A few weeks ago, before the worst of summer's heat arrived, I opened a bottle of 2018 cabernet from Napa. It was one of the many bottles I picked up during the pandemic, when the absence of restaurant sales created a supply glut in certain corners of the market. Through channels that shall remain unspoken, I was able to deduce the source of the grapes used to make the wine - one of Napa Valley’s most exclusive estates, whose wines fetch many hundreds of dollars from the lucky few who can find them.
Reselling surplus grapes is nothing new, just as it’s commonplace to find wines that were sold in various stages of evolution - from grapes still on the vines, to barrels ready for blending, all the way through shiners, or fully finished bottles that haven’t had the producer’s labels glued on to them yet.
The basic business model here is that a buyer with cash and an audience of potential customers makes a bulk purchase from a producer with excess capacity. Naturally, part of what gets negotiated in the transaction is disclosure, or how much the buyer can say when marketing the wine. The more the buyer can say when they market the wine, the higher the price they pay. And if the producer/source has some pedigree, they’re usually able to command a higher price – and, hopefully, sell out of it quickly.
But in many cases, very few clues are disclosed. This is expressly to protect the identity and brand equity of whomever is doing the selling. Sometimes this is because the quality of what’s being sold is lackluster, and the producer does not want their name to be associated with mediocre product. (De Negoce’s offerings of late are, regrettably, littered with examples of this.) Other times, the product is find, but producers still don't want to be seen liquidating wines that end up in the market at a fraction of the price they sell for under their own label.
Imagine if wine club members, paying, say, $65 for a bottle of pinot noir, got word that someone else was selling the exact same wine under a different label for $19. Bye bye wine club membership.
The surplus segment of the market, made up of many differently-sized operations, has been working very efficiently for decades in the US (centuries in Europe,) and always with a sensitivity for brand equity preservation. Which, in today's world of instant information, is kind of remarkable.
But then there’s the opposite, head-scratching end of the brand equity spectrum, which will be covered in the next piece.