Friday, January 14, 2011

Prediction for 2011 - Mr. Toads Wild and Crazy Ride

I am still reading all of the predictions about the wine industry for 2011.  The only good thing that I can say about them so far is that there are at least more of them than my already broken New Years Resolutions.  As you can tell by the title, I am predicting some massive instability and here is why.

In the last month, I have watched as yet another billionare has swooped into the California wine market and paid top dollar for an "almost" blue chip winery.  I say almost, because, while the winery has a great reputation, it is not from an area that most would consider to be blue chip on the world market.

In the meantime, I have watched as it appears our large corporate wineries are basically dumping their Australian assets.  I realize that some of this has to do with the Ausie dollar and some with unfortunate marketing and style of many Aussie Shiraz's.  However, a few years back, everyone was worried that these Aussie wines would rule the market place, and this is not the only baffling issue.

On the local scene (Central Coast of California), I have watched retailers and wineries dive head long into discounting wine.(My inbox yesterday contained an offer for six single vineyard pinots which claim to retail for $230 on sale for $99 with tax and shipping included.)  I have seen incredible producers shift production away from the high end vineyard designated wines to create wonderful and affordable blends.  Clearly, the price pressure being felt by the average winery is intense.

Finally, I was shocked when I read this morning about the sale of a Bourdeaux Chateau for a record high sale price.  I have some knowledge of Bourdeaux wines and have been lucky enough to drink a few, but I am not even close to the level of an aficianodo.  Thus, maybe I have simply missed all of the hub bub about this Chateaus in the past, but I had never heard of it.  While I do not doubt that it produces nice wines, a little known Chateau sold for a record price.

"Its vines today cover 4.7ha, with a further 3 hectares of parkland. This means the sale price equates to €3.8m per hectare – which according to local paper Sud Ouest is the highest amount ever paid per hectare for a vineyard in Bordeaux, even taking into account that some of that price will have been paid for the adjoining park, and attractive 19th century chateau."  I realize that the Far East Market is driving crazy prices for high end Bourdeaux wines, but I still do not get this purchase.  I think we are in for a new era.

Our World economy seems to be seperating between the top and the bottom.  If you are considered a rare luxury good, there appears to be strong demand and no pricing pressure.  However, below that, there appears to be massive pressure for value.  This pressure is supported by the fact that the wine market is awash in quality wines from all over the world at very reasonable price points.

When new owners pay records prices, I have to assume that they are shooting to be in the luxury brand.  Otherwise, I just do not see the margins for those in the value catagory that would justify these record prices.   Justin and Chateau Carmes may prove their purchasers right, and they may transcend the boundary between value and luxury status, I simply do not know how much room for growth exists in the luxury arena.  However, I no longer believe that simply putting Napa on the label or Haut Brion will guaruntee you that status.  As the title, inspired by a recent trip to Disneyland with my children states,  I think that this is part of the wild ride that the wine industry is about to take.  In the meantime, I am enjoying picking up some wonderful wines at prices that seem very reasonable.



Monday, January 10, 2011

Gabrielle Giffords Shooting

This post is seemingly way off topic to the world of wine law.  However, with the fact that wineries/retailers and distributors are in a political dispute over HR 5034, I for one think that anyone involved in politics needs to sit back and think about the shootings in Arizona.  The events in Arizona are a tragedy that will be made worse, if we do not learn from them.

In reading about the events, I wanted to quote from Marty Kaplan's blog, as it resonated with me for two reasons.  "If you're worried that violent video games may make kids prone to bad behavior; if you think that misogynic and homophobic rap lyrics are dangerous to society; if you believe that a nipple in a Superbowl halftime show is a threat to our moral fabric - then surely you should also fear that the way public and media figures have framed political participation with shooting gallery imagery is just as potentially lethal."  Marty is specifically refering to the Palin Pac ads with gunsights on Ms. Giffords district, and the fund raising efforts of Ms. Giffords opponent that included the opportunity to shoot a fully automatic M 16.  This resonated with me for two reasons.  The first is that rhetoric does matter.  The second is that there is no way to correlate these events with any rhetoric, as opposed to the mental imbalance of the shooter. Finally, I am not advocating the we regulate anybody but ourselves in the face of this tragedy.
When we look back at history, we see the strong effect that rhetoric has had.  I do not think anyone in England during the World War II era would doubt the part that Winston Churchills speaches played in keeping England strong and unified.  The civil rights and politics of the 60s immediately bring up images and language of Martin Luther King and John F. Kennedy in my mind.  Words have power, and I am not just saying that as a lawyer.

Back on the issues of winelaw, I have not seen any sort of incendiary language used to describe the battle between wholesalers and those that wish to ship wine from out of state.  However, I do know that the two sides are very polarized and assume that both sides want to ruin the other.  Last fall, I attended an event in Chicago, where I was very excited to see a debate on HR 5034, as I know that I have strong opinions about the motivations of the two sides.(The true debate did not occur, because the representative for the wholesalers could not make it.) Going forward, we need to remain mindful of the force and affect our choice of lanuage may have and continue to remember these events in Arizona.  We need to remember that we can disagree on issues, without using the symbolism and rhetoric that links the issues with war.  Finally, we do not need to waste any time trying to change anyone but ourselves.

God Bless and keep all of those harmed in the recent shootings in Arizona.

Wednesday, January 5, 2011

Getting Paid for Grapes

I hear it all the time; the wine industry is so small that people can still make agreements on a handshake.  They go on to say that reputation is so important in this industry and there is no need to worry.  However, I also get calls every year at about this time from growers wondering how they can enforce their sales agreements.

Grapes Sales Contracts do not need to be lengthy, but they do need to be more than a handshake.  The industry is growing rapidly and the economy has put a big strain on wineries ability to pay. Thus, more and more growers are finding themselves in a position where they have to enforce these agreements.

In California, you can enforce a "Growers Lien" that is an automatic lien placed upon the grapes sold.  This will allow you to go to court and seize the wine made from your grapes or the funds received from the sale of the grapes.  The growers lien is not canceled by the filing of a bankruptcy and will give the grower priority over all but wages or a warehouse lien claims.

The Growers lien is in addition to the normal contract remedies.  If the winery has the funds, a grower could also recover damages beyond the value of the wine, as this economy has left bulk wine worth less then many grape contracts, and attorney fees if provided for in the agreement.  This is one very strong reason to have a grape sales agreement.

A grower can also file a complaint with the California Department of Food and Agriculture.  The CDFA market enforcement branch will investigate your complaint and issue a finding. The CDFA can also provide arbitration proceedings for the parties.  The CDFA can utilize license revocation and/or criminal proceedings to enforce your sales agreement.

While we may all wish that our tight knit industry will insure that all parties comply with their agreements, this is not always the case. Further, the economy in some instances has simply left parties unable to comply with their agreements.  Good grape purchase agreements and knowing your rights as a grower are essential.