In economics, Veblen goods are a theoretical group of commodities for which peoples’ preference for buying them increases as a direct function of their price, instead of decreasing according to the law of demand
For the last decade plus there have been wines, primarily the top wines from Bordeaux, Burgundy, Champagne, and Napa Valley which could have been considered the very definition “Veblen Goods.” Think, Cristal Rose!
Like every other part of the economy the wine business has been greatly affected over the past year, mainly due to large shifts in buying patterns as well as volatile exchange rates. One of the first indications of the bursting bubble of ultra-premium wines was the cooling down of the auction market of top Bordeaux and Burgundies, quickly followed by a decrease in demand of Bordeaux futures. However, one area of the business, which for a time appeared to have survived the turmoil, was that of “Cali-Cult” wines. I have never been quite sure if that moniker is self-proclaimed or anointed, especially with a winery that has never released a wine! These wines are typically very expensive, in the $250 to $1000 per bottle range, extremely limited production, sometimes less than 200 total cases, and quite modern in style. Status-seekers from around the world were continually driving up the prices on the “Cali-Cult” wines to the point where there seemed to be no ceiling as result from never ending demand.
Well, in the past couple of months, I have seen the “Cali-Cult” bubble finally burst. Allocations of high-end California wines have been loosening up, but the “Cali-Cult’s were still not being offered through the traditional distribution channels. They are predominantly sold directly to consumers via mailing lists and the remaining bottles are parceled out to the country’s top restaurants. Only occasionally were few bottles available to retailers. So, I found it very interesting when a couple of weeks ago I was invited to Per Se for a luncheon/tasting hosted by a new “Cali-Cult” winery featuring two wines, both first releases. While it is not uncommon for a well-financed winery/importer to host a tasting at a high profile restaurant like Per Se to create “buzz” among the press and industry, it did strike me as odd to rent a private room for 36 clients at such a place given the current economic climate…definitely an investment in branding.
Admittedly, the winery has the right “cult” pedigree of people, land, facilities, etc., but, while listening to their impressive resume, I kept telling myself this feels more like a “hard”sales pitch rather than a marketing event. At the end, we were given allocations and pricing, and, as expected, my cost was $300/bottle! Yes, the wine was good, but at that price, not memorable enough to pay $3600 for a case. Despite the occasional accusation by admirers of these “Cali-Cult” wines as being an inveterate Europhile, my job is remain as objective as possible, and I am generally unimpressed with the quality of these wines and questioning the hype.
Receiving an allocation of twelve bottles was an obvious sign of the shifting market for these “cult wines.”. Of course we were told, “Please confirm your order ASAP as only 150 bottles were allocated for Manhattan.” Upon returning to work I placed the order sheet in my “offers to price out.” However, the real indicator of the bursting bubble and expanding exclusivity was when a week later I got a call for distributor reminding me to submit my order and if I so desired I could order two cases!
My advice to those who enjoy the wines, by being patient you will save yourself some dollars and may even get more than a couple of token bottles for your collection.