wait for so long.  I understand that sometimes paperwork takes a while, especially when you’re talking about digging up sections of old seabed.  But, if those rules were put in place before hand, shouldn’t you be able to tell people an answer to their AVA questions in relatively short order?

Lastly, let’s add this to the long list of things to brainstorm since it definitely does effect how people learn about and ultimately, buy wine.

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As an Industry and as a Society, Do We Care?

wine store shelf shot

I’m sitting at a Costco, waiting for a flat tire to be fixed, with my Chromebook hooked up to a wifi network, powered by a refrigerador about 10 feet away (it’s fast and yes, secure btw….the internet of things has come an awfully long way in the past 2-3 years) and the whole scene made me think about progress and where we’re at as an industry and as a wider society.

I see two main marketing messages happening in the wine space today.

Option One: Personalized Wine Recommendations, Producers No Longer Matter

First, there’s an intense push for customization coming from one side, at least a few of my wine club competitors included in that. There’s talk of using algorithm’s to help people to know the type of wine that they like.

Wine will be created and fed into the beast. There’s a HUGE advantage inherent to this model for larger producers. If you can sense what’s happening in the wine industry, you can make a few hundred cases of it pretty easily.

It’ll allow the largest and best funded wineries to give the market what the algorithm wants.

Cabernet Sauvignon is hot? Easy, we’ll make more of it.

Cool climate vineyards are hot? No worries, we bought 2 of them last year.

The larger producers will simply produce the type of wines that the market demands and will block the smaller guys from ever being seen.

Option Two: Artisans and Taste Maters Tell You What to Drink, Your Choice Doesn’t Matter:

Option two exists in a spot where my wine club happens to fall, into the category of someone else telling you what you should drink.

The problem is what if someone really only does like Pinot Noir from cool climates?

In this model, there’s a huge advantage to the smaller, artisan producers and those interested in the less than mainstream.  Make a Graciano, the snobby industry folks are likely to love it. Make a standard Cabernet Sauvignon from Napa Valley? It’s a tough sell, after all, we’ve already seen about a thousand of those right?

The problem is that the little guys charge more and do run out of wine occasionally.

Over the Long Term:

I think we’ll see more of both over the longer term.  Part of where the wine industry moves, as a whole is going to have a lot to do with how many sales really do start taking place online.

If the industry continues to increase online sales, then the option of larger producers dominating the online algorithm’s becomes more sustainable and IMO, a better idea over the longer term.  If people aren’t buying as many bottles of wine off their grocery store shelves, then they’re going to need help finding something to drink tonight. Wine drinkers, like the general public (myself included of course) doesn’t like change nearly as much as they self report to, thus the two party political system we have currently (maybe that’s cherry picking an example, but ok).

Plus, this model, if it exists online, will offer more competition and opportunity for a wider range of producers than does the current fight for shelf space that’s dominated by a handful of multinationals and little else.

The artisans will always have a spot of course.  There’s always going to be Sommelier’s and folks like me, interested in smaller projects.  However, what can they do, to mainstream themselves as much as possible?

Is there a way for them to do both? Can we talk about native yeast, choosing to make wine without sulfur like Donkey and Goat (as an example) while still being relevant to wine drinkers opening their only bottle of the month?

There in lies the real challenge.  I think most consumers want the smaller producers to win, but what’s being produced may not hit the market perfectly enough to sustain the wider market.  With average prices for boutique wineries often 2x to 4x higher than their larger competitors, what’s a wine drinker to do, but go with the bigger guys more often than not?

I’m going to be trying to feature some smaller producers that I believe are truly doing both well in coming entries. Guys like Kaena and their entry level bottles around $20, are a great example.

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Dear Media: Enough with the BS Stories on Wine Disruption

Disruption in the wine industry

So Forbes did it this week, again.  Another story about a wine company “disrupting” the wine industry.

So these stories always come with a few pieces of information. First and foremost, they feature online sales. About 5 years ago, my online wine club was probably considered to be disruptive, then again the business model had been created in the early 1970’s so maybe some folks just weren’t paying that close attention.

Secondly, there’s some unique aspect to the sale.  In this case, you learn everything about the wine, but don’t know the brand.  Other times, there’s a winery masquerading as a wine club.  Still others, it’s a wine club saying they ship small production wineries and mostly, it’s bulk, crappy juice.  Others still, it’s a group of newspaper wine clubs all shipping the exact same wine, made at the same time, but bottled under different labels, under the assumption that consumers can’t really tell the difference anyway.

Oh and all the above only exist because of a single thing, discounts.  Seriously, every single “disruptive” wine industry company that gets profiled, gains business by discounting.  At least according to the media.

There’s a problem of course…..IT DOES NOT HELP WINERIES.

Let’s have a look at other actually disruptive companies in other industries, do any actually exist only based on discount? Uber offers a more responsive, faster and easier to communicate taxi experience. Airbnb offers hotel rooms in more different sizes and price points (some less expensive, some more).  Amazon’s Prime program offers free 2 day shipping on items, which my wife and I consistently use to buy kids birthday gifts to save us 10pm runs to Target. Sometimes cheaper, sometimes full price. Netflix, Hulu and SlingTV are trying to find ways to render the cable box obsolete, or at least the 2 year contracts that accompany them. Facebook has made high school reunions, passe.  I mean, the conversation is a joke compared to a generation ago right when you wondered where people lived, or wanted to see pictures of their kids.  Now it’s, hey how was the doctor’s appointment for the baby last Tuesday? Then there’s Elon Musk’s suite of companies doing everything from revolutionizing how we power our homes, to our cars to our space program and eventually, hopefully how we travel.

Look, there hasn’t been a number of actually really innovative wine companies over the years, but there’s ample opportunity for that.  Here’s three that I think have come the closest:

Cellar Tracker: So there’s a number of cool parts of the app.  First, communal reviews of wines including a listing of how many folks on the software have the bottles in their cellar.  For smaller producers, these might be then only true reviews they have.  Also, there’s drinking windows and more information no matter the production size.  For an app that started simply to let you track the wines that you have, it does a ton these days. The part where CellarTracker might eventually make some money is their where to buy list on the side of the screen.  The theory is that if you read someone’s review of a wine and it matches yours, you may look at their virtual cellar and buy some bottles that they’ve liked in the past.  I don’t think this happens a ton yet, but as we’ve learned with other truly disruptive businesses, having enough users give you the chance to figure out revenue later on. Vivino is similar, but when I can’t tell the difference between the two, I’ll credit the one first to market.

Naked Wines: So technically they’re a competitor of ours, but I really do like the idea of crowd funding new wine projects.  I don’t know many of the behind the scenes details outside of perhaps some scarily low margins, but there’s been plenty of top flight winemakers that I’ve worked with that have crowd funded new tanks, concrete eggs and other equipment.  Maybe Naked gets to the point where they’re a logical landing spot to fund that stuff, simply by making some extra wine.

Custom Crush: For years, winemakers had no where to make their wines.  Napa Valley, ever at the forefront, allowed people to permit a commercial winery in their garage of 200 square feet. Custom crush allows for the next step up, a logical spot for someone making a few thousand cases to do so professionally. Most have a full time winemaker and manager on staff, a small tasting room that basically never gets used and allows winemakers to do their day jobs and make some wine on the side. Some winemakers, like Michael Sigouin at Beckmen could make his Kaena brand on site, but not everyone has that advantage.

I know you’re wondering, what would I see actually disrupting the industry?

To start, there are imo, two major issues inherent in the current wine industry….well three, but the main one is completely out of our hands. I’ll touch on the government’s general unhelpfulness at the end.

First, even if a great winemaker is making wine at a custom crush facility, it’s really, really difficult for them to gain a ton of sales either through the 3 tier system, or directly to consumers. Someone will eventually make it easier for them to do both, DTC for in person sales on some type of rotating basis (since the guys that would need the help wouldn’t be able to supply enough wine to have wine placed at a major urban tasting room for long).  Trade sales happen 0% on any type of website, or platform currently.  If a winery has a unique offering at a fair price, I’d love to hear about it directly from them instead of through a third party, taking a cut.

Secondly, there’s got to be something better about connecting people interested in wine and those making it.  The internet is quickly moving away from text into pictures and video.  Reading wine tasting notes is often painful even for those of us within the industry.  Plus, ask anyone about their wine tasting experiences and they’ll often tell you about how they loved the winemaker or the hostess etc.  It’s just as much about personality as it is anything else.  Video tells the tale better than text for all but the very best writers and winemakers are not traditionally the most interested in writing. That’s why Madeline at Wine Folly has done such critically acclaimed work, she’s one of the few working in pictures, instead of text.

Lastly, the entire 3 tier system is inherently broken.  It’s election season and we’ll hear ad nauseam about how messed up Obamacare is after only a few years, yet the system created for alcohol sales hasn’t been updated on the federal level since the end of Prohibition.  It’s wrong that wineries and retailers are sometimes allowed to compete, sometimes not.  Not with each other and certainly not with government owned entities. It’s the 21st century, internet sales aren’t going away no matter how old school anyone else, so let’s create a suite of laws that make the current setup function better.

My general list:

  • An easy and free permitting process for every winery and every retailer, in every state that can be done online in one central place (1 form, for 51/50).
  • Require the seller to collect the correct taxes for each jurisdiction and pay those quarterly to the area where the wine is being delivered. Again, done online with integration to the first form so everyone gets paid on time and correctly.
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The Shady Underside of the Wine Industry

throwing shade wine industry style

There’s something that I’ve had on my chest for a bit now and I’ve been cautious, even afraid to write about. Normally I don’t really give a crap, it’s the nice thing about owning a small business….there aren’t a lot of people to answer to.

That being said, there’s a shady underbelly to the wine industry, at least there are some bad actors and I’ve done business with at least one of them. I don’t feel any better about it now than I did then.

Ok, so here’s some background. The vast, vast majority of my wine comes from relationships with wineries and winemakers.  I buy direct for a few reasons. The price is better.  The wine is better.  Also, it’s a hell of a lot more fun to own a wine business and actually spend some time in wine country. Let’s be honest, that’s the part that you all picture when you think of what I do…..sitting in Yountville having a glass of wine.

Photographic evidence that does happen and has for a while.

Ok, so I won’t name the middle man in question for a few reasons, but I am sure they’ll know exactly whom I am talking about here.

Sometimes, wineries have relationships with distributors or brokers that necessitates working with some sort of middle man.  Some middle men are quite good. Hell, I really like some of them.  Some know their stuff and they bring stuff that I wouldn’t otherwise find.

Other’s set up relationships and even if I find a winery, completely independently of them, and want a cut.

That makes me and the winery both pissed off, if you were wondering.  We both feel like we deserve that cash, which amounts to about 15% of the purchase price of the wine in question, or at least the chance to negotiate who keeps it.

That’s where the 3 tier system that came into being after Prohibition in this country breaks down. I’ll talk about the Commerce Clause and how wine laws run afoul of it in the coming weeks, but I’ll stick to telling a sordid underbelly story here.

So there was a winery that necessitated me working with a middle man to get the wine.

My “Sales” rep became a friend and they did, admittedly shuttle me some good wine over the years.  I was hardly a big client though, perhaps to some of their frustration.

Around the time of my relationship ending with them, things started to look funny.  Instead of paying them directly, I had to pay a “funding” company. Evidently they had “sold” some level of future receipts for present cash flow.

I’ll let you Google that one.  I had to.  It’s about as bad as you think. Ok, it’s actually worse.

The folks at the funding place were nice enough, but it was clear they needed to be paid almost immediately, even if the wine industry standard is a net 30 day payment cycle (and quite honestly, about 30 days after that before anyone takes notice).

Then, I had a conversation with a winery.  It turns out that they sold me some wine through this middle man or distributor.  I paid the distributor.  Well I actually paid the funding company. But, the winery had never been paid for the wine.  Despite the fact that calls started to me about a week after the wine was delivered, the winery, after about 6 months hadn’t received their cash (I am told now they are about 2 years out and have written off ever being paid).

WTF?

It made me wonder, how do wineries think of me at the end of this chain of events?

Then, work got busy and I didn’t want to write this for a few reasons and life went on.

Today, the phone rang with the owner of a winery who made a wine that I bought through this middle man.  They were graciously inviting me up to see their new tasting room since I had spoken highly of their winery here on my wine blog. Honestly, it’s a winery that I like.  The wine’s good.  But, sales I think aren’t as easy for them based on location as it would be for others. They have a story that I want to support, but the vast majority of our conversation had dealt with this middle man and how everything went for each of us.

We chatted for about 10 minutes about kids, the state of the industry and how this distributor had been a bad actor.  My rep has since moved on, so I feel more comfortable speaking on this now.  But, the winery still wasn’t happy about how the relationship ended and I had to ask one of the most uncomfortable questions I have ever asked a winery on the phone.

Did they ever pay you for the wine I purchase and paid for?

After I asked it, I wondered what my plan was if they said no.  After all, I had already paid for it, I wouldn’t be offering to pay for it again.  But, I also don’t want to put myself in the middle of two other companies.  But, I really, really wanted good news on that front.

It turns out that after some arm twisting and going about 4 months over the regular payment time frame they were paid.  And like other conversations I’ve had that came from this relationship, everyone understands that the end point (ie my business) isn’t responsible.

Given my conversations with wineries whom I consider friends who now are waiting over a year for a payment from a distributor in Virginia…..the 3 tier system is broken.

We’re relying on this “system” to help choose the best wines for consumers, BUT I don’t see any evidence that’s actually happening.  Wineries struggle for placements with the biggest distributors.  Then are cut if 50 cases a month aren’t being sold.  To reach 50 ASAP they have to cut prices, or offer specials. Any of which is a bad business practice for a quality winery.

In any case, if you wondered how your favorite wine ended up at the your average grocery store (assuming your state exists in the 21st century) or at your local wine store with a standard shelf….you might not want to ask, you might not want to hear the answer.

Lastly, this whole thing made me think of a question I was asked this weekend when we had my wife’s department over to the house for a BBQ.  What do you do? My standard answer is that I own an online wine club. Maybe I should expand that to mention that I ship wines left behind by the 3 tier system because of a myriad of reasons, including but not limited to: the wineries wanting to be paid on time or the wineries not making enough wine.

UGH.