Doing the Discount Shuffle

Talk about bad timing. A year ago, just as consumers began to turn their backs on overpriced wines, California wineries raised prices again. Result: The more popular wines found their sales leveling off, and the rest hit a brick wall.

Consumers were sending a perfectly clear message, but by the time it dawned on the industry that they weren’t kidding, there was serious trouble--an ocean of unsold wine backing up in warehouses. A dozen wineries filed for bankruptcy; owners began to draw up salvage plans.

The wine industry had dug itself into a hole. Consumers felt $15 was too much for table wine, but wineries feared they couldn’t just drop their prices because consumers might suspect there was something wrong with the wines. And to discount heavily (especially to volume buyers such as discount warehouses) was dangerous, because, with restaurants still charging based on the original price, the disparity would be ludicrous--a $12 wine selling at $6.99 in a warehouse and $30 in a restaurant.

With this in mind, three established wineries are now re-tooling their primary brands, and what will appear on the shelves is somewhat different from what you’d have found last year. All of these wines provide better dollar values without sacrificing the prestige of the winery’s more expensive reserve bottlings.

Flora Springs Winery, one of the largest vineyard holdings in the Napa Valley (more than 350 acres), has made a name for itself with a number of great reserve wines. Trilogy (a blended red wine that sells for $35) and Soliloquy (a superb Sauvignon Blanc, $20) sell well despite elevated prices, as does the excellent Barrel Fermented Chardonnay at $22.

Still, a year ago, the Komes family faced the crunch of 1991. Sales of lesser Flora Springs wines were turning soft.

“We couldn’t afford to drop the prices of our Napa Valley wines,” says Flora Springs winemaker Ken Deis. “But our Napa Valley Chardonnay was $16 and that was too close in price to the Barrel Fermented. In effect we were competing with ourselves.”

The owners chose to elevate the Flora Springs wines into an all-reserve line. At the same time they created a lower-priced label called Floreal, which will account for the bulk of their total wine sales. Floreal wines are still estate-bottled and represent excellent values, especially the 1989 Cabernet ($12, sometimes discounted to about $10). With deep cherry flavors and rich taste, it would have cost $16 almost a year ago. The 1990 Floreal Chardonnay ($12) also is a good buy, a wine of creaminess and delicate pineapple notes.

Belvedere Winery in Sonoma County also changed its strategy. The property is owned by William Hambrecht, founder of the San Francisco investment banking house Hambrecht & Quist. Each May, H & Q (as it’s known in the financial trade) sponsors a wine industry investment symposium. A year ago, Hambrecht attended the event to hear what the experts had to say.

“I walked out of there and said to myself, ‘I just heard a lot of wisdom that said I shouldn’t be in the wine business at all.’ I had to figure out what I was going to do,” he said.

Belvedere was making 30,000 cases of high-quality vineyard-designated wines using grapes from some of the county’s most prominent growers, as well as a line of blended wines under the Discovery label, which had grown unexpectedly large--325,000 cases a year at its peak.

“We were almost overwhelmed by the Discovery wines,” Hambrecht says. “It was one of the smaller brands in a very fiercely competitive business, and we had to decide if we were going to go head to head with the Glen Ellens and the Gallos or retrench.” Competing would mean a massive infusion of cash.

Instead, Hambrecht chose to trim the line of Discovery wines. Hambrecht’s blended wines are now being marketed under the Grove Street name. Production will run about 150,000 cases a year.

For the Belvedere line, winemaker Erich Russell and vineyard manager Fred Peterson decided to put emphasis on making wines of even higher quality--while reducing prices about 20%. To begin with, they stopped buying grapes from other growers and now concentrate on grapes from Hambrecht’s own 500 acres of prime vineyard land (most owned, some leased). As a result, Belvedere wines are no longer designated by vineyard but by region.

This excellent line of wines is topped by the first Zinfandels under the Belvedere label. The new 1990 Zinfandel ($10) is a brawny, spicy wine with raspberry and cedar notes. (The 1989 Zinfandel also is good, but the ’90 is better.) I also liked the 1990 Belvedere Chardonnay from Alexander Valley ($8), a soft, floral wine with a creamy finish, and a 1990 Russian River Chardonnay ($11), spicier and more delicate. In the past, these wines would have sold for $13 or $14.

At Villa Mt. Eden, Mike McGrath has made excellent Napa Valley wines for years. In the past, the owners felt that as a historic winery (founded in 1882), it could command top dollar for its wines.

Three years ago, Villa Mt. Eden was bought by Stimson Lane, the wine division of U.S. Tobacco Co., which also makes splendid wines at its other properties--Chateau Ste. Michelle, Columbia Crest and Snoqualmie Winery in Washington and Conn Creek Winery in the Napa Valley.

Rather than simply dropping the prices for Villa Mt. Eden wines, Stimson Lane decided to change the wines and the brand image. Stimson Lane brought in former Kendall-Jackson Vineyards winemaker Jed Steele as consultant. He and McGrath retooled the wines, starting a lower-priced line of wines blended from various North Coast regions under the designation Villa Mt. Eden Cellar Select. Included are a lovely, crisp, flavorful 1990 Chardonnay, an excellent, bold 1989 Zinfandel, and a flavorful 1989 Cabernet Sauvignon, all at $8 to $9.

At the same time, there is also a line called Villa Mt. Eden Grand Reserve, made from the winery’s 80-plus Napa Valley Acres, including a 1990 Chardonnay and 1989 Cabernet, at about $13. Both are good values.

If new names and new marketing schemes like these catch on, wine buyers may be in for a round of reasonable alternatives to the steeply priced wines of the last few years.

Navarro Vineyards in Mendocino County was the big winner at the National Orange Show Wine Competition in San Bernardino recently, winning three best-of-class awards.

But the surprise of the event was that a Missouri wine made from French-American hybrid grapes won the sweepstakes award as the best white wine.

The 1991 Hermannhof Winery Vignoles ($7) was judged the best white wine at the competition for wines from New World countries. The Vignoles, an off-dry wine, won out over 1990 Geyser Peak Semchard, a blend of 75% Semillon and 25% Chardonnay.

“I’m proud that the judges fairly acknowledged the achievements of wines outside the fashionable clique of popular varieties,” said Jerry Mead, coordinator of the event.

He said the judges were “so open-minded that they gave their best-of-show award to a Semillon, the sweepstakes white wine trophy to a French hybrid from Missouri, and gold medals to an Alicante Bouschet, a Chancellor from New York, a Shiraz from Australia and a Muller-Thurgau from Oregon.”

James Trezise, president of the New York Wine & Grape Foundation, said: “This shows that West Coast wine judges are more open-minded about the hybrid grape varieties than judges in the areas where they are grown.”

Among other white wine runners-up was another hybrid wine--the 1991 Blumenhof Winery Seyval Blanc, also from Missouri.