If location, location, location is the key to the property market, explaining why a sock drawer in Knightsbridge costs more than a palace in Kabul, it also tells you a lot about the wine market. The main reason it costs more to produce wine in a Grand Cru Burgundy site than in, say, the Riverland is the price of land.
Anyone who wants to understand why Californian wine is comparatively expensive — anything under $20 is considered a “value” on the West Coast — could do worse than take a look at a real estate section in a local paper. California wine country is considered a desirable place to have a house, or rather create a lifestyle, and this inflates the price of vineyard dirt.
One owner of a five hectare block in the Santa Cruz Mountains, a few miles from Silicon Valley, ruefully told me that his historic site would be worth around $11m if he chose to sell it to a developer, even in these chastened times. Little wonder that he sells his top Cabernet Sauvignon at $125 a bottle. You hear similar stories in the Napa Valley, parts of Sonoma, the central coast and Santa Barbara. More than anywhere else in the New World, wine is a rich man’s game.
How does all this translate to the UK? As the number two supplier of wine to these shores, with three brands in the top ten (Blossom Hill, Gallo and Echo Falls), the world’s fourth largest wine producing region appears to have cracked the market.
But talk to most producers, even of medium sized brands, and they’ll tell you that the figures don’t add up unless the stuff you put in the bottle is very cheap and sourced from the irrigated, high-yielding hot house of the Central Valley.
The average price of a bottle of California wine over here is now £4.26; even if it were the same as New Zealand’s (£6.44), many wineries would find it hard to compete. As Bill Leigon, president of Hahn Family Wines, puts it: “Unless you have no debt, you’re taking a bath at £5.99; £6.99 is break even for us in the UK. At £9.99 we can do very high quality wines and at £8.99 we can do pretty high quality.”
After two weeks of tasting on the West Coast, visiting producers from Mendocino to the Santa Rita Hills, I think this is a key battleground for California if it wants to compete in the UK. There are a number of wineries who sell their wines at more expensive prices — Ridge, Au Bon Climat, Seghesio, Bonny Doon and Saintsbury have all established good distribution, thanks to a combination of hard work and high quality — but California won’t conquer the mainstream with £10 plus wines.
The market for California wines at £9.99 is almost non-existent in the supermarkets, and likely to remain that way for the foreseeable future. But that still leaves the high street specialists, independents and the on-trade. If Asda and Tesco want to compete with each other to sell Blossom Hill on promotion, leave them to it.
Now is as good a time as any for producers to sell some very palatable Californian wines under £10. The exchange rate is reasonable, though not as good as it was 18 months ago, at least for UK importers, and grape prices are softening by the minute on the West Coast. With flat sales (at best) and declining prices for many brands on the domestic market, now is the time to shift some wines overseas.
Where do the opportunities lie? Well, there is a significant over-supply of Syrah among other things. (“What’s the difference between a case of the clap and a case of Syrah?” jokes Randall Grahm of Bonny Doon. “Eventually the clap goes away.”) Chardonnay, Merlot and Zinfandel are all available from good areas at reasonable prices, as is Pinot Noir, thanks to a post-Sideways planting boom. The likes of Kendall Jackson, Delicato, Gallo, Beringer, Mondavi, Bonny Doon, Hahn and Ravenswood are all in a position to make further inroads here.
If consumers begin to appreciate what California can deliver between £6.99 and £9.99 — and that’s a pretty substantial if — they might start to raise their sights towards its best wines. I’m not talking about over-priced, over-alcoholic, $200-a-bottle Cabernets here, but about wines that could sell for between £25 and £50.
California is making world class, cool climate Pinot Noir and Chardonnay at the moment, some very classy Cabernets and Bordeaux blends and some excellent Zinfandels. At the fringes, its Rhône and Cal-Ital wines are also improving by the vintage, however hard the former may be to sell domestically. I’d even go so far as to say that, at this level, California can compete with anyone. All it needs now is a few more people to import, and more importantly sell, its best wines.
Originally published in Off Licence News