What's a Good Price for a 'New' Wine?

A few weeks ago, Lettie Teague wrote an article for her "On Wine" column in The Wall Street Journal, and asked what had happened to New Zealand Pinot Noir? Teague noted that the presence of New Zealand Pinot Noir in American wine shops, and on restaurant wine lists had become markedly diminished over the last few years, and explored the genesis of New Zealand Pinot Noir's rise to (and fall from) popularity over the course of her column. Teague's article mentioned several reasons that New Zealand Pinot Noir had become less ubiquitous in the United States in recent years, and among the most notable contributing factors were the following:

• The Sideways phenomenon that sent the United States into a frenzy for Pinot Noir, and caused Pinot Noir production to skyrocket in both California and Oregon, leading to a highly competitive market for New Zealand Pinot Noir to enter into
• The economic crisis of 2008-09, which caused several distributors to go bankrupt, and limited or eliminated the distribution of many New Zealand Pinot Noirs in the American market
• Price - The article mentioned that it is difficult to find a good New Zealand Pinot Noir for less than $20, and cautioned that in general, consumers could expect to spend $30-$40 for a "good" New Zealand Pinot Noir

However, as compelling as the previous explanations were, I was most intrigued by Teague's commentary that a lack of brand recognition was responsible for the disappearance of New Zealand Pinot Noir on the shelves of American retail stores. Teague referenced a conversation with Sherry-Lehmann wine buyer, Ken Mudford, who was born in New Zealand, who identified brand recognition as a huge issue for New Zealand Pinot Noir. 

"Few customers seemed to recognize the best Pinot producers or why certain wines commanded high prices. There were a few exceptions, a few wines that Mr. Mudford called 'brands'—these were the wines people asked for by name, such as Craggy Range, Ata Rangi and Felton Road—but they were the exception rather than the rule."

This commentary made sense to me. What history or provenance did New Zealand Pinot Noirs have to command such high prices? Earlier in the column, Teague had stated that "eager winemakers (and wine writers) heralded the early [New Zealand Pinot Noir] wines as 'Burgundies of the South,'" but added the caveat that "the vines that they came from were often only several years old." New Zealand Pinot Noir is not red Burgundy. It doesn't have Burgundy's history, or the limited production that can send prices for Premier Cru and Grand Cru Burgundies skyrocketing into the hundreds or thousands of dollars for a bottle.

Burgundy trades on a winemaking history that is thousands of years old, where Cistercian monks researched and discovered the best villages and vineyard sites to plant their vines. The 612 Premier Cru vineyards, and 33 Grand Cru vineyards of France's AOC system were established on the basis of the tireless exploration of vineyard sites that had been conducted by the Cistercians centuries before. For example, the walled Grand Cru vineyard, Clos Vougeot has a history dating to the early 12th century. At 125 acres, it is one of the largest Grand Cru vineyards in Burgundy, but in the grand scheme of things, the overall wine production from Clos Vougeot is miniscule. Because of French inheritance laws, approximately 80 different owners produce wines from Clos Vougeot, with an average annual production of about 80,000 bottles produced in total. Because of this scarcity, the history of the vineyard, and the recognized quality of fruit sourced, some wine enthusiasts are willing to pay exorbitant sums of money for Clos Vougeot wines from top producers, due to the combination of a great vineyard site, and great winemaking. New Zealand, and other recently established wine growing areas, lack the codification of the greatness of their terroir. 

Take for example, the 2005 Domaine Meo Camuzet Clos Vougeot Grand Cru. 2005 was one of the more recent great Burgundy vintages, and Meo Camuzet is regarded as one of the top producers in all of Burgundy. A quick search for the 2005 Domaine Meo Camuzet Clos Vougeot Grand Cru on wine-searcher.com showed that the average price for this bottle was $373, while the lowest price in the U.S. market was $289. Other Meo Camuzet Clos Vougeot Grand Cru wines, from less heralded vintages could be found for as little as $140. Comparatively, the 2010 Felton Road Bannockburn Pinot Noir, a Pinot Noir from a highly regarded New Zealand producer in a well-rated vintage, sold for an average of $49 per bottle, with $40 being the cheapest price in the U.S. market.

Now, obviously there is a sizeable difference between $49 and $373, and the difference between $40 and $140 is still substantial. Yet, as I thought about my wine buying habits, and the wine buying habits of my friends, it became clear to me that it was not only a lack of brand recognition that was hampering sales of New Zealand Pinot Noir in the American market, it was a lack of history, and price to value correlation. Twenty dollars frequently represents a luxury threshold for many consumers. When spending over $20, many consumers want to know that their money is well spent. While they may not opt for a $373 Grand Cru Burgundy, spending $40 on a wine from an emerging region or unknown winemaker is also a risky proposition.

While Felton Road enjoys brand recognition and something akin to cult status among New Zealand Pinot Noirs, other producers are not as lucky. Given the region's emerging status, consumers are not likely to spend significant amounts of money on a Pinot Noir from a region and winemaker they are unfamiliar with. I found myself in a similar situation earlier this summer, when I encountered some terrific red wines from New York. I had read several articles touting the advances being made in red wines in New York State. While most people equate New York wines with the relatively infamous Rieslings, Gewurztraminers, and other cool climate white wines from New York's Finger Lakes region, several articles written earlier this year sang the praises of red wines from New York. Pinot Noir and other reds from the Finger Lakes, and Merlot and Cabernet Franc from Long Island earn particularly high praise. Unfortunately, despite Vermont's proximity to New York, few red wines from New York are distributed here. As such, I was pleasantly surprised when I encountered a selection of red wines from Red Newt Cellars at the Killington Wine Festival in July.

I tasted Red Newt's 2008 Reserve Merlot, and the 2010 Red Newt Viridescens (a Bordeaux style blend), and was impressed by both. They were more elegant and lithe than many wines from California, yet more fruit forward than most Bordeaux. Although I was told that the wines were not distributed in Vermont, I was sufficiently taken with the wines that I paid a visit to Red Newt's website upon returning home from the festival. Upon arriving at the page, I was shocked. The Reserve Merlot was sold out, but the Viridescens loomed large in the Red Wines section, with a price tag of $56.15. As much as I had liked the wine, I couldn't bring myself to pay that price for it.

The price of a wine from an unfamiliar region may have more to do with its success in the market place than its quality. While the Red Newt Viridescens was good, I don't buy $50 wines every day, and the allure of other $50 wines that I was more familiar with was enough to dissuade me from purchasing it. Had the wine been available for purchase immediately after I tasted it, I might have thought differently. In my experience, the psychology of consumers is such that if they have to work hard to spend a significant amount of money, and there are similar products available elsewhere, they aren't likely to work to spend the money on the more elusive product unless it has something uniquely compelling about it. In this case, high priced wines from emerging regions are almost better suited to be unique varietals, or have other unique differentiators that set them apart from similar wines that consumers can obtain elsewhere.

This is likely the problem with New Zealand Pinot Noir. While it has something of a novel quality about it, consumers aren't likely to spend $40 on a Pinot Noir from New Zealand that isn't overwhelmingly different from a Pinot Noir from Oregon or California that they can obtain for half the money. In my experience, wines from obscure or emerging regions need to be moderately priced, or significantly differentiated to gain traction in the market place. Given the high costs of vineyard land, grapes, and winemaking equipment, this places a high burden on fledgling winemakers, but unfortunately, it is the current reality of the industry. There is a large barrier to entry in winemaking. Still, some wineries from lesser known areas are making a name for their wines.

In addition to Red Newt Cellars, I also encountered Dan Mitchell of Fox Run Vineyards (also of the Finger Lakes) at the Killington Wine Festival. When I engaged him in conversation about Finger Lakes red wine, Dan told me that he hadn't brought any red wines with him, because they weren't distributed in Vermont. However, he did mention that Fox Run Vineyards made several red wines, including a Lemberger (also known as Blaufrankisch) which was a top selling wine in the New York City market. Coincidentally, the Fox Run Lemberger also boasts a price of $17.99. As I thought about it, I wondered if the success of the Fox Run Lemberger could be attributed to a perfect confluence of a well made wine, from an emerging region, that utilized a unique grape varietal, and was available for under $20. Lemberger or Blaufrankisch is easy to like. It is common in Austria, and other Eastern European countries, but examples are starting to appear in in the United States. It generally shows spiciness, mixed with dark fruit flavors, and a medium-bodied character. Fox Run Vineyards described their Lemberger as having "aromas of blackberry, raspberry, and freshly ground black pepper ... complemented by rich plum and black cherry flavors that lead to sweet vanilla, smoke, and a spicy black pepper finish." 

Although I haven't had the chance to try Fox Run's Lemberger, judging from my experience with Austrian Blaufrankisch, I can imagine why it's a popular wine in the New York market. A well made wine, from a local producer, and a unique grape varietal is likely to sell well. The fact that it is under $20 also helps. This may not be fair, but well made wines with high prices that aren't sought after by collectors often need to be tasted before they can be sold in mass quantity. Sadly, not every wine gets that chance. Until it does, we'll be left with a situation where vintners from emerging regions struggle to find the balance between charging a price for their wines that reflects the high costs of their labor and equipment, and finding a price that encourages consumers to experiment for experimentation's sake. 

What's the most that you would pay for a wine you weren't familiar with?