Some wineries learn lessons the hard way

By By Stan Torgerson / wine columnist
July 9, 2003
Two weeks ago in this column we quoted Garth Cobb, winemaker for Karly wines of California. Cobb had told me California winemakers had a problem. Too much wine. Too few customers. Many, he said, were hurting.
Last week there was proof he was right. Industry giant De Loach Vineyards declared bankruptcy.
De Loach is reportedly $30 million in debt. They lost $2.6 million this year. They were producing 250,000 cases of wine a year and losing their shirt. So they declared chapter 11 in an attempt to keep their doors open.
De Loach in Mississippi
Many Mississippi wine lovers have tried their product. De Loach was a favorite of the buyer for the state's ABC warehouse. The Mississippi select wine list, the buying guide for wine retailers in this state, lists four different De Loach chardonnays, ranging from their low end bottling at about $10 to their top-of-the-line Russian River version, priced in the $28-$30 range.
In addition, two De Loach cabernet sauvignons are on the Mississippi market. Again, the low end is a $20 wine. The high end retails at about $23-$25 even though one review I read rated the wine at only 84.
That's still not the end of the ABC love affair with De Loach. Their merlot is listed. Figuring the normal 30 to 40 percent markup, it is about $20 retail.
Two De Loach pinot noir wines are available through the state, one for approximately $20 and the other $30-$32 at the retail level.
De Loach zinfandels
The state also invested heavily in De Loach zinfandels, four of them in all. Low end $11, high end $36-$38 with two zins in between.
That makes a total of 13 De Loach wines purchased by the state for resale in Mississippi, the most bottlings of any wine producer we can find on ABC's list.
This is no Johnny-come-lately winery. It was founded in 1975. During the 1990s when California vintners were convinced that wine was the next gold mine to be discovered in that state, De Loach increased productions from 150,000 cases to the 250,000 mentioned earlier. Translated into bottles, that's 3 million bottles per year coming on the market with their label.
Garth Cobb is right. The wine roller coaster is roaring down the incline and taking some long term, big time producers with it and De Loach is one.
The problem
My problem is, as I said two weeks ago, I'm still waiting for major price cuts to begin but I'm not seeing any. Wouldn't you think the state warehouse, with 13 De Loach wines in stock, would see the handwriting on the wall and start dumping some.
After all, if these wines are not selling fast enough elsewhere to keep the company out of bankruptcy, it is likely they are not selling in volume here either. But Mississippi wine buyers are victims of the lack of competition in this state. The retailers either buy from ABC or not at all. Why cut prices when the buyers have no other source?
This month the wine list sent to retailers shows 15 wines with price changes in June. Two of them were reductions. Thirteen were increases. How's that for a sellers market?
My friend Cedrick Martin in New Orleans is a combination retailer/wholesaler. He has deep pockets. When he hears a fellow wholesaler has lost a particular wine label or is overloaded with a wine that's not selling, he often goes to them and offers to buy every bottle of that particular brand in inventory but at a fire sale price.
The price?
More often than not he gets what he wants at the price he wants to pay. A week later the wine is on sale at his store at prices that sometimes are so low they seem too good to be true. They are loss leaders or, in his case, break even or small profit leaders, designed to get customers into his retail store.
We don't have any Cedrick Martins in Mississippi. What we seemingly do have is a hold-the-line philosophy that forces the retailer to sell less and the consumer to pay more.
Every businessman will tell you the key to success is not the dollars represented by his inventory but the dollars rung up by his cash register. De Loach has learned that the hard way. I can only hope the state will learn it some day as well.