Source: Mark Tarlov

This Winemaker Is Pulling Back the Curtain on the Price of Wine

An Oregon vintner turns to price transparency on a pinot noir, side-stepping distributors.

In the fall of 2015, after all his grapes had been grown, picked, and bled into big oak barrels, Mark Tarlov started doing math. Like any good vintner, he tallied his costs—for labor, equipment, even packaging—and broke it all down by the bottle. Finally, he calculated a price, with a 45 percent profit margin, and set about building a website he'd use to sell it.

This small batch of pinot noir from Oregon’s soggy Willamette Valley, called Alit, sells for $27.45 a bottle, and Tarlov may be the only vintner in the world telling drinkers exactly why it costs what it does.

The barrels cost $1.11 per bottle. The farming and harvest soak up another $5.66. And the packaging, intricate cardboard shipping boxes that require no extra padding, runs $2.88.

Alit is sold directly to consumers—but then, lots of wines are. It's cultivated using old-fashioned, all-natural techniques; those are fairly common now, too. What really sets it apart is how it's priced.

“I don’t know of anyone else who’s really doing what he’s doing,” said Joshua Greene, editor and publisher of Wine & Spirits magazine.

A photo posted by alit wines (@alitwines) on

Most wine is priced according to how good it is and what kind of customer the vineyard wants to target—not how much the barrels, bottles, and farmhands cost. “It's brand-driven," Greene explained. "You say, ‘I want to make a wine for the 1 percent,’ then you work backward from that."

Tarlov is doing the opposite. “We’re taking the elements of very high-quality, esoteric wine and saying, ‘You should enjoy this on Tuesday,’” he said. “You don’t have to bow down to it.”

Tarlov's show-your-math business model has won favor in other retail sectors. Most notably, Everlane built an apparel empire by going straight to online customers and detailing the cost of materials, labor, transport, and fees for each garment. On some items, it even lets customers pick the price, the lowest of which provides no profit at all. The idea has spread to other e-commerce startups, too, like bagmaker Oliver Cabell.

The subtext: The middleman is being cut out, and both the creator and the consumer are getting more for their money.

Virtually every winemaker in the world sells directly to drinkers, but they usually make a point to do so at the same prices customers would see in a retail shop. That way, they don’t undercut their wholesale partners, and they pad themselves with a fat profit.

Alit is very similar to Tarlov’s other wines, which are sold under the Chapter 24 label for up to $100 a bottle, but unlike them, it will never be sold from a shelf. That’s why its label is white text on a white background. "It will never have to stand out," Tarlov said.

The distributors and retailers who sell Tarlov’s other wines haven’t retaliated in any way, at least not yet. “It’s definitely raised flags, and it’s going to raise a lot more,” Tarlov said. “But I would love to be the one to destroy my own business.”

Mark Tarlov

Mark Tarlov was a Hollywood producer before getting into the wine business.

Source: Mark Tarlov

Tarlov didn’t have to do this. The former movie producer's 140 acres of vines in the soggy hills south of Portland were already producing highly respected wines. Those Chapter 24 bottles travel the traditional way, from distributors to restaurants or retail stores, where they fetch $50 to $100 a bottle. 

But Tarlov is a storyteller. In Hollywood, where he produced 24 feature films, including Bill Murray’s The Man Who Knew Too Little, that meant pitching a script and then making the numbers work. In his Oregon vineyards, that means using a cost breakdown as a clever marketing tool—a way to talk about what his vintners have been up to.

“The story element is the thing that I do,” he said. “Honestly, there are people who do the wine thing a lot better.”

For one thing, his vineyards don't use irrigation, herbicides, or pesticides for either the Alit batch or the Chapter 24 wines. The winemakers also don’t use added yeast, relying instead on wild versions already clinging to the grapes and barn walls. And they've worked with MIT scientists to do a census of micro-organisms on the site, so they would know exactly what was going into their wine and how to manipulate the various elements.

“It’s the most fascinating project I’ve seen in a long time,” Greene said. “It’s looking at all of the life that 90 percent of the industry just wipes out so they can make a commercial product that’s more shelf-stable.”

Finally, with the Alit portion of his harvest, Tarlov decided to do whole-cluster fermentation, in which the grapes’ stems are included in the fermenting process. It’s not an uncommon technique, but it is tricky: Stems don’t always ripen in step with grapes, so a vintner must take care to harvest only from areas of the vineyard where they have. But when the blend is right, Tarlov says, wine stewed from ripe stems resembles a symphony suddenly swelling with strings and woodwinds, not just brass and rhythm.

“The stems can give a different feel on the palate—flavor intensity without weight,” Greene said. “Most commercial producers are looking for flavor intensity plus weight, that heavy feeling in the mouth.”

Tarlov is addressing his Alit story—the wild yeast, the Oregon soil, the nifty cardboard box—to a new kind of consumer, one who doesn’t much care about the rating a wine scored in a magazine. And yes, he is after millennials, who now quaff almost half the wine sold in the U.S.

A photo posted by alit wines (@alitwines) on

Tarlov’s biggest concern is winning a following, getting enough customers to notice. At the moment, Alit’s website doesn’t rank highly on a Google search; even a request for “Alit” leaves it far down the page. After launching in November, the brand at press time only had a couple dozen followers on Instagram and Twitter.

“He’s taking a big risk,” Greene said. “And he’s counting on some very sophisticated marketing to carry him through.”

Even if Alit does catch fire, it may still struggle to stand out. Tarlov expects other vintners to sharpen their focus on direct sales, and he suspects some will try transparent pricing.

In 2014, less than 2 percent of wine sales were made online—but the industry, once ruled by arcane regulations and intricate supply chains, has shifted since. States have hacked away at restrictions on cross-border sales and e-commerce, as they finally built systems to collect critical tax revenues from them.

Today, selling wine on the internet alone is tantamount to hanging a shingle on an ever-busier street. As buyers shift online, smaller brands—at least, those that manage to get noticed—won't have to sacrifice margin for prime positioning in a store or on a wine list.

If all 36,000 bottles of Alit’s inaugural vintage sell, Tarlov and his five investors will harvest a modest gross profit of about $445,000. Much of that has already been spent on the brand's website, marketing, customer service, and everything else it must provide when dealing directly with customers.

Meanwhile, the 2016 batch—almost 39,000 bottles’ worth—has just been siphoned into barrels. Tarlov is crunching the numbers again. 

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE