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Premier Cru: A Ponzi Scheme and Wine Come Together

Premier Cru

Premier CruFor those that read this space consistently, you’ve probably realized that I live in San Francisco’s East Bay.  For those that are really familar with the area, you probably wonder what side of the hill.  In essence the region is divided by two natural boundaries.  First, as you come across the Bay Bridge from San Francisco you’re left with Oakland to the south and Berkeley and it’s suburbs to the north.  We live to the north.

A more important divider though, is what side of the “hill” you live on.  To the east you have more traditional suburbs that remind me much of where I grew up in San Diego.  The side of the hill closer to San Francisco is more urban, densely populated and wonderfully messier in many ways.

In any case, Premier Cru isn’t exactly my local wine store, but it’s close enough that we pass it a couple of times a week.  If you haven’t followed some of the sordid details of what went on there from the mid 90’s until the business was forced to close a year or so ago, Food and Wine has a pretty good summary.

I think one of the major issues of course is that, for about 15 years before the Ponzi scheme started Premier Cru had a good reputation among wine lovers, for allowing people to preorder French First Growth’s and other high end European wines, often at a significant discount, delivering them a few years later.

To me, that’s an interesting model and one that my wine of the month club has to fight some competitors with fairly similar models-at least in terms of the discounting factor.  Here’s what no one tells you about the wine industry, the vast, vast majority of wines are sold to retailers at one of two price points.  Most common is wholesale, which is a 33% discount from regular retail.  Secondly, you see wine sold at FOB (basically if the winery does not have to market it to the retailer and the retailer takes care of picking it up, or paying for shipping) which is a 50% discount. Wine is sometimes sold at more significant discounts than that of course and we definitely get those offers in our email from random wineries and wine companies, but overall that’s going to be wine that you simply do not want to have to buy. It’s definitely not the type of wines that Premier Cru was known for selling.

Premier Cru at times was offering a 40% discount on French 1st Growth’s. Given the way that the industry is priced and structured, that’s simply not possible-unless they were planning on losing a bit of money on every bottle they sold.

I guess that’s what makes me a bit sad about the entire thing, if anyone had taken a hard look about what was happening here, they could have said something that would have stopped this, well before people were scammed out of at least 45 million dollars. There is an element, even with online sales, when too good to be true is truly too good.

If you’re interested in the ongoing story and scandal, which is unfortunately not the first in the wine world, Berkeleyside continues to be among the best online local news sources anywhere.

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Pinot Days San Francisco 2016

pinot days sf

pinot days sfPinot Days is coming up on Saturday afternoon in San Francisco.  If you’re wondering why I’m mentioning an event that only a small fraction of our readers and wine of the month club customers could possibly attend, there’s a couple of good reasons for this.

First and foremost, for the past decade Pinot Days has been among the most important trade shows in America for Pinot Noir producers.  In fact, it’s the biggest such event right now, anywhere in the world.

As you might expect with any California based event, there’s plenty of local wineries, or at least California based wineries in attendance.  There’s also usually a sprinkling of Oregon estate’s as well as a group of wineries that are a relative newcomer to the world of Pinot Noir: New Zealand wine growers.

This year there is one very interesting and important change to Pinot Days.  The event this year is being held at a new space, the Bespoke Networking which is a coworking space in the middle of San Francisco’s Financial District at the Westfield shopping center.

I have a pretty standard request of these type of events: have them where public transportation is easy to find and easy to use.  Good for Pinot Days on that count, there’s literally no easier spot in SF to access than Westfield. It has a BART station underneath, as well as dedicated MUNI stops from virtually every direction.

If you’re a fan of Pinot Noir and enjoy a unrushed tasting experience, Pinot Days SF is well worth a visit on Saturday.

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In Pursuit of Balance Closes

In Pursuit of Balance Closes

In Pursuit of Balance ClosesI was both saddened and a bit surprised, at least initially, to read yesterday that In Pursuit of Balance would be closing at the end of the year.

If you aren’t familar with the organization, In Pursuit of Balance was really one of the first organizations of its kind in California: they were a non profit that aimed to move the needle so to speak from the ultra ripe wines that were increasingly being made in the state, to a more balanced, or even a more acidic style of winemaking.

I’ve shipped a wine from Raj Parr before and while I’ve joked about IPOB before, largely after they declined me a tasting ticket a few times when we first opened, the organization was playing a very real role in changing perceptions about wine in California among the wine trade at least.

At the end of the day, this is a non profit that really was a victim of both its own success, as well as, a changing market.  The wine industry is increasingly moving toward more balance and more acidity in their wine here in California and elsewhere.  To prove that we only have to look at the most talked about growing regions on the west coast: Sonoma Coast, Central Coast, Oregon and Walla Walla are hardly regions that anyone would say were lacking in acidity or even balance.

It’s funny on some level, I knew quite a few winemakers who couldn’t wait to get into the organization because once you were in, there was a level of complexity removed from selling to restaurant Sommelier’s.  Membership in In Pursuit of Balance was really a badge of honor for many winemakers and wine companies.

For that reason I’m sad to see it go, even though their mission, to bring back balance to California wine continues in large part by like minded individuals and the growing regions they choose to support.

There’s a number of wineries that I’ve shipped as part of my wine clubs in the past and will continue to do so in the future.  Calera, Copain, Mount Eden, Sandhi, Wind Gap. I could name quite a few others that deserve to be on that list, but it’s just made me think that the fact that In Pursuit of Balances closes at the end month is pretty surprising, even if it’s a logical end to a great non profit.

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Opus One Winery Expansion

Opus One Winery

Opus One WineryI’ve talked about some of this stuff before, but in Napa Valley wineries are constrained by a series of rules, regulations and laws that are goverened by the planning department and a few other agencies. This week, Opus One Winery won it’s petition for an expanded production limit.

That’s entirely more unusual than you expect. For some time I’ve heard people say that this type of stuff must be rubber stamped locally and it simply isn’t.  I won’t go into the details of failed application, after failed application but it’s taken some well known wineries up to a decade to win their expansion requests in the past, with a celebrity or two along the way being decline outright to build a winery at all.

If you’re not familair with the Opus One story, it was a joint project by Mondavi as well as Baron Philippe de Rothschild with the simple premise that you’d use French winemaking and Napa Valley wine grapes.

To this day, the winery only makes a single wine, a Cabernet Sauvignon.

For most wine drinkers, Opus One is both an iconic brand, but also a household name.  I think many people would be surprised to learn that the winery was previously only permitted to host 1,200 visitors per week.  Heck, I’m in Napa at least 25 times a year and I was surprised. With the new permits, that number jumps to just over 1400….still, if you’re thinking of traffic and the effect on the near by community, hardly a significant impact I’d say.  Your local Starbucks would probably close if they only sold coffee to about 200 people per day right?

As always the Napa Valley Register has all the details, but this is a good sign for Napa Valley on a few levels.  First, wineries that are doing well should be allowed to expand when they do it in a way that won’t materially change their location, or the surrounding neighborhood.

Second, there is a new debate starting in Napa and one that you’re likely to hear about more often in the coming months and years. Traffic.  Much of the complaints about these types of winery expansions aren’t about an single application or approval, but their cumulative effect on life, especially for those whom live and/or work in the upper valley.  I can attest that getting through St Helena in the afternoon or early evening for the commute is pretty much a fool’s errand.  That’s consistent with a bunch of places in and around  the Bay Area these days and from my house, the traffic in Berkeley only breaks going west bound into San Francisco for an hour or so per day (starting around 5am, it’s bumper to bumper often until 9pm).  The problem for Napa Valley though is that there isn’t a logical way for them to help alleviate the traffic issues.  In our more urban areas, sure more BART and better bus routes can take the pressure off, even if those take decades at times to pull off. There’s talk of employee shuttles and moving many of the more office centric jobs out of the wineries and into buildings closer to downtown Napa or the airport.  Some even consider some shared sales and marketing spaces in San Francisco.  The trouble with those ideas though is quite simply that one of the reasons people often take less money to work in wine is that they like the lifestyle.  If you lose that, do you also lose something else along the way? How do you quantify that loss compared to the most expensive agricultural land in America?

Ok lastly-where does Opus One fit in any of our programs? They do sell wine through distribution channels, they’re way too well known for any of our wine clubs, but if we ever did a history of wine gift basket or something along those lines, they could fit.

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Copain Sold to Jackson Family Estates

copain winery sale
copain winery sale
In the years before the grey hair starting creeping in…..

It shouldn’t come as a surprise any longer, but another high end small scale producer has been gobbled up by the largest player in the Sonoma wine scene.  In this case, Copain has been sold to Jackson Family Estates. The Copain winery sale brought up some thoughts, in large part because of our history with the brand:

In the case of Copain, it’s the first winery that’s been sold to one of the huge players that I feel like I/we have something of an ongoing relationship with. Pictured in this post were Matt and I along with a couple of Copain’s team back then….. before Uncorked Ventures even opened, Copain was among the first shipments we ever put out for each of our 3 levels of wine clubs.

Those relationships over the years have also continued to bear fruit so to speak.  Drew Huffine at R2 Wine Co, as well as the folks at Cinque Insieme both came to us through our prior work with Copain.

For Jackson Family Wines, the purchase makes a ton of sense.  Over the past year or two, they’ve definitely shown an interest in acquiring a range of producers, known for their single vineyard Pinot Noir production. While the purchase of Penner-Ash brought Jackson Family Wines directly into Oregon, buying Copain is a long term play with two essential goals.

First and foremost, it’s important to note that Jackson Family Wines owns a ton of vineyards.  Folks in Sonoma joke that if someone wants to sell a vineyard, it’s easy to do because the Jackson folks have already offered them over market price for it. While there’s always talk about behind door deals happening in wine, I do know of an Anderson Valley property that Jackson Family purchased, where they had a deal worked out reportedly for the property with the owners children well before the owner passed away.  It’s in a great spot in the Anderson Valley and unlike others in the region, is big, is ready to be planted and borders some really, really highly thought of vineyards. That’s just the deal here, Copain for all their history and top rate winemaking and facilities, didn’t own any vineyards.  Heck, the Sauvignon Blanc in front of the tasting room at one point was being sold to another winery since it was too hot in the Russian River Valley to make the style that Wells wanted to make.  Most of the fruit these days came from coastal Santa Barbara, or Anderson Valley.

The Anderson Valley aspect is undoubtedly an important part of this as well. Anderson Valley is perhaps the most highly thought of Pinot Noir growing region in California according to winemakers today.  Given the hype behind the Russian River Valley and Santa Barbara that’s going to surprise most wine drinkers, but given the choice, I’m guessing most winemakers I know these days would prefer Anderson Valley fruit.

To the credit of everyone at Jackson Family Wines, they own a, pardon the term as I heard a winemaker call it a while ago, crapload of land in Anderson Valley.

For wineries like Copain, it wasn’t always easy to find high end vineyard fruit available from Anderson Valley.  Truly, the demand is outpacing the supply currently.  It takes a vineyard at least five years to be ready to produce high end wine grapes after being planted, so this pressure is simply not going to lessen any time soon.

All that is to say, while Copain being sold to Jackson Family Wines seems strange at first, they’re a more logical match than most people would expect at the outset.  I expect this will be a deal that works well for those parties over the short and the long term.