Wednesday, January 28, 2009

No Quarter?

Note: The tax discussed in this article was eventually dropped from the final budget.

Financially, California is in a mess. Despite a GDP estimated at around $1.7 trillion there's a huge budget deficit. Governor Schwarzenegger has proposed a budget to address this, but as usual tax hikes aren't popular.

One that's proving particularly unpopular in certain areas is a proposed "nickel a drink" tax that would add around 25 cents to the price of a bottle of wine. It's being hotly contested; a group of major drinks producers including Anheuser-Busch, Diageo and MillerCoors have set up a web site against it,

The big question for winemakers is how to react. Should they put up their prices? If they do, that 25c will almost certainly end up being $1 by the time the wine hits the retail outlets. Rather than marking up a wine from $19.99 to $20.24 you can bet it'll go to $20.99, with the extra 75c going to the three tier chain. But if they hold prices then a 1,000 case winery ends up with an additional $3,000 tax bill.

So here's a few suggestions that you might want to try.

1) Ditch those oversized bottles. I've run a one-man campaign against those oversized, heavy Burgundy/Rhone bottles that don't fit in a standard Bordeaux-sized rack. When I buy wine I'm paying for what's in the bottle, not the bottle itself. I was overjoyed the other day when Thérèse Martin of Martin Ranch winery told me that she was switching to smaller bottles for her excellent Santa Clara Valley Syrah. If you really think that you need a hefty bottle to convince people to buy your wine, well you've got bigger problems than a 25c tax hike.

2) Lose the foil. Foil caps are nice, but they aren't necessary. They serve no useful purpose; in fact they can be downright annoying. You can't see how well the cork is holding up, they hide leakage and other problems. Stefania winery decided to go foil free from the very start, and it doesn't seem to be hurting sales for them.

3) Switch to Stelvin, particularly for white wines. Top quality corks are expensive; bad quality corks are a liability. How much do you lose by replacing corked bottles?

4) Simplify your labels. You don't need one on the front and another on the back. Unless you're trying to distinguish yourself on a shelf and attract an impulse buyer then you don't need metallic embossing, bottle numbering, clever die cut shapes or any of that. Here's a clue: we can't afford to impulse buy any more. We are looking at the price tags, not the pretty pictures. On a wine list, all wines look the same.

And here's one suggestion for our cigar aficionado Governor Schwarzenegger: Increase tobacco taxes. Significantly. 87c a pack is peanuts - make it $2 at least. You'll be raising money and saving lives.


dhonig said...

Make that a two man crusade. I can't stand the bigger bottles. In fact, I spent three hours last weekend pulling the dividers off some of my racks, removing the nails, and re-gluing them further apart, just to fit the pinot and syrah bottles.