undervalued but not for long? (edited)

[Robert_Dentice]

Hofgut Falkenstein

I agree! Just look what some freaking idiot paid for those older bottles at the Winzer charity auction.

They are currently undervalued, very small production, in my opinion no one else makes a wine in their style and they have a rabid global following. And if you care about that stuff have high scores. Most importantly they are excellent wines!

Full disclosure: I am very long Falkenstein!

You’re talking about those 1988 bottles? What was the final hammer price? I stopped after $150 for each two-bottle lot.

I think I paid $700

[Brian_S_t_o_t_t_e_r]

I agree! Just look what some freaking idiot paid for those older bottles at the Winzer charity auction.

They are currently undervalued, very small production, in my opinion no one else makes a wine in their style and they have a rabid global following. And if you care about that stuff have high scores. Most importantly they are excellent wines!

Full disclosure: I am very long Falkenstein!

You’re talking about those 1988 bottles? What was the final hammer price? I stopped after $150 for each two-bottle lot.

I think I paid $700

[Joseph_Grassa]

[/quote]

I’m afraid you’ve got it backwards. The large production of cheap wines makes it very difficult to move other wines under the same name upmarket. That’s why so many wineries create new brands for their upmarket wines. Same process happens across all consumer goods.

Perhaps. I can see the psychological factor, but I’m not sure it is as much of a factor as it was perceived to be in the past.

Take bourbon for example. 4R yellow label hasnt slowed the insane climb 4R Limited Edition SmB, EH Taylor Small Batch or Rye havent slowed the now over $2000 limited release from EHT each year. Those limited releases were $200 just a few years ago. Eagle rare 17 year doesn’t suffer from the standard ER and so on.

I think the fact that the bottle comes from a producer which has great distribution, allows it to appear in more stores around the world, and in front of more faces. If that coincides with quality, people repeat buy. Again this is all speculation on this bottle and I could be totally wrong. If I am, it sure won’t impact the enjoyment I will have drinking them.

I’m no bourbon expert, but 4R and EH Taylor are already premium brands, with their base bourbons selling for $50 or so. Altos – whose base malbec can be had for less than $10 – is more akin to Jim Beam or Wild Turkey. Hard to take brands like that seriously upmarket. You need to create a new brand.

Four Roses base actually competes with JB & WT. 4R Yellow label goes for about $20 per 1L, but they have a small batch in the $30s and single barrel for $50ish. I think it is a valid point, just not sure it is conclusive. I cant even drink the cheap Altos, so if I tried that first, I would have never tried the Gualtallary, but the fact that it can be on the shelf at so many more stores is huge in my opinion. And if the supply is really only 10k bottles still, I would imagine it being hard for them not to sell out each year.

WT 8/101 from early 90s/ late 80s goes for $500 per bottle now and the higher end stuff from that time period goes for much more. Just 3 years ago I was buying them for $265. I was skeptical and ignored recommendations because I couldn’t imagine Wild Turkey being worth that price, but I finally pulled the trigger and then bought 6 more, wishing now that I bought even more, since the market caught on and at that price they are amazing drinkers. Well worth the $500 imo too, if you can afford to spend like that.

Bourbon is in its own world with the craze over the past 10 years though.

[Kelly_Walker]

Better producers of St. Aubin (I’ll leave that to those who do their homework) . Train has left the station but has not yet gotten to speed. You might still be able to jump a car.

[HenryB]

I find it very hard to see anything produced in Hermitage these days as undervalued. I do agree there are a good number of producers in Cornas and cote rotie making very good wines at still reasonable prices, but, of course, those prices have also risen quite rapidly in the last 5 years.

Well, that’s a fair comment. I’m looking at a sort of 2015-2019 average. What’s definitely true is that a lot of 18 hermitage came out at record prices, or at least record-ish. Obviously I’m biased as I have a hermitage la chapelle vertical 2015-2018, and 96 bottles of Hermitage Le Greal 2017 & 2018. I dont intend on buying any 19, for what its worth. I think at release point some of the 15s, 17s, etc, were pretty well priced - 17 Greal at 550/6 was a cracking deal in the scheme of things.

[GregT]

I gotta agree here with Otto’s general sentiment. How much do you think an importer or a retailer can boost a price of a $40-ish bottle of wine that isn’t Burgundy and get away with it (unless it’s a WS top ten, but that’s a rarity)? It ain’t gonna be $100. Argentina isn’t that hot in US markets.

There’s both a sea of “undervalued” $40 wines (tho that’s also a contradiction to 99% of wine buyers) and an ocean of undervalued $20 wines.

I think the key is consistency. Undervalued for 1 vintage won’t drive price much if at all, but if a producer is consistent several years in a row, price tends to rise. There is a lag because it takes time for the quality to be recognized and the recognition is really what drives consumers to buy. Year after year, if a wine sells out earlier and earlier, price is going to go up no matter the region. Often we even see price continue to rise as the quality fades for several years because of that same lag.

I don’t think that particular Malbec is about to be $120, but its hard to imagine that it doesn’t hit $50 or so within a few years if the quality is sustained.

Joseph - a lot of factors go into the price of a bottle of wine. In the case of Argentine Malbecs, as others have pointed out, the producers have built a reputation on inexpensive, well-made wines. They do indeed make more expensive wines, but there is a lot of customer resistance to those.

More important however, is the government. Their government has spent the past two decades carefully and deliberately destroying the economy of the country. Building a sales and marketing channel takes investment and time and that is not happening. When you sell a wine, you are paid in dollars. Those must be brought in through an Argentine bank, which will convert to pesos. And that conversion is not at the black market rate, but at whatever rate the government wants to set. And you get paid when they feel like paying you. So unless you have a lot of padding in your pricing, you’re going to lose money on everything you export. That’s because if you are in business, you are obviously a capitalist and you are obviously exploiting the masses, so you should be punished.

So what happens? Unless you have outside investors like Rolland, Hobbs, Lurton, etc., who can wait out the ineptitude, you end up buying cheaper grapes or cutting corners. And your wines are a little worse this year than they were five years ago. Argentina is fully capable of producing wonderful wines, but it’s not where I’d look for looming price increases until they get a different government.

[Hank_Victor]

I gotta agree here with Otto’s general sentiment. How much do you think an importer or a retailer can boost a price of a $40-ish bottle of wine that isn’t Burgundy and get away with it (unless it’s a WS top ten, but that’s a rarity)? It ain’t gonna be $100. Argentina isn’t that hot in US markets.

There’s both a sea of “undervalued” $40 wines (tho that’s also a contradiction to 99% of wine buyers) and an ocean of undervalued $20 wines.

I think the key is consistency. Undervalued for 1 vintage won’t drive price much if at all, but if a producer is consistent several years in a row, price tends to rise. There is a lag because it takes time for the quality to be recognized and the recognition is really what drives consumers to buy. Year after year, if a wine sells out earlier and earlier, price is going to go up no matter the region. Often we even see price continue to rise as the quality fades for several years because of that same lag.

I don’t think that particular Malbec is about to be $120, but its hard to imagine that it doesn’t hit $50 or so within a few years if the quality is sustained.

Joseph - a lot of factors go into the price of a bottle of wine. In the case of Argentine Malbecs, as others have pointed out, the producers have built a reputation on inexpensive, well-made wines. They do indeed make more expensive wines, but there is a lot of customer resistance to those.

More important however, is the government. Their government has spent the past two decades carefully and deliberately destroying the economy of the country. Building a sales and marketing channel takes investment and time and that is not happening. When you sell a wine, you are paid in dollars. Those must be brought in through an Argentine bank, which will convert to pesos. And that conversion is not at the black market rate, but at whatever rate the government wants to set. And you get paid when they feel like paying you. So unless you have a lot of padding in your pricing, you’re going to lose money on everything you export. That’s because if you are in business, you are obviously a capitalist and you are obviously exploiting the masses, so you should be punished.

So what happens? Unless you have outside investors like Rolland, Hobbs, Lurton, etc., who can wait out the ineptitude, you end up buying cheaper grapes or cutting corners. And your wines are a little worse this year than they were five years ago. Argentina is fully capable of producing wonderful wines, but it’s not where I’d look for looming price increases until they get a different government.

Inflation in Argentina is resulting in higher production costs which ultimately leads to higher retails. So those inexpensive value malbecs are getting more expensive but is the quality improving to match its price tag?

[Drew_Goin]

I am reluctant to type this. I know very little about economics - and the factors determining product pricing in wine are legion.

My personal focus is on what I buy, as limited in quantity and frequency as it might be. West Coast Rhône-style reds and California Zinfandel/field blends have remained my favorite purchases.

While certain West Coast Rhône-style wines appear more vulnerable to higher pricing modeling, Zinfandel has been spared (for the most part).

A newer handful of Zinfandel specialists were on the rise just a few short years ago. National press had rediscovered the virtues of small-production, high quality wineries focused on ancient Zin vineyards. The average price-per-bottle sometimes teetered around $20-35. One year, due to inescapable circumstances, one popular producer began to outpace the rest of the pack in price. I found myself unable to keep track with that particular winery. Comments on the WB forum sometimes echoed my experience. There were even grumblings questioning whether site-specific, old-vine Zinfandel bottles were worth $40-50/btl.

Today, it is not uncommon for the remaining members of “the pack” to offer >$40/btls Zin-based wines. There are Zinfandels that cost $60-70 and, with respect to the high quality of farming, production, etc, they probably merit it! I just won’t be able to purchase them if that happens.
In all honesty, it does seem almost silly that certain Zinfandels are not more expensive.
To clarify, while there will always be producers pursuing niche Veblen Goods, that is not what I am talking about in this instance.

---

Tariffs on imports is one thing but, as Michael Ch@ng notes, many expensive bottles are produced in quantities exceeding 70,000 cs/yr. Meanwhile, excellent quality small-production domestic wineries operate on insultingly small profit margins.

As I was flipping through back issues of wine magazines the other day, the published price of countless West Coast wines were shockingly low. The doubling of retail pricing for many bottlings (from wineries with production levels <50,000 cs/yr) appeared in ~8-12 year increments. $9/btl in 1993? $18/btl in 2000? $35/btl in 2018.

Whether the above trend is sustainable, I don’t know. The popular shift, in the under-$20/btl category, from varietal bottlings to blends may very well be an effort from the wine industry to maintain a desirable margin of profit. It certainly appears to be true for the mega-brands.

I don’t know the approximate rate of inflation for the past 30 years. I do understand that US minimum wages have not scaled with aggregate cost of living since the 1970’s, but that’s a topic for another day…for smarter people than me!

[Jayson_Cohen]

Not really true when you think of pricing for eg keller, several US chardonnays, gaya & rey etc etc and that’s just restricting to white wines. Cotat’s wines are absolutely on a par if not “better” (whatever that means - ageability, track record, aromatic complexity, palate depth etc etc etc) than those and cost peanuts in comparison.

But both Gaja and Keller are huge anomalies in their respective regions as well. It has relatively little to do with quality and all about to do with self-feeding hype loop. You’re just trying to elevate Cotat into this Veblen good level which doesn’t mean that the product would be undervalued at the moment, but instead suddenly becomes overvalued because of the scarcity and prestige.

When it comes to US Chardonnays, I don’t know wth is going on there. From an outsider’s perspective, the pricing of US wines doesn’t really make any sense.

I don’t agree with this. Going back to the OP, I think the point is what is undervalued relatively to its quality. Francois consistently makes world class, age worthy wine and the prices have stayed relatively modest. That was the point.

By contrast, as good as the wines are, Vatan has become a Veblen good. There is room between the two now for Francois’s prices to go up without reaching current Vatan levels of perceived status.

[dbailey]

Not really true when you think of pricing for eg keller, several US chardonnays, gaya & rey etc etc and that’s just restricting to white wines. Cotat’s wines are absolutely on a par if not “better” (whatever that means - ageability, track record, aromatic complexity, palate depth etc etc etc) than those and cost peanuts in comparison.

But both Gaja and Keller are huge anomalies in their respective regions as well. It has relatively little to do with quality and all about to do with self-feeding hype loop. You’re just trying to elevate Cotat into this Veblen good level which doesn’t mean that the product would be undervalued at the moment, but instead suddenly becomes overvalued because of the scarcity and prestige.

When it comes to US Chardonnays, I don’t know wth is going on there. From an outsider’s perspective, the pricing of US wines doesn’t really make any sense.

I don’t agree with this. Going back to the OP, I think the point is what is undervalued relatively to its quality. Francois consistently makes world class, age worthy wine and the prices have stayed relatively modest. That was the point.

By contrast, as good as the wines are, Vatan has become a Veblen good. There is room between the two now for Francois’s prices to go up without reaching current Vatan levels of perceived status.

Precisely. My fear is that they become another Veblen good and I’ll drop out of yet another wine I very much like. However, with prices at current levels ($45/bt all in), there’s a very long way for them to go before they reach that level.

[J_D_o_v_e]

To the OP — don’t hold your breath on some Argentine Malbec no one has ever heard of becoming all the rage. And, if your idea of going up in price is going from $40 to $50 over the next several years — well, that’s going to happen to everything. If you’re asking for $40 wines that might double or triple in price, that relies on reasonably limited production and people like those on this board becoming infatuated with it. And, I don’t think people who haunt this board are going to become infatuated with Argentine Malbec anytime soon. Maybe lobby Wine Spectator to include it in its top 10 list every year…

My vote is for whatever the Chinese decide they like. They seem to increasingly like Barolo. So, I’ll say Barolo will become materially and increasingly more expensive in the next decade. I think Bordeaux has seen its bubble and it’s going to flounder. But no, not an Argentine Malbec.

[Victor_Hong]

Doritos. Were not the large production (“You keep eating them. We’ll keep making more.”), they would be like gold nuggets.


Hey, their name even translates to that!

[Victor_Hong]

To the OP — don’t hold your breath on some Argentine Malbec no one has ever heard of becoming all the rage. And, if your idea of going up in price is going from $40 to $50 over the next several years — well, that’s going to happen to everything. If you’re asking for $40 wines that might double or triple in price, that relies on reasonably limited production and people like those on this board becoming infatuated with it. And, I don’t think people who haunt this board are going to become infatuated with Argentine Malbec anytime soon. Maybe lobby Wine Spectator to include it in its top 10 list every year…

My vote is for whatever the Chinese decide they like. They seem to increasingly like Barolo. So, I’ll say Barolo will become materially and increasingly more expensive in the next decade. I think Bordeaux has seen its bubble and it’s going to flounder. But no, not an Argentine Malbec.

The Chinese have been loving equities, but that is a different thread.

[Marc_Hauser]

I gotta agree here with Otto’s general sentiment. How much do you think an importer or a retailer can boost a price of a $40-ish bottle of wine that isn’t Burgundy and get away with it (unless it’s a WS top ten, but that’s a rarity)? It ain’t gonna be $100. Argentina isn’t that hot in US markets.

There’s both a sea of “undervalued” $40 wines (tho that’s also a contradiction to 99% of wine buyers) and an ocean of undervalued $20 wines.

I think the key is consistency. Undervalued for 1 vintage won’t drive price much if at all, but if a producer is consistent several years in a row, price tends to rise. There is a lag because it takes time for the quality to be recognized and the recognition is really what drives consumers to buy. Year after year, if a wine sells out earlier and earlier, price is going to go up no matter the region. Often we even see price continue to rise as the quality fades for several years because of that same lag.

I don’t think that particular Malbec is about to be $120, but its hard to imagine that it doesn’t hit $50 or so within a few years if the quality is sustained.

Yeah, sure, but a bottle of wine costing $10 more in a couple of years? That’s not something you stock up for. So I’m not sure I get the point of this outside of rare or hot wines.

[Eric_Ifune]

Some Portuguese wines. They’re starting to gain traction outside the country. “The Wine Show,” a British television program is starting their third season and will be set in Portugal. Portugal is also one of the top travel destinations right now. Mainly the old guard wines which are iconic within Portugal. Herdade do Mouchao, Quinta do Mouro, Quinta da Pellada, Luis Pato single vineyard Baga, old Caves Sao Joao, Quinta do Crasto, Quinta do Vale Meao (origin of the original Barca Velha), and others.
Madeira has already taken off. Ten years ago was the time to go in.

[David_K2]

I look around and see more wines overvalued than undervalued. Even many new release Burgundy prices don’t make a whole lot of sense outside of a few trophy producers.

[Jay_Miller]

The obvious answer is Sherry

Sorry, couldn’t keep a straight face while saying that. Undervalued yes, but will probably continue to be so for a looong time.

[Marcu_Stanley]

I think the days of buying a relatively inexpensive case from a previously obscure producer and making tens of thousands of dollars in profit are gone. As some others have said, I’d be worried more about deflation on wines you already own or are considering purchasing.

[Brent_C_l_a_y_t_o_n]

Sounds crazy, but I actually do. Between tariffs/distributors incentives, climate change and mainly the quality of that specific wine. I don’t care for malbecs, and this is the only one I really drink. It drinks way better than a $40 can get me just about anywhere else and if the quality stays near as high as the past 2 vintages, it’s hard to imagine to keep getting this steal for too long.

Different wines, but I had the 2016 one day next to the 2015 Luis Seabra Xisto Cru, and the malbec was the one I kept wanting more of. 6 hour slow ox for each of them. I dont really drink malbec, so correct me if I am wrong, but it is pretty rare to find a malbec that could benefit from a 6 hour slow ox.

75000 cases produced, better stock up before it sells out.

I think 75k cases might be the total production of a different wine they make or all of them. The fact that they are selling so much of their cheap malbecs also is a factor in why I think their Gualtallary will go up though. In 2016 they produced only 10k bottles of Gualtallary from what I see. Could not find a definitive number for the 2017 though.

I’m not quite sure you grasp how the global wine market works.

[Pat_Martin]

To the original question, the only true winner-picker savant I know is Salil. And even he whiffed on German Riesling.