The Race for Shelf Space Narrows Consumer Choice

The fun begins when one pops into a well-stocked wine shop to look for a bottle of Chardonnay. There are 50 or 100 to choose from. Or 200. Unless you know what you want, or know a lot about wine, the selection is mind-boggling.

Imagine, then, the confusion facing the merchant trying to stock those shelves. There are about 700 wineries in California, and Wine and Vines, a wine industry publication, estimates that at least 550 of them produce Chardonnay.

Add to that Chardonnays from Australia (which represent good value because of the weakness of the Australian dollar compared with the U.S. dollar), Italian Chardonnays, and white Burgundies from France. The shelf space needed for just Chardonnays could fill all the space an entire wine shop used a few years ago.

Trader Joe’s, the Southern California chain that pioneered discount wine pricing after the repeal of Fair Trade in 1978, has seen the demand for shelf space grow to proportions never anticipated. At one point, Trader Joe’s stores were so jammed with wine that they took up not only shelf space but most available floor space, with boxes stacked on boxes, and aisles jammed with more wine.

Last Oct. 19, when the stock market crashed, all that ended.

Stop, Look and Lighten Up

“What we did on Oct. 19 was to stop and look at what we were doing,” said Bob Berning, longtime wine buyer for Trader Joe’s. “Our intention for the past 12 months had been to cut down on the boutiques (small premium producers of wine), because some of them were not paying the rent on the shelf space.

“We felt that on Jan. 1, 1988, we would modify and severely reduce the number of boutiques that we would carry from 350 items to a range of 30 to 50 items.”

But when the Dow Jones Industrial Average lost more than 500 points on Oct. 19, Joe Coulombe, chairman and chief executive of the 27-store chain, got together with Berning and they decided that the wine market was also oversold and it was time to cut back.

“I went through the warehouse and saw that every wine over $10 was a California boutique,” said Coulombe. “I asked myself, ‘How are we buying these things? Why don’t we buy these the way we buy Bordeaux, by the carload and where we get a big discount?’

“There has been no physical growth in the wine business in the last five years because Americans have not learned to consume wine with their food.”

By adopting a policy of buying only good values, Coulombe ended the “good ol’ days” when you could stop at a Trader Joe’s and buy Ridge, Heitz, Diamond Creek, Trefethen, Chateau Montelena, Burgess and a dozen more producers all at discount, and while you were there pick up a few $1.99 specials under the Trader Joe’s label--wine that was purchased in bulk and bottled at Chateau Diana in Healdsburg.

‘Best Pricing Thresholds’

Berning said that under the company’s new buying policy it will carry only those wines “that we think are good and that are readily available, and where the winery is willing to ship it to us at best pricing thresholds.”

Included in that, he said, were two 1986 Chardonnays, from Fetzer and Parsons Creek, “which we bought at maximum discount--two truckloads. We must be able to buy and use our strength to bring the consumer a better value if we’re going to maintain our position in this business.”

That means that some small producers of wine that previously were marketed by the chain will not be seen there in the future. Nor will some limited-quantity items.

Instead, Trader Joe will feature close-outs and special items that haven’t sold. Also, the company will continue to market wines from the “off” regions of the world such as Muscadet, the Loire and Alsace, Bourg, Fronsac and Touraine (France); Spain; Portugal; Australia and Germany. And since Joe is a dedicated Rhoneophile, the chain will always have good values from the Rhone Valley in France.

“These are not the glitzy wines that the rich Swiss and Germans are buying up,” said Coulombe, noting that high prices for prestige Bordeaux have forced him to consider the Cru Bourgeois wines that represent better values.

He added that the company may well buy one vintage of a particular wine and not the next vintage, ostensibly adopting a policy used by the British wine trade for years that has led to lower pricing for poorer wines, something that hasn’t been a practice in this country.

Since the late 1970s, Trader Joe’s has been the wine discounter in Southern Califoria, although other shops later began to offer wine at discount too.

Despite the competition, Trader Joe’s chain, stretching from San Diego to the San Fernando Valley and soon with stores in the Bay Area, grew rapidly, due in part to a cleverly written newsletter that is sent five times a year to 3 million subscribers, at no charge. The newsletter sells close-out and special-purchase wines better than a carny barker.

Coulombe discovered the yuppie more than a decade ago, before the phenomenon was identified and labeled by pop sociologists. Today he says, “I cater to ouppies now. Those are older urban professionals.

“But my ideal customer is an unemployed Ph.D.--someone who has the ability to discriminate, but who doesn’t have any money. These days, it’s an unemployed stock broker who has just had his Benz repossessed. And he now wants Bordeaux Blanc for $1.99. He wants to get something reasonably civilized to eat and drink at a fair price.”

Coulombe now owns none of the chain he founded. Nine years ago he sold it to the Albrecht family of West Germany, which also owns half of the Aldi Stores in Europe. Plans calls for two or three Northern California Trader Joe’s stores this year and perhaps as many as a dozen eventually.

Berning, wine buyer for 14 years, finds the wine for the Trader Joe’s label from samples of bulk wine. He makes offers on those lots that are the best and most are bottled by Tom Manning’s Chateau Diana.

Three months ago, John Shields, former vice president of operations for Mervyn’s Department Stores and an old friend of Coulombe, was appointed president of the chain.

Among the good values at Trader Joe’s stores last week were 1979 Crozes-Hermitage from Jaboulet at $9.99; a marvelous dry sparkling wine called Cuvee Rouge from Culbertson of Fallbrook at $8.99; 1983 Evenson Dry Gewurztraminer at $1.99; 1985 Chalk Hill Sauvignon Blanc at $3.49 (less than half its original price); and 1986 Glen Ellen Fume Blanc at $4.99 (suggested retail is $7).

Other Southern California merchants also have found they must take special measures to market because of the plethora of producers.

David Breitstein, owner of the Duke of Bourbon in Canoga Park, one of the earliest of the premium wine shops in Southern California, admitted that things have changed.

“Ten years ago, we could have bought a flyer, a new wine we didn’t know anything about. And if we made a mistake, we sold it anyway because there was a shortage of product. Now, with hundreds of Chardonnays, customers can be selective, so we have to be, too.

“And it’s not the money, it’s my reputation I’m concerned about. I can’t afford to take a flyer on anything.”

Also, he said, “the pressure and stress on buying has never been as great as it is today. Sales people are on the phone to us weekly . . . but we will carry only the wines I really want.”

At the Wine Cask in Santa Barbara, “we spend much more time with each customer than any other store I’ve been in,” said Laird McLain, “so we get to know what they want.”

Taking Some Gambles

He added that the staff is always seeking unknown wines and “we can take those gambles. If we believe in a wine, we’ll take a chance because we have a restaurant, where we can introduce people to it.” Also, he said, the shop buys private collections to stock a cellar of older wines.

That’s the draw, too, at Vintage Wines Limited in San Diego.

Owner John Lindsay of Vintage Wines said that in addition to older vintages, he will carry only the top wines as rated by wine publications and his own tastings and discount every item.

“We’ll always have Heitz Martha’s Vineyard (Cabernet) and wines of that caliber, but I don’t want to be a grocery store carrying a lot of stuff just to carry it. I want to be selective, and I’m always looking for wines in a wide variety of styles.”

The store with the greatest reputation for low pricing in the area is the Los Angeles Wine Co. in West Los Angeles, and buyer Jeff Walker said “our whole idea here is volume. We turn our inventory every 30 days.”

Owned by Tom Kowalski and Steve Bialek, the L.A. Wine Co. has been open six years. Walker said its low pricing is achieved by “our warehouse atmosphere. We carry all the premium wines, the ones that get the best reviews.”

He said that if the company doesn’t carry an item, “most likely the problem is price.” He said if a new wine can’t be sold very competitively, it won’t be carried.