By Thane Peterson
If you like to open a bottle of wine with dinner, this is a great time to stock up. The plunging U.S. dollar and the gradual drying up of the grape glut in California mean prices are likely to rise later this year, not just for American wines, but for Australian, European, and other foreign vintages. And there has never been more drinkable table wine around at bargain-basement prices than there is right now.
I know because I went shopping and did a blind tasting of reds under $10 to see how good some of last year's hottest sellers are. In my case, let's just say it was a humbling experience. More on that in a moment.
First, a little background on the trends in the wine market right now. U.S.wine consumption, which has been rising steadily for a decade, was up again last year by a healthy 5%, to 240 million cases. Per capita U.S. wine consumption hit an all-time annual high of 2.68 gallons last year, according to the Wine Market Council.
Sales of expensive wines have continued to rise, but much of the action was at the low end of the market. Most striking was the enormous surge in sales of extreme value wines, such as the Bronco Wine's Charles Shaw line, so-called "Two Buck Chuck," which is sold only in Trader Joe's stores. The label was launched in late 2002, yet sales soared to 6.5 million cases last year, making it the fastest-growing new wine label in U.S. history. The main reason is price: Bronco bought up tons of cheap grapes during the glut and used them to launch a drinkable wine that sells for just $2 per bottle in California (and a bit more elsewhere -- it goes for $3 in Chicago).
The label now accounts for an estimated 15% of all wine purchases in California. And a few similarly priced competing brands -- such as the Safeway (SWY ) grocery chain's Sea Ridge wines -- have started to emerge. "Every wine-drinking culture in the world has ordinary basic table wine at very inexpensive prices, and now we're starting to see it here," says Rich Cartiere, publisher of the Wine Market Report. I tasted Two-Buck Chuck Merlot over the holiday and it's certainly drinkable -- which in my parlance means it won't kill you. However, my guess is that the price of the extreme value wines will rise next year as demand soars and the grape glut gets worked off.
More interesting to me are all the much better wines that have been coming out in the $5- to $10-per-bottle category. The leader is Yellowtail, an Australian label that saw its U.S.sales triple last year, to 4.2 million cases, according to Lily Volpe, Yellowtail brand manager at W.J. Deutsch & Sons Ltd., which imports the wine. Led by Yellowtail, the fastest-growing foreign wine label ever, Australia passed France to become the No. 2 wine exporter to the U.S., second only to Italy.
New wines targeted for the average consumer are slightly sweeter
Australian wine companies are struggling not to raise prices, despite the rise in the Australian dollar. But Yellowtail prices are going up $1 per bottle, to $6.99 to $7.99, Volpe says. I suspect the other Aussies eventually will have to follow suit. "We have no plans to take any price increases at this point," says Thomas P. Burnet, CEO of the U.S. arm of Southcorp. Wines, which makes Lindemans, Rosemount Estate, and Penfolds wines. "But that," Burnet adds, "could be subject to change."
Meanwhile, some California vintners are coming out with their own Australian-style wines. Among the hottest new U.S. labels last year were Ironstone Vineyards' Leaping Horse and Don Sebastiani & Sons' Smoking Loon. Ironstone sold a very healthy 328,000 cases of Smoking Loon last year, the label's first on the market. "We aimed this wine straight at the consumer palate," says Stephen Kautz, Ironstone Vineyards' president.
Like Yellowtail, the new California wines all have brightly colored, consumer-friendly labels. They're also slightly sweeter than traditional fine wines because that's what consumers prefer in blind tests. They're less oaky, too, because aging to add oak flavor is costly and time- consuming. Kautz says Ironstone "took a page out of the Australian play book" and now uses a rotary fermentation technique in which the wine vat turns constantly. That way, the wine can be finished in a mere four or five days.
In theory, the resulting wine -- which is supposed to list at $5.99 -- is pretty good. Ronn Wiegand, publisher of Restaurant Wine, an industry newsletter, rates Leaping Horse Merlot "terrific for the price." But I didn't just want to take the experts' word for it, so I did a blind taste test of 14 red wines under $10. The panel of tasters consisted of me, Sharon Byrne, and her husband, John (a former BusinessWeek writer who now is editor-in-chief of Fast Company magazine). I figured the test would prove just how sophisticated our palates really are. We make homemade wine together, so I added a bottle of our 2002 Pinot Noir to the tasting.
In choosing the other wines, I tried to emulate the way most people actually buy wine: on the fly, and largely based on price. Most tastings are organized by grape variety -- say, a dozen different Merlots in $10 to $20 range. Instead, I jumbled together all sorts of different reds -- cabernets, pinot noirs, merlots, and others. I wanted to see if average wine drinkers like us would prefer hot-selling supermarket-style wines or what we think we should prefer -- more traditional wines chosen by an expert.
So, I pitted Yellowtail, Smoking Loon, and the others against a bevy of wines recommended by Jeff Connell, the wine buyer at Astor Wine & Spirits, a venerable wine shop in New York. ("Two-Buck Chuck" is hard to get where I live so I didn't include it.) Connell assured me relative sophisticates like me and the Byrnes would immediately notice the sweet taste of the Yellowtail-style wines and prefer his suggestions.
He was right -- sort of. We ranked a California wine Connell suggested as the best of all the wines we tried -- a 2002 Castle Rock Russian River Pinot Noir, for which I paid $8. We scored it 8.13 out of 10. However, much to my distress as a budding wine connoisseur, the supermarket wines did about as well as the expert's choices. We awarded the No. 2 spot, and a 7.67 overall rating, to a 2002 Lindeman Bin 400 Merlot that I bought for $7. A 2003 Yellowtail Shiraz ($7) came in No. 3. Sharon gave it a 9 and I gave it an 8. John, who generally scored on a lower scale, gave it a mere 5. Our No. 4 chouce was a 2001 Wyatt California Cabernet Sauvignon recommended by Connell, which we gave a 7.17 rating.
One of Connell's wines, a 2002 Bodegas y Vinedos del Jalon Vina Alarba ($5.99), came in fifth with a 6.83 rating. A pair of 2002 Ironwood Vineyards -- Leaping Horse Cabernet ($8) and Pepperwood Pinot Noir ($7) -- wines were tied for sixth place, with 6.67 ratings.
And the bottom of the barrel? No, it wasn't our homemade Pinot Noir, which came in respectable ninth, with a 5.33 rating, despite the fact that John gave it a 2 and said it had "no taste." Tied for next-to-last were Leaping Horse Merlot and a cheap French Merlot I bought in a liquor store for $5.49. And in absolute last place was a Spanish wine chosed by Connell, a 2001 Codice Tinto ($8) that earned a mere 3.67 rating. The experts at Astor Wine & Spirits say it has "lots of flavor, mixing black cherry with herbs, spice and pepper: Sharon gave it a 1, and remarked: "Bad smell. Yuck!"
The lesson of all this: Taste in wine is subjective. And people -- me included -- tend to buy what they think they're supposed to like rather than what they really do. Why, just a few months ago, I pompously advised some old friends they would stop liking Merlot when their tastes matured. Now, I've rated Lindemans Merlot right behind one of my beloved California Pinot Noirs. Oh, the hubris!
Peterson is a contributing editor at BusinessWeek Online. Follow his weekly Moveable Feast column, only on BusinessWeek Online
Edited by Patricia O'Connell