To Kalon Grape Pricing

Incredibly interesting article on massive increase in grape costs for Beckstoffer To Kalon.

Great article. Thanks for drawing attention to it.

As someone who has actively and willingly contributed to the To Kalon mania, I must say I am just about at the breaking point. While To Kalon wines always show well in my experience, we are fast approaching (passed?) the inflection point between bottle cost and enjoyment.

I probably own a great many To Kalons just gathering dust off-site to last me years before I would need to restock. Rather than continue to give interest free loans to winemakers well ahead of actual delivery, let alone ahead of a wine’s peak enjoyment (Pobega-ing is outlawed in my home), I may begin actively exploring more reasonably priced quality vineyards in Napa and elsewhere.

I will, however, miss my old friend. There’s no question she treated me quite well.

Wow.

Start with Panek. Move to Pellet. Dabble in Crane, although I feel the same fate is on the way and while you are at it get on Becklyn’s list (thank me later). As much as I like spending all my retirement money, I can’t/won’t sustain the $100 and over crowd anymore. real good stuff in $65-$90 range these days. Distinctive and beautiful. REAL terroir is getting real costly in the Valley.

Fascinating article, thanks for posting. Can’t really fault Beckstoffer for looking to get paid for his brand. That is probably the goal of most growers, though perhaps not quite to the extent of pushing your producers to the edge. At some point when the highest bidder contracts your fruit and produces some crap wine, that brand begins to get diluted. Seems from the article he’s nearing that point - buyers won’t pay up without the brand, and he can’t afford to sell to a producer without a good track record. Must have a long list of well pedigreed producers wanting to shell out sick money for the fruit.

" ‘I’ve talked with some of the other people who are buying To Kalon fruit’, said one frustrated winemaker, ‘and the winery principal said “yeah, we know we can’t make any money on this, but we have customers who have come to expect the wine, so we need to keep making it.’’

‘Do you know how they’re going to keep doing it?’ continued this winemaker, ‘They’re taking money out of their marketing budget to pay for the grapes.’ "

Actually, I would imagine the rest of their lineup is simply being marked up enough to recoup the carrying cost of the To Kalon in the producer’s portfolio, increasing the prices for their “less extraordinary” offerings.

10 years from now people will look back at this article and say, “yep, that was a sure sign we were in a bubble…”

Serious question: excluding illegal crops like pot, cocaine, etc. are there any other crops that cost more per ton that To Kalon grapes?

Saffron and vanilla beans come to mind.

Another question re. the above - does Beckstoffer have the right to refuse putting their name on the label of any wine if they feel the producer isn’t making great wine? In other words, do they get the chance to taste the wines before Shrader/Tor/Realm/Alpha Omega/etc. put ‘Beckstoffer To Kalon’ on their label?

From a business perpective, it is schrewd. As he mentioned and is true, owning a global ‘luxury’ brand is highly coveted and creates pricing power - which seems to be what he is doing. Once he has proven and visible pricing power, he can command a higher multiple for the value of the asset. Further, whether intentional or not, he is showing bankers, investors and others a somewhat static pricing and margin approach which works wonders in financial forecasting. A bit a vitruous circle if he can keep it up. Ideally, the premium brand recognition will carry over to his other vineyards- Gerorges, Crane, Piedras, Missouri Hopper, Bourne… commanding again a relatively higher price. Then a dominant, premium asset with some diversification and more asset value. More acquisitions which then get revalued higher over time. Sure, things can go wrong and perhaps some element of the pricing backfires, but for premium products or for esteemed brands, history is on his side and he is on a roll.

There have been billionaires from wineries in the US, has there been a grower/vineyard owner yet?

…and truffles.

Dried Morels $500,000+/ton

I guess all my old Karl Lawrence Beckstoffer TKL’s are growing in value like GOLD !!

Inkjet ink.

Farmers are funny people sometimes.

This isn’t one of those times.

I don’t own any To Kalon, and indeed the only Napa wine in my cellar is Massican (which hardly counts).

Nevertheless, I found the article fascinating because it speaks to the pricing dynamics of higher end US wines generally. It seems as if the philosophy is “charge what the market will bear.” And the market will bear a lot – I wince sometimes reading these boards when people effusively thank winemakers for giving them an allocation, or for fulfilling a wish list order. Yes, thanks for allowing me to spend from $40 up on a bottle of wine that I’ve never tasted and that (often) has no track record to speak of. So many people have cellars full of Rhys, for example that they’ve not even tasted. And the price has escalated even as the wine goes untasted and the track record of its aging isn’t there yet. I’m not picking on Rhys because one could say the same of many many start up wineries. As wine consumers we sometimes, I think, only have ourselves to blame when prices rise and arc, as with To Kalon, towards the stratosphere.

Makes MacDonald seem bargain bin huh?

It’s a fascinating pricing sytem. It’s not like a normal input cost increase that the producer can just pass through, since passing it through increases the input price even more! Is there any other industry like this? For a numerical example, let’s say someone was selling a bottle for $250. Their cost of grapes just went from $38 to $66, a difference of $28. However to keep their $ margin per bottlethe same, they would actually have to raise the bottle price by $40.

Makes Robert Mondavi To-Kalon seem like a bargain too.

Spot on Mike. My thrill nowadays is searching out the Becklyn’s of this world.

To the Napa-phobe like myself: what makes this vineyard so special? Is it really a special terroir, or is it just a matter of marketing? Just looks like another piece of flat land to me…

Sounds like Andy wants to be an equity partner in these wineries without taking on any of the risk.

The story that I recall most when I hear his name is how he sold grapes to Juan of Realm based solely on Juan’s passion. Sounds like those days are 100% over. Hope he buys the Chinese version of Rosetta Stone, he’ll need it after he chases all his current buyers away.