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02.04.2008

Why Do Wines Go On Sale?

I get a lot of e-mails from readers, most of which are cheers (and a few jeers) but surprisingly (and perhaps thankfully) I don't get a lot of general questions about wine. I, like every wine writer, definitely get the occasional "I found this bottle in my attic of 1979 Gallo Chablis, is it worth anything?" but not that many people write in with interesting questions like this one I got yesterday:

I've been a regular reader of your blog, and thought maybe I could suggest to you this question that has sort of nagged me for awhile. So here goes......


Whenever I see regular everyday wine on sale (wine shop, supermarket, bevmo, etc), I wonder why it is on sale and therefore, whether it is a chance to find a bargain or a signal to avoid and pick something else. Various theories come to mind:

1. the retailer is trying to clear this year's vintage off the shelves to make room for the next year's that is already in the warehouse (a chance for a bargain)

2. this wine is terrible and no one is buying it (avoid)

3. this wine is not getting noticed on the shelf for some reason, but the buyer must have tasted it and liked it. one man's loss is another man's gain (a chance for a bargain)

4. there's a reason that's an obscure varietal (avoid)

Am I overthinking?

GHR

This really is an excellent, and perhaps difficult to answer question. Before I take the plunge, GHR, you should know that I've never worked in or owned a wine store in my life, so I'm talking out of school here. I do know that there are plenty of people who read Vinography who DO work in wine stores, so I'm counting on them to tell me I'm wrong and/or fill in some of the gaps.

You may be overthinking things, but you're certainly thinking clearly. I think wine often goes on sale for ALL the reasons that you suggest above, including some more that I'll add here:


5. The distributor wouldn't sell the retailer the wine they wanted unless they agreed to buy some of this other stuff they didn't want, and so now they're trying to get rid of the wine that they didn't want.

6. The shop owner's margins on the wine are pretty good, and maybe sales are looking a little slow for the month so why not put some stuff on sale to stimulate buying?

7. Everyone else sells this wine for $3 more, so putting it on sale makes this store look like a great place to come for deals on wine

8. Everyone else has this wine on sale so the retailer just wants to compete better

9. The wine is fantastic, and the retailer thought they could sell it to people, but no one is buying despite their best efforts


I'm sure there are many more. At the end of the day, it's generally the case that the merchant has more of the wine than they want either for reasons of shelf space or poor sales of that wine.

The one time when it's easier to assume that the merchant is trying to make room for new vintages of wine is when an entire category of wines go on sale regardless of their price point. Most wine shops should never need to put expensive (i.e. $50+ per bottle) wines on sale unless they are trying to reduce inventory for space reasons or portfolio balancing reasons (e.g., we have too much Burgundy in comparison to all our other wines).

So most of the time it's the $25 and under wines that go on sale, as you point out, and usually just one or two here or there. Which, indeed, makes it hard to figure out exactly why.

Of course, with a smaller shop, you could always ask, but I understand that you might have doubts about whether you could trust the answer.

My best advice on how to approach this situation, regardless of why the wine went on sale is as follows:

1. Ask the shop owner about the wine and why they bought it in the first place, and why they would recommend it.

2. Figure out whether you might actually like the wine by asking the shop owner questions about what other kinds of wine it is similar to, especially if you can compare it to other wines you've bought, and enjoyed, from them in the past.

3. If you think you might like it, buy 1 bottle, take it home and try it that evening. If it's fantastic, go back and buy as much as you want.

Thanks for the question. Commenters, please weigh in.

Comments (16)

02.04.08 at 4:54 PM

I think that because there's so much wine in the marketplace, it's not uncommon to find wineries that end up with a little more of something than they could easily sell in a given vintage, and they end up offering the last portion at a pretty attractively reduced price to move it qauickly. So the stores may buy quantities of it and put it "on sale." In this situation, the store definitely makes a good margin, and makes lots of friends.

michael wrote:
02.04.08 at 6:49 PM

i suspect it's for the same reason almost anything goes on sale -- inventory management. the costs surrounding upkeep of inventory, especially of a perishable good, is something any good store-owner tries to minimize.

that being said, it is usually one of two interrelated issues: store owner got caught with the bag (excess inventory, so better to sell cheap than take a haircut on dumping the lot); the distributor also got caught and moved a lot of product, pushing down the cost and allowing the store owner to have a "sale" at less of a markup than typical. either way, the trick is to adjust the price to move the product quickly while covering cost, lest a haircut ensue.

remember that easily 75 to 90 percent of all wine on the shelves is meant to be consumed in the first few years after bottling. that means a whole lot of product taking up shelf / warehouse space that won't just go bad, but may very well be taking up space better used for other, more movable product.

(i am taking for granted that we all understand that wine stores and specialty shops account for only a small percentage of wine sold nationally & internationally. viz. costco et alia.)

02.04.08 at 6:55 PM

Nice topic, Alder, and good post.

Here's another reason (speaking from experience):

Often times a distributor offers the wine on discount to the shop to get rid of a vintage, move excess wine the distributor thought would sell better, or to increase their own sales.

In general, I agree that the best option is to first ask why it's on sale. Another is to head home, do some research on the wine (check reviews, etc) and if it turns out to be a good buy, head back and take advantage.

Jason O. wrote:
02.04.08 at 7:38 PM

There's really a lot to talk about here, so kudos to your reader for a very insightful question.

I am myself a veteran of the industry having worked it from almost every angle (restaurant, retail, distribution) over the last 15 years. Overall the answer that really covers it all is michael's. As with any other product (maybe even more so for wine) it's important to understand general retail price structures and schemes. There is sometimes a mark high, then "reduce" scheme common to almost every retailer of any stripe. I think that rarely a bum wine is put on sale, though there's no accounting for tastes. You may not like it, but chances are it was put on sale because the buyer thinks it's salable and of worth, just overlooked for any number of reasons listed above.

However, I'd like to embellish Michael Mohammadi's point about distributor's "getting rid of a vintage". One of the fantastic and most overlooked failures of the three-tiered system and how it's perceived in the US is the sheer sloppiness of the large (and growing larger) distributors.

Yes, I work for a small independent distributor, but we see almost hilariously misguided sales tactics from our larger competitors on an almost daily basis. We sometimes joke about "pre-sale closeouts" where salespeople are selling wine at close-out pricing when it's still literally on the water. While that is actually rare (though it does occur, let me assure you), it illustrates an interesting point about the larger national distributors that's very important to the consumer: inventory management and logistics drive the sales force, not quality.

One thing that is absolutely very common is salespeople "calling in favors" when they have fallen short on their goals. They usually fall short because the wine is bald-faced cash cow with obvious flaws or because the inventory managers are no judge of quality or worth in the marketplace and have expectations that are too high.

What this means for the consumer is that there are mines out among the case stacks in their local wine shops. Some of these wines were perceived to be an excellent value and the retailer negotiated a great price and so can afford to put the wine on sale to move through and turn a fast buck while keeping customers happy. Some are simply end-of-the-month dogs from a less-than-honest supplier.

In the end, the only way to navigate this minefield is simply to drink and taste and, as I advocate a lot on my site, not to be afraid to drink bad wine. Also, you should try to have the presence of mind to commit both the errors and the triumphs to memory if not paper. Buying a bottle of plonk will only make you a more shrewd buyer in the future. After all a bad bottle of wine is much less severe than say a bad tire, or a bad matress--at least you can still get the buzz if you pinch your nose and guzzle it down.

Alfonso wrote:
02.04.08 at 10:17 PM

Another logical answer, from one in the industry, in that distributors program wines to have quantity discounts.

They sometimes go "on deal" in any given month or time cycle.

This is traditionally more common with large distributors usually in concert with the winery or the importer. Sometimes it is mandated by large suppliers and often it has been established as part of the business plan. This has been going on for years.

When a store "buys in" on the deal, they can pass it on at a discounted price to the consumer.

It is not always that inventory has been mismanaged, or vintages are piling up, or close-outs. That does happen too, with large and small distributors.

You don’t have to be a large distributor to be misguided or sloppy. That is often just a function of being human and imperfect, which we are all capable of, whatever the scale of the operation.

Jason O. wrote:
02.05.08 at 6:15 AM

I agree with you Alfonso and I'm sorry if I implied that ONLY large houses can be sloppy. In my particular market there are as many small sloppy houses (if not more so) than large ones.

I accented the larger houses because they above any should know better. With so much changing with the national market, I'm always shocked that these guys are opting to wait in the shade while big retailers try to gobble up more control and supply, but maybe that's another topic.

As for QDs, I have to say that the reliable ones aren't usually out in stack as a sale. They might be out in stack, but with regularly scheduled deal cycles, most retailers buy in to get them to the next cycle and maintain a steady price. There are many one-time only promos, but on the more established labels those are more rare and are usually launched to sell a side-project wine or to pick up sales of a wine in the family that has been dogging a bit.

Now maybe I exaggerated when I said that the sales force for such distributors is only driven by inventory management, but my point is valid and I want to make it strong. I know from first hand experience (both as a large volume retail buyer and as a distributor) that a "fantastic" deal from these houses often has an underlying motive not necessarily related to the QPR of the wine.

02.05.08 at 6:17 AM

We have offers every month (never more than 10-12%), simply because some groups of people just like to be offered something.

In our case, we do not confront stock management problems since we only import what has been ordered. So, we use our sales to motivate people's buying in the one direction we want to push, which is normally to promote one winery or another.

I ratify what has been said earlier, if you do not know, do not hesitate to ask why!

Ryan wrote:
02.05.08 at 8:17 AM

If it's one bottle on say, it's probably old. If it's a stack on sale, then the retailer bought it on deal, typical though "not technically" legal(in some states). I free case on every 10 bought is VERY common. At our shop we always had stuff on sale, and it was all about the margins. We even had "regular" sale items, meaning they always got the red tag. Odd I know, but the owner though it worked.
In the end, sale tags sell wine, and when you want to move wine a big shinny sign with a red tag always works!

Dean Tudor wrote:
02.05.08 at 12:09 PM

Do not overlook what some wine industry people in both Canada and the United States have told me (in strict confidence, but I have no idea why this should be): wines go on sale when wineries/importers change distributors, and the wines in stock are just dumped.

Jill wrote:
02.05.08 at 12:21 PM

What Dean says is very valid. I have gotten amazing deals on wines whose importers have changed distribs. I have also taken advantage of vintage close-outs. In all of these cases, I always pass along savings to the customer. It's a win-win situation (as I think your reader initially pointed out).

One unfortunate situation did occur when I stocked a wine I liked, after a broker assured me it would only be placed in small specialty shops. A month or so later, I found that BevMo had purchased the wine in quantity and was selling it for less than I could. In this case, I dumped the wine -- but I thought it was worthwhile enough to bring in in the first place. I just didn't want duplication with a mass market retailer on this sku. I could have fought with the broker and made her take the product back, but it was easier just to sell through the cases.

02.05.08 at 1:33 PM

Consolidation has definitely resulted in some big 'dumps' in the market over the past few years. When Constellation or KJ or Diageo picks up a new brand or portfolio of brands, they obviously already have their own distribution channels, which are often quite different than the previous. In this circumstance, the previous distributor may ditch the product at a very low price to clear it out, sometimes with the effect of depressing sales for the new companies. Or the winery may even clear their channels as they go into a sale, to liquidate the inventory into spendable cash. I've watched this happen in a few markets which are pretty cutthroat - the handover is rarely seamless.

bb wrote:
02.05.08 at 2:13 PM

I worked the retail wine biz for a number of years and there were many reasons to put something one sale. However, not every sale should be viewed with skepticism. I often put wines on sale just to let folks know what kinds of wine that we carried, just part of the advertising strategy. Sometimes a bargain is really a bargain.

Boyce wrote:
02.05.08 at 11:45 PM

Re: "Do not overlook what some wine industry people in both Canada and the United States have told me (in strict confidence, but I have no idea why this should be): wines go on sale when wineries/importers change distributors, and the wines in stock are just dumped."

On the flip side of the coin, here in Beijing, I have found good deals when a distributor dumps a winery from its portfolio or it loses it to a competitor.

Cheers, Boyce

David C wrote:
02.06.08 at 6:37 AM

What we're overlooking here, while I agree with every point (and shading thereof) above, is that discounts are a basic way of marketing consumer goods. Why does a particular brand of peanut butter go on sale at Safeway? Because someone in the supply chain (from the producer on down, including the retailer) has put aside some marketing dollars for it to happen.

Why do they do this? At the most sophisticated levels, in order to test price elasticity of their product vs. the competition, to account for seasonality, and other wonky MBA-type reasons. Smaller producers, distributers and retailers tend to do a more rudimentary, seat-of-the-pants version of this, albeit sometimes unwittingly.

Of course, the smaller you get (on any of the three tiers), the less money you have to spend on marketing. This means that the $10 off deals are either; a) big wine factories going business as usual or b) a desperate move on someone's part (sometimes an opportunity for a steal).

It's all just to say that not all discounting is reactionary. It is a bonafide tool in selling stuff in our marketplace. Having said that, I'll echo the recommendation of asking your shop keeper why it's on sale! Couple that with shopping at small, passionate retailers who taste all their merchandise and are willing to give you hands-on help in your selection, and you've got a pretty good formula for finding good wine.

Hope that makes sense!

barbara wrote:
02.07.08 at 5:45 PM

I know a sales manager of a wine distributor who dumped wine cheaply when they lost the agency. It was a top brand and he hoped to make it more difficult for the new distributor to keep it in the exclusive restaurants. The particular individual was one of the reasons I ended up leaving the company.

Jason Haas wrote:
02.08.08 at 11:00 AM

Great question, Alder. One thing that hasn't been directly mentioned in these answers is that (unlike in other industries) sales are rarely decided on at the store level. Sure, there may be an "odd lots" bin where it's clear that the last bottle or two of a few wines have been sitting on the shelf gathering dust (avoid! avoid!) but most sales are the store passing along savings that they receive from their distributor. The distributor may be offering a better price as an inventory reduction closeout (thoroughly explained above) but they're at least as likely to be passing along savings they've received from their supplier, whether an American winery or an importer.

As most suppliers don't like the front-line price of their product to be reduced, they're rather everyone down the line treat it as a "sale" rather than a price reduction. That requires fewer explanations when you release the next vintage.

Thanks, Jason

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