Diamond Creek Offer - Only the rich need apply

https://www.winespectator.com/articles/napa-pioneer-al-brounstein-dies-at-86-3118#

My view is that Brounstein deserves to be considered as one of the great winemakers of the 1970s that put California Cabernet on the map. The thread did not start out this way, but it is nice to pay tribute to one of the pioneers and legends of California Cabernet.

I recall that Brounstein was a pioneer in moving California wine prices significantly higher in the 1990’s based on his view that Diamond Creek wines were worthy of First Growth prices. I may be mistaken but I remember a Wine Spectator interview in which Brounstein described why he was pricing his wines at $150 each; this was some time in the early 1990s.
Soon after, prices for a number of Napa Cabs I was buying from Winex more than doubled.

Boots has not passed away. She is 92 and lives on the property.

Nice to hear. I just assumed she had passed given her age.
I remember those picnics. People bringing odd bottles and sharing them around.

I’ve had the Lake bottling a few times, always a memorable wine.

Yes, that surely justifies the expense! Seeing the property makes it worth $250 a bottle. neener

I am totally cool chatting about wine prices, here. So below is my usual long post. [tease.gif]

Napa and Bordeaux above $100 are actually in mild competition for many of the same collectors. Although there are some buyers who buy mostly BDX (I was one of those until 2002), for every one of those there are 10 Americans who prefer Napa Cab and have zero or little interest in Bordeaux. Yet, it seems that the two regions fluctuate in ramping up prices, which leads to a glut in those categories, which leads to a correction in them. As one falls the other seems to gain the momentum for some years.

From 1995-2000 Napa ramped up their prices. Then, when the weaker 1998 and 2000 vintages came out during 2000-2004, it suffered a price recession and relative drop in demand. The bear market in stocks in that time period did not help. At the same time, BDX began a long stretch of excellence and their prices began to soar. I purchased 2 cases of Pontet Canet (vintage 2000) for $28 a bottle on futures in 2002. By the release of the 2003 vintage, that kind of pricing was gone for good.

For the most part, BDX began slowing around 2005 and Napa started to ramp up again. From 2005-2008, Napa prices blew up. But the 2008-09 recession saw a real drop-off. A lot of top wineries still have a lot of vintage 2006 in inventory out there or they sold it to retailers at steep discounts. It did not help that the 2006, 2008, 2009 were considered average vintages by many at the time and that those vintages came out in the 2008-2012 period, during and after the “Great Recession.” In that time, Napa saw its most recent glut (remember Two-Buck Chuck and Winestilsoldout?) Yet in that same period, due to heavy China-interest and the amazing 09 and 10 vintages coming out as futures, BDX re-took the lead. I remember many of the same complaints about top BDX in 2014 that we are hearing now about Napa. By the year 2015, the party was over for Bordeaux and new vintages for most new releases are still below the 2010 vintage. Again, since that time, Napa pricing has accelerated as excess demand moved back here.

It seems like clockwork. And it might be Napa’s turn to have a correction.

$225 is the new $150. $125 is the new $75. Vintners have taken notice and costs are cascading upwards. Their prices always go up near the end of the cycle. Napa average fruit was $4800/ton five years ago and last year was $6800. Top fruit that went for $10,000 in the 2010 vintage is now $15,000-17,500. I know of two wineries who buy fruit from some vineyards at $50,000/ton+. $20,000 per ton is not at all uncommon for 98-100pt wines and good luck finding anything excellent below $12,000. Custom crush facility costs are up 33%, more state licenses are needed to ship direct than ever before, and despite the stronger dollar, barrels, corks and foils are all higher-priced. Good luck even finding a custom crush facility if you don’t already have one.

Should consumers even care about all this higher cost to the producer? In my opinion… no. Consumers basically do not care about the cost/profits to the producer. If they did, then Amazon would have no clients because no one would want to put malls out of business, LOL. It’s called the free-market. Making the business work is the business-owner’s problem, not the consumer.

What has changed the last decade is that some of the brand-new, ultra-small, 200-500 case wineries are produced by people with so much capital that they frankly could care less if it ever sells. They want the wine but don’t need the revenue. This is a new wrinkle and it is going to cause problems for those like me who make my actual living off these wines because they can push up prices for raw materials (grapes) and custom-crush and not bat an eyelash. Not that this is a problem for the consumer, but it might be for me and others over time.

I raised my price last year from $150 to $175 and there were four reasons I did that when I did.

  1. I knew there would be headwinds for some in selling 2017 and to raise prices for that vintage was not something I thought would be wise for myself, so I pulled the trigger early. This was the right move for me, in retrospect.
  2. I had seen my prices to make a bottle go up about 35% over three years and since I could not afford to see my margin crater, I had to bite the bullet. No real optimum choice there.
  3. I thought we might be in recession by now and if I did not get ahead on the price last year, it might be several years until it could be raised again. (I was wrong on that point.)
  4. I knew price hikes for top wines were coming for many during releases in 2019 and I did not want to be part of that wave. I wanted to “rip the band-aid off” last year and then sit at $175 while others might be going up.

Barring true systemic inflation, which no one sees on the horizon, I plan to sit at $175 til the cows come home, hopefully. With 2017, my production is just enough to sell to my existing 2016 buyers, so I expect to sell-through with no inventory left. I pulled back my original planned expansion for this vintage and sold off 40% of my juice to other producers; resulting in a really good wine for the vintage (or for any vintage.) I will sit-tight at this production level and then deal with the 2018 vintage when the time comes. But since I might be expanding for that release, I plan to keep the $175 price for 2018 as well. When I worked at my previous winery, I was able to sell-out that wine in a massive high-end pullback; it just took a long time. That was priced at $175 ten years ago, so I feel confident I know how to do this. I’ve only done a winemaker dinner in one city in 8 years. I have no US distribution. I have levers to pull if I need to.

Honestly, I did lose some buyers with that price hike last year, a few more than I thought I would. I asked many “Why?” and they said I was already their “splurge” at $150 and at $175 it took them over the line. I totally get that. But I eventually did sell through 95% of it and this year, with no price change, I feel pretty good about my chances for quicker sellout and smaller production. After all, if they did not bail-out last year…why leave now? We will see.

I’ve met half of my buyers now and 1/4 of them more than once and their re-buy rates are close to 100% because in the end it is about… relationships. My goal has always been to not be just a wine, but a view into the world of winemaking, viticulture and the process of building my business. I think this has added a degree of client loyalty which has helped me greatly and this was my intention from day one. I’ve done this without ever being professionally reviewed (although hundreds of reviews are on Cellar Tracker and Delectable.) I feel as long as I can keep my price from starting with a “2” that I have some kind of modest pricing-edge for a while, however minor. Not many are left below the $200 level, amazingly, as the list earlier on this thread points out. It also helps me somewhat that I have one wine, not a wide portfolio of high-end SKUs. 250-325 cases is ultra-tiny. The wines that got 98-100 from Robert Parker himself before the days of score inflation are the ones over $400 and that level will be forever out of my (or any relative newbie’s range.) That’s fine with me.

I think this will be a transitional year for Napa high-end wines. Buyers are starting to do what they do every 6-10 years or so, reassess, look at their collections and start whittling down some of their buying. My goal is to be one of the last ones they want to whittle. I have always built my business with recessions in mind and I feel ready, if necessary.

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This is the thing that made me not want to ever buy his wines. I find this attitude of setting the price to match the owner’s inflated aspirations very condescending. When wineries have this belief that prices should reflect a perceived tier, they are showing their arrogance, not their winemaking skill.

Ok, now everyone can shut up about Roy. If there is anyone who is more transparent about their business, let me see their tax returns. If $175 is too much, move on. No one is gouging you with truly small producers. I actually learn something about this process when Roy posts. Aside from the fact his wine is excellent, it is interesting to drink in light of the videos posted.
I have yet to see any Bordelaise producers do the same. If those wines seem more appealing, then bon appetit. But they have been moving closer to California over the last two decades than vice versa.

Thanks Roy for your post, and very informative. And you were right about the economy possibly being in a recession by now- we ARE in one, it’s just the eggheads haven’t officially come out and stated that we are yet.

In discussing value in Cal cab versus Bordeaux, the exchange rate is also important. The dollar is much stronger against the euro than it was a few years back. The euro was around $1.45 in mid-2011 versus $1.11 today. And since 2014 alone it has fallen almost 20%, as the chart shows.
Euro-dollar exchange chart.JPG

Markus, I have a different point of view. I like his comments (I remember reading them at the time). They reflect a belief that he was making world class wines and should be able to price them as such. I wouldn’t want to do business with someone who didn’t passionately believe in their product. People often forget that the wine business is exactly that…a business. People are in it to make a profit. It is disappointing when a winery raises prices beyond a level one feels comfortable paying, or beyond one person’s perception of value, but neither scenario suggests anything nefarious on the part of the winery owner.

I built a business that became the leader in our niche by having a stated goal to not be the cheapest, but rather the best. That closed us off to some corporate clients who only bought on price, but those were exactly the customers we did not want. They leave you at the drop of a hat, and generally are the most high maintenance.

If there is no profit motive, few people would enter a market. Capitalism has been one of America’s greatest advantages since our beginning. The wine business is a terrific example of that, with the explosion of new wineries and greater choice for all of us.

My two cents. Feel free to give me change. :grinning:

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Outstanding post, Roy. I always enjoy your insight. Every time I read a post from you, it makes me want to seek out your wines. Thank you for being so transparent.

As others have pointed out, DC’s pricing seems reasonable in the current context of Napa Cabernet. I don’t understand the problem.

Jim, it’s not that I mind companies (or wineries) charging what they will, for I don’t mind paying for something that will last longer, feel more comfortable, do the job well, because as you say, sometimes the price being charged is cheaper than being dissatisfied with a cheaper, less well-made alternative. However, it is the attitude and posturing I see in respect to a general market that gives an impression of elitism that I can’t stand and strikes me as disingenuous. Not sure if it clarifies my position or not, but it is similar to a class issue and one of entitlement.

Roy, if I was in the market for your level of Napa cab you would be one of the first I’d contact. Your openness and willingness to build a relationship with your customers is awesome and unique. It’s easy to complain about pricing, but I hope your well thought out plan succeeds. If you ever bring on a 2nd wine from sources where grapes aren’t 20k per ton I’ll be a buyer.

I’m sure you’ve read other threads started by the OP?

Nice

+1

Good point.