Making the Right Choice: Wine Pricing and Perceived Quality

As a novice wine lover, how much can one rely on price as an indicator of quality in wine? I know that when I am at a loss in the face of endless options at a wine store or when staring at a wine list (read: book), I often resort to price as a filtering mechanism.

                                             source: Wine Folly

While some of this is simply a function of practicality (each consumer has an individual willingness to pay for wine depending on their purchasing power, the occasion, and a variety of other factors), differentiating on price in the super and ultra-premium bands $20-$50 is tricky. Additionally, given the 3 -tier system and the truth behind markups, how does one know what they are paying for? To what extent is the price due to supply chain and distribution vs the quality of the wine. Furthermore, after learning about grand crus and its impact on pricing, despite variability in quality and improvements/degradation over the decades, I find myself wanting guidelines for how to interpret what is signaled by price and how to make a smart choice.

Price and quality must be connected in some way, for example, if a wine originates from a small winery on another continent, the markup probably reflects something special about the wine (e.g. that it was hard to obtain, was produced with care and expertise in small batches/from low yield vineyards). However, how does one take the next step to understand the association between price and quality/taste? To what extent can a bottle's price be used as a proxy for how much someone might like the wine?

This next note "culled from the collective wisdom of sommeliers and other wine professionals", did not help to clarify the situation:

""Restaurants will likely jack up the price by two to three times the retail price, but the more expensive the wine, the less the mark up," Soltani told INSIDER. "So even if you are on a budget, don't pick the cheapest wine on the list. I would go for the second cheapest. Also, one bottle of wine equals about four glasses. But if you pour tasting pours (two ounces), the wine will go a lot further."
(Our experts disagreed on whether or not the cheapest or second-cheapest was the worst option to order on a wine menu. If you're on a budget, it's safe to go with a cheaper mid-range bottle.)" - How to Order Wine Without Looking Like an Idiot, Serious Eats

It pays (no pun intended!) to recognize how complicated this question is given the psychological factors that feed into human satisfaction and perception of value. "Value", "quality", cheap/expensive, and what is considered to be a valid substitute for a "good" wine is all at least somewhat subjective, and therefore varies from person to person. As an example, someone who doesn't place a high premium on rare wines or the story behind a wine might be upset by a higher price, particularly if they are able to identify a lower-priced (better value) substitute.

It is difficult to ascribe "rules" to guide making wine purchasing decisions based on price. It is hard to hold anything constant given the compounding complexity of consumer perceptions and preferences, and the many ways in which the products of the wine industry can be cut and examined. To be continued!

Wine Refrigerators

Professor Rapp mentioned that she was a fan of Subzero wine fridges during the last class, so I decided to do a little research on the cost and quality of different fridges.

On Amazon, the best seller listed was a 24" $849 Kalamera model, but there were several well-rated, similarly-sized models in the ~$200 range. The "Amazon's Choice" option was a $190 Ivation model. However, that model is slightly smaller than 24".

On the Subzero website, the 24" model retails for about $4,000. That's almost a bigger brand premium than we see in the wine itself!

Finally, I took a look at some of the recommendations on the Wine Enthusiast website. They offered a couple of Wine Enthusiast-branded refrigerators for ~$500, and a couple of N'Finity options for about ~$1,000.

I looked for more information on the Wine Enthusiast website to understand refrigerator quality. It seems that under-counter units require front vents, and tend to be slightly more expensive. These are the refrigerators that can "blend into" your kitchen cabinets, rather than being standalone. Having two temperature zones (to store red vs. white wines) also increased price. Overall, I didn't see much information to justify a large brand premium -- but if any Subzero fans out there want to make their case, please comment below!

Thoughts on Vivino

Recently, Vivino raised $20m in funding led by the investment arm of Moet Hennessy. Wine lovers everywhere rejoiced at the fundraise as Vivino is the world's most downloaded wine app. In class we talked briefly about the fundraise but I wanted to dig into a bit more and try to understand the investment thesis.

Vivino launched in 2010 with the goal of easing consumer’s wine purchasing experiences. After downloading the app, users can take a photo of their wine label and proprietary image recognition technology will promptly deliver pricing, ratings, and provide them with an option to purchase. Additionally, with an annual subscription of $47, users can get their curated wine selections delivered to their door at no added cost.

Vivino plans to use the new investment capital to expand its wine marketplace and add key team members. They’re aiming to reach $1 billion in wine sales by 2020 and have plans to expand into Hong Kong. According to Vivino, since its series B funding round closed, their user base has grown from 13 million to almost 29 million. All this growth and progress but they still have yet to corner the delivery market which is ripe with large and well-capitalized competitors including Blue Apron and Amazon.

Many publications have written about direct-to-consumer wine delivery and AI-powered sommeliers. Vivino is banking on a future where both of those things are ubiquitous and they are betting that they will be the first company to figure out how to seamlessly combine the two, a potentially powerful combination.

Furthermore, Vivino’s move to combine mobile commerce, an online marketplace and  personalized recommendation system is an interesting model. It isn’t a stretch to see vertical integration like this become the go to model in the grocery-delivery space. Companies focused on any consumable good (coffee, weed, etc.) where delivery apps exists but where there is not emphasis on consumer guidance could look to the success of Vivino as a model to employ going forward. Vivino itself may even look to push into other adjacencies. It also isn’t a stretch to see Vivino partner with door-dash and Eaze to provide the ultimate take-out experience. The future is bright for Vivino and I’d be interested to see how it plays out.

White Girl Rose

The first time I saw a bottle of White Girl Rose I was at a music show after party. The bottle, which was being displayed on the bar, and passed around by guests caught my eye immediately (as it did everyone else’s at the party). A catchy title led to a quick laugh with friends which led to a purchase which led to a picture and a Tweet. Soon enough I was seeing White Girl Rose at parties, restaurants and homes throughout LA but I also seeing it somewhere wine shows up less frequently –-- all over social media.

 In case you are unfamiliar, White Girl Rose was created by Josh Ostrovsky aka “The Fat Jew,” a social media influencer with 10.5M followers and David Oliver and Tanner Cohen aka “White Girl” Babe Walker, a Twitter and Instagram personality with over 2M followers between the platforms.  Both comedy platforms make their living making fun of cultural trends, in fact “White Girl” focuses specifically on mocking white women’s “basic” woes.

While the rise of rose in 2015/2016 was certainly responsible for the exceptional success of this brand, White Girl Rose is the ultimate case study in the power of influencer marketing around a wine brand.  In fact, White Girl Rose was “the most photographed alcohol product on Instagram” in the summer of 2017 according to the founders.

Yes, the bottle is silly and arguably offensive, but it’s also brilliant. It makes you laugh (perhaps squirm) but it also makes you want to take a picture of it and post it on social media. The fact that you are reacting in the first place is valuable – you will certainly remember the brand. The fact that you’re also tempted to take a picture of it and post it on social media is even more valuable. This virality effect leads to heightened interest, greater purchases and even greater domination via a exposure loop.  Having a contemporary wine brand people want to not only drink but also post or pose with? Now that’s powerful.  

How to Order With Confidence (or) Never Choose the 2nd Cheapest Bottle

I thoroughly enjoyed Alder Yarrow’s perspective. I found his approach accessible and particularly appreciated two takeaways: first that assessing and interpreting wine is entirely subjective, and second that the importance ascribed to a given wine is largely derivative of the story/influencer reading of the juice. I came out of the talk feeling that- if I were to expose myself to enough wine- I could develop a valid opinion/taste.

However, for the time being, Alder’s talk brought up one tactical (and possibly pedestrian) question: if interpreting/describing wine is so subjective, how would you accurately order wine to your taste at a restaurant, or ask for a recommendation per your personal preferences?

Of course, if you are an expert or are well-versed in your preferred wines it may be easy to spot a wine on the list or to generalize the taste you are going for, but as a beginner, this seems challenging. It is (admittedly, sometimes) embarrassing to ask the sommelier/waiter’s recommendation for “a dry white.” 

Maybe I have a bad memory, but I generally struggle with wine lists (even with Vivino’s help). As a result, when it comes to selecting a red wine I often resort to the cabernet sauvignon on the ‘by the glass’ list or ask the somm for the most “full-bodied” red- which I generally enjoy (though that’s probably the vaguest description, confirmed by Alder’s detailed tasting card). When it comes to white wines I am lost (aside from requesting a “dry” or “minerally” white). Should I instead say that I prefer “ocean air” over “butter”? I have a feeling that wouldn’t go over well.

The words that I have used to describe my taste preferences when ordering wine differ somewhat for red and white wines but have resulted in inconsistent outputs and overall varied success (measured by whether I like the wine I ordered, how closely the taste matched what I was attempting to put into words, and the somm’s reaction to my amateurish requests). Based on some of the reactions that I have received when ordering it is entirely possible that the descriptions I have attempted may have even been contradictory (e.g. is it possible for a full-bodied red to be earthier rather than fruit-forward? I hope so…).

After class I did a quick “how to order wine” google search and found that, in-line with Alder’s comments, lack of confidence around ordering wine plagues many. There are countless articles with step by step instructions on how to order wine, including Wine Mag’s “How to Order Wine in a Restaurant: 14 Alternatives to Panicking.” While this article certainly wasn’t foolproof, I found a few tips to be encouraging, including:

·      -  “Lesser known wines (usually) mean greater value.”

·       - “Skip the second cheapest bottle.” (we also covered this in our microeconomics class) - this has inspired me to look into pricing for my next post!

·       - “Know what you like and be honest with yourself.”

·       - “New World (fruit-forward) or Old World (earthy)” - this seems like a helpful break down…but is it really this generalizable?

I will continue to look into this, and will let you know if I find anything particularly ground-breaking!

Wine Signed by Astronauts

I was looking for a new recipe to try and was browsing Food and Wine earlier this week. I stumbled upon an article about Moonwalker wine that peaked my interest (Moonwalker Wine). According to the article, the limited edition release from Holman Cellars in Napa, is signed by 3 of the five US living astronauts that walked the moon. It is a Cabernet Sauvignon and the price of a bottle ranges from $120 to $1,490! What I find interesting is that the label and the concept is what seems to be selling. I am assuming the wine is of high quality too but the marketing emphasis is much more on the story behind the label.
Part of the proceeds from the sale will be donated back to Cosmosphere International Science Education Center and Space Museum in Hutchinson, Kansas.

Reading this article ties so much of what we have learned in the class together. We see wines with a story appealing, and demanding a price premium in this case, to consumers now. I was chatting with my sister yesterday after reading this article and decided to do a little experiment with her. Mind you, she is not the biggest wine drinker so she doesn't know many labels and/or the industry. I asked her if she had to chose between a grand cru wine and a wine where astronauts had signed the label, she chose the latter. She asked me what a grand cru was and was much more interested in hearing more about the astronaut signed wine. This proves many of the hypotheses we have discussed in class and reflects the trends we are seeing with consumers today.