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Wine retailing

from the sf chron: http://www.sfgate.com/cgi-bin/article...

Given Zin's experience (and that of some others here), I'm wondering what their thoughts might be on this. Lots of new retailers in San Diego but I find myself wondering how they are all going to make it; particularly when some don't seem to know much about wine to begin with...

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  1. The more I learn about wine the more I think you're crazy to go into the business. For instance, take the Reno area. This is Rombauer central. People go crazy for the stuff. But it's more of a status symbol (it shows you're solidly upper middle class) than taste.
    And then I hear the stories about strong arm tactics by wine distributors.
    And a lot of the people who go into the business don't know much. Several years ago a wine store opened that focused on wines $25 a bottle or under. It was me as a customer who explained to the owner that she need to check out Kermit Lynch's portfolio. She had no idea who Kermit Lynch was.

    1 Reply
    1. re: SteveTimko

      well you gave her some great advice

    2. I may not have as much experience as our list veterans, but as I interact with the public and our small local shops, it all comes down to Customer Service and Good Value.
      In our town, we have 3 shops and things have been tight. However, the knowledge and passion usually make it through the worries and we all share the benefits of the love of wine.
      Some folks may not make it due to many possible factors, but as long as we do what we can to support the decent shops, the ones that survive will make things better for all, IMO.

      1 Reply
      1. re: BigWoodenSpoon

        Just get a loan for $10,000,000 and follow what K & L does.

      2. I live in an area where wine can only be purchased locally in a wine/liquor store. Grocery stores are not allowed to sell wine. So my experience is likely different from others who may post here.

        There are gnerally two different philosophies that take place--make money on margins or volume. Certainly these are not mutually exclusive, but you get the idea. So we have those liquor stores that will focus primarily on wine, those that will carry wine because they have customers who will buy it, and those that attempt to do both.

        On top of that, there are over 20 wholesalers/distributors in the metro area here (some states have fewer than what can be counted on one hand). So there is a lot of competition between those outfits for shelf-share of their portfolios.

        Even so, I still have to order my Champagne from K & L or Chambers Street.

        1. I agree with Bonne at the Chron -- consumers are entering another golden age for wine retail in the U.S. The reasons why: 1) there is a massive selloff going on right now because of the economy. There's never been a better time in 15 years to buy affordable wine. 2) International wine is everywhere now. It's not just Kermit Lynch and Wildman importing great wine. Thad said, the selection has never been more diverse. 3) new technologies and higher winemaking standards are creating a much higher percentage of drinkable wine under $20.

          These are all great things for the consumer. For the wine distributors, this market is a nightmare...only the very fit will survive...and the ones that do will totally thrive.

          1. LONG, DETAILED RESPONSE (I apologize in advance)

            The "World of Wine Retailing" is not for sissies . . . and it has changed dramatically since I entered the trade in 1969.

            NOTE: please keep in mind, I can only speak of retailing *in* the state of California. Although I have worked all over the US, and in various facets of the wine trade, a) I have always been California-based, and b) ONLY worked in retail stores in California. While I've worked from San Diego to Redding, most of my retail experience have been in Southern California (Beverly HIlls, West Hollywood, Hermosa/Manhattan Beach) and Santa Cruz/SF Bay Area.

            In "the old days," remember that Fair Trade was the law in California. That meant that the MINIMUM retail price had to be posted with the California State Dept. of Alcoholic Beverage Control (ABC). So wine shops and liquor stores thrived or died based upon customer service and -- in those stores where it mattered (let's call them "carriage trade" stores) -- knowledgeable employees. Also, unlike in many states, supermarkets in California sell beer, wine and liquor, so *everyone* was your competition.

            Under Fair Trade, the minimum you could sell a wine for was 50% over your "case one" price. Simple example: a case of Chateau Cache Phloe Chardonnay wine costs $120 for one case, or $10/btl. That meant the Fair Trade retail was $15.00, and it was unlawful to sell for less -- unless your customer bought a case (mix or match), and then you could take 10% off. You could make a decent living that way, but the only way to increase your beginning gross profit was if there was a quantity discount offered on the Chardonnay (e.g.: 10% discount on 10 cases; meaning your bottle cost was $9, but now you have 120 bottles to sell).

            Following the declaration that Fair Trade was unconstitutional, the only minimum price regulations in California are now 6% over cost, with an exemption for "competitive reasons." That changed everything . . .

            The mid-1970s saw chains like Liquor Barn, and stores like Wine Club, Wine Exchange, Premier Cru, and other high-volume discounters thrive. Some "regular" retailers did go out of business in the 1980s and 1990s; gas stations and 7-11's sold increasing amounts of beer, and some supermarket chains (most notably Safeway) increased their premium wine selections to take advantage of volume discounts for purchasing large quantities and lower retail prices. Cost Plus got into the wine business, so did Costco . . .

            All this doesn't mean every "carriage trade" full-priced retailer went out of business. Some did, but others survived -- most by discounting where they could, and by having wealthy clients who benefitted from service and knowledge, rather than mere price. But price was what many focused on, and times were indeed tough.

            At the same time, there was a significant merging of wholesale companies, from more than a dozen major companies down to two.

            This opened the door to small, specialty wholesalers who focused (e.g.) Spanish wines, or Australian wines, or Italian wines, and so on. By the turn of the century, small, speciality retailers were actually beginning to thrive. True, importer-retailers (Kermit Lynch, North Berkeley, The Wine House in SF, etc.) always survived and thrived . . . but now there are new ones -- like Vintage Berkeley, Solano Cellars, Wine Mine and more.

            There IS a need for knowledgeable retailers, with a well thought-out selection -- just as on a restaurant's wine list. And as the pendulum swung too far in the direction of self-serve and less-than-knowledgeable employees ("uh, Zinfandel? I think that's on Aisle #6"), it is now swinging back towards in the other direction . . . .


            3 Replies
            1. re: zin1953

              "Chateau Cache Phloe Chardonnay" - LOL

              1. re: ibstatguy

                Well, while I've used that expression for years, I cannot take credit for it. A store in Marin County, California had a private label that was "Cache Phloe Vineyards" -- or maybe it was "Cache Phloe Cellars," I don't recall. They used to buy Napa Valley Chardonnay from Veedercrest, as but one real-life example, and have it bottled under their own "Cache Phloe" label. They would do the same from other wineries, other varietals . . .

                The use of the word "Chateau" on an American wine label has always bothered me, so I just changed the label a little bit.


              2. re: zin1953

                Incredible background as usual, Jason. Thanks so much.