The first question is whether the incentives for profit maximization are the same across different owners.
The second question is the time horizon for profit maximization (put differently, what’s the future discount value for the given owner).
PE vs. mom and pop - Former likely to have stronger incentives for profit maximization over pursuing other goals, such as reputation. Also may have higher discount value because goal may be to increase short term revenues at expense of losing long term customers, with goal towards making stake more attractive to future buyer… But that’s a trickier question, and given that Childs apparently has a personal interest and friendship with Kosta-Browne may not apply in this situation.
But, as you pointed out above, overall the price increases have occurred at a relatively modest rate when smoothed over time. Although the SVDs have increased at nearly 7.5%/year over the last two.
I think there are a lot of variables in what drives the value of a winery like KB, including mailing list size and recent purchasing history. I also don’t know who the eventual target buyer would be or what the larger strategy is, but I would doubt the plan is to own KB as it is for longer than 6-8 years.
Good points, the time horizon on the ROI can be different depending on the ownership. As far as moving pricing up to reflect market demand, you see that from a John Alban, Tom Dehlinger or Kevin Harvey too. That’s not a criticism of any of those three in the least - they make good products that people will pay a lot of money for, and they deserve the money they can get for them. But I can imagine that if Alban had been owned by some PE group or had been bought by a large corporation, many people would have perceived those same big price hikes in a very different and less favorable way.
If nothing else, we don’t have enough information yet under new ownership to see if the rate of price increase has increased. Prior to last year it had been a bit fitful, but overall consistent over time. So, hard to say whether increases are a “normal” response to market demand and cost drivers or different pricing philosophy.
(BTW, my question mark after “private equity” that triggered this discussion was partly an indicator of jest, and also to note I wasn’t sure thta was a driver, although I think it’s a reasonable question to ask.)
Well the fruit prices are going crazy. Latest rumor was 9K/ton for Gaps so right there you have a $90 wine. We bailed from a vineyard where our contract went from 4.2K to 6.2K after the older contract expired. BAH! $6. Imagine asking my clients to swallow a $20 YOY price increase.
I have had the 4 barrel several times. I personally prefer the SVDs over the 4 barrel. I think they have more character and complexity. No doubt the 4 barrel is a delicious wine but I do not think it shines above the other wines.
I’m a 4 Barrel fan. Michael does his best to pick barrels that blend together to produce something different from the other SVDs. I just finished the last of my 07s a couple of weeks ago, and it was still going strong. I’m also a big fan of the ‘K’ SVDs (Kanzler, Keefer, and Koplen). Those are my ‘go-to’ KB SVDs year after year.
I’m passing on the offer. I’m happy with the appellation wines - I think they can be more complex than the SV’s in a good year and I don’t need any more $100 bottles of wine (I’m sure the appellation wines will get there soon enough). I think the kicker was the thought of having to buy a bunch of SV’s for several years before I got to the ones I really wanted (Kanzler for one).
After some thought I decided to drop KB, ive waited a long time to get on the SVD list but when I finally did get a chance I bailed !!! not only have I passed on this I asked to be removed from the list
After several years on being on lists I am getting a little tired of the way you are held hostage and thrown a few crumbs to keep you hooked. If you take the Bedrock model against this its a no brainer, MTP throws out wines to everyone.
Last year I was told 4-6 year wait list for SVD, I took a pass on the spring wines this year and instead of getting dropped I was offered SVD. I get the feeling that while KB are not struggling that their mail list retention rate is dropping and that they are having to go down the wait list pretty quick. I bet if you signed up now you would get SVD wines next year
For my Pinot fix I am not however passing on the Pisoni Estate Pinot, this is a little cheaper but somehow feels like a better more special
That’s quite an increase, but as so many have stated the demand is there from a list stand point and the secondary market for them is strong overall. I would imagine these will be near or at $100 per bottle by next offer if the increase continues. Still some good stuff but they’re playing in a market a lot of can’t touch, and those that can only get a few of them, but hey good for them they’re definitely a thriving business model of wine sales/production!
Anybody know if you decrease quantities of one of the ones whether it will impact potential quantities on the other wines? For example, when I first received SVD wines it was only the Gap’s Crown. Bought my full allocation, then slowly over the years other vineyards have been added. If I decrease the quantity of the GC wines, will it impact the quantity of the others?
Thanks, Chris. That makes sense based on how the offerings read. I was curious if anyone could confirm/deny (e.g., “I used to get 4 Barrel but decreased my order of GC from 6 to 4 and stopped getting the 4B” or “I stopped buying all the SVDs except I still get my 3 bottles of the 4 Barrel”).
If you’re asking whether they will affirmatively decrease your allocation of other wines, then it would run counter to their policy.
If you’re asking whether it reduces your chances of getting more bottles of other wines, then I think it’s unclear (i.e., if there’s an extra bottle of 4B, would you or the guy who ordered his full allocation get it).
Good point of clarification. Yes, that is effectively what I’m asking. By way of the real example, I have received 6 bottles of the Gap’s Crown, and enough of the other vineyards (though not all of them) that I am probably getting more than I need/will drink. I’d prefer to get 3 Gap’s Crown bottles, but at the same time can probably find somebody to take those three if decreasing my allocation decreases my chances of getting the whole line-up. I’m a fan of their wines, so it isn’t that big of a deal either way, but I’ve also started trying to analyze what I actually drink and then buying accordingly.
