How To Sell Beer For $700 A Bottle

Slate.com published an article the other day, and, while it's about wine, not beer, I thought it worth looking at because it shows an excellent opportunity for the craft beer industry.

One thing caught my eye: On the day it became clear that Lehman was kaput, the trader pulled a 1997 Barbaresco Santo Stefano out from under his desk, and he and some colleagues proceeded to drink it from paper cups. The producer went unnamed (Santo Stefano is a vineyard), but the story said the wine cost $700. I e-mailed the writer, Gabriel Sherman, who told me the bottle was a double magnum. Piecing together these details, I'm reasonably certain that the Lehmanites were numbing themselves with the 1997 Bruno Giacosa Barbaresco Santo Stefano. Giacosa is a winemaking god, and reading about the shabby treatment accorded his wine—stored under a desk! drunk from paper cups!—prompted the first real schadenfreude I've felt since Wall Street went on life support.

I'm not the smartest person in the world about wine – in fact, wine has always baffled me. But, my nascent appreciation for beer has brought out some information about wine that I didn't necessarily understand before. Like what the hell this person, Mike Steinberger, is going on about. Ahh…yes…a 1997 Barbaresco Santo Stefano. Fools! Unfortunately none of that makes sense to me, and, really, without Mr. Steinberger's help in the second half of that paragraph I would never know that any details were missing from that. Turns out, it's sort of like saying, in the beer universe, a 1997 Willamette Pale Ale.

I'll get the less interesting part of the article out of the way now: blah, blah, blah; rich people are still making money and drinking expensive wine.

But it's that first paragraph that has me interested. By now you're probably wondering why. Well, if you're anything like me, you wonder why the hell anyone would pay $700 to keep a double magnum (128 ounces) of wine in their desk drawer. There's a few things at work here: first, why is the wine $700 to begin with; second, given the reasons for one, doesn't it make far more sense to keep it on a shelf or displayed so that you can show it to others? I'm relatively unconcerned about the drinking from paper cups part – everyone likes the irony of drinking expensive things in cheap paper cups (although, frankly, I prefer to go the other way, and have been known to drink PBR from a Waterford crystal tulip glass). But the whole scenario reeks of "I'm too good for high quality" elitism, snobbery, and fakery.

But, what I am interested in is the nomenclature of wine. I am far more interested in the reason why bottles sell for $700. In fact, it's fairly safe to say that this Lehman trader probably owns at least two bottles of this particular vintage (which makes me think, if I'm a Lehman Brothers client, that I am paying way too high of a commission to the traders!). And, the answer, as Mr. Steinberger points out, is right on the label. By looking at what these things tell us, we can maybe apply them to the brewing industry to better educate and drive interest to consumers.

1. 1997 – the vintage date
   
2. Barbaresco – the style
   
3. Santo Stefano – the vineyard
   
4. [Bruno] Giacosa – the vintner
   

First, the date. The macros have instilled in the beer consumer this idea that consistency is super important; in their world every bottle must be exactly the same or something is wrong – the process has been corrupted. Their processes have become so mechanized that if one bottle is any different from another there is clearly something wrong. Indeed, much of the to-do that the macros make about their "forays" (such as they are) into "craft" beer is that their American ale is "better" because they have a better control of the process and thus every bottle tastes exactly the same; with the concomitant negative implication that "and craft brewers don't." And this is borne out in their marketing when they tell us that their beer is flown in from all over the country to make sure that every single bottle tastes exactly like every other bottle despite the fact that they come from different places within the country, are produced under different brewers, and are being sold to different markets. Market factors aside though, this dogmatic obsession with consistency is a result of the strong-arming of the realities of brewing. Wineries put dates on the bottle because, quite frankly, some years are better than others. 1997 becomes famous as a good year, so any bottle carrying the 1997 imprimatur instantly becomes more "valuable." Well, much like the wine industry, some years for brewing are better than others; in a minute we'll get to some of the agricultural factors that make a slight difference between the industries, but even if it is brewery specific that still makes the date of great import. Note that this doesn't excuse inconsistency in quality it only recognizes that every batch is not going to taste exactly the same. Of course, the macros want you to drink great quantities of their swill in rapid succession, so they perpetuate the myth of "born-on" dates and beer "expiring." The reality is that while some beer is "better" fresh, absent spoilage, the beer doesn't go "bad" it just changes its character over time. Typically you can expect a beer to lose hopiness, meld malt characters, and become a little softer. In a light lager, these are not necessarily beneficial changes. In an imperial stout, or even an IPA, these can completely change the character of the beer and make it infinitely "better." Luckily, putting the date on the bottle accomplishes both tasks simultaneously – it lets you know both if it is fresh and how long it has aged. But, you say, it is not unusual for brewers to brew the same beer multiple times a year; in that case, use batch numbers or some combination like 1997 batch 1, 1997 batch 2, etc. This puts some impetus on the consumer to know that 1997 batch 2 might be great if the bottle you are holding is an imperial stout, but in 2008 it may not bode well for the pilsner. Word of mouth, that 1997 batch 2 is better than 1997 batch 1, will take care of the rest. In this way, in 2008 when said bottles come up in an auction market, the bidders can know that they are bidding on a 1997 batch 3 vintage Rasputin Russian Imperial and adjust their bids accordingly.

Second, style. And, for a single word, the style is very specific. Barbaresco: a red wine produced from the Nebbiolo grape in the Piedmont region of Italy " and specifically in the communes of Barbaresco, Treiso and Neive plus that area of the frazione San Rocco Senodelvio which was once part of the commune of Barbaresco and now belongs to the commune of Alba. … The soils of Barbaresco zone are composed primarily of calcareous marl dating from the Tortonian epoch. The area is typically divided into three regions based on the principle town of the area-Barbaresco, Neive and Treiso. The soil and climate of the three areas are very uniform to each other which creates more across the board consistency than what would be found among the 11 communities in the Barolo zone." All of that is said in just one word. What does "Pale Ale" tell us? Or even "Imperial Stout"? Not really a whole lot in contrast. Ah. But what about "Washington Island Wheat" (for those of us here in Wisconsin at least)? We all know intuitively or at least through trial-and-error, that different parts of the country tend to make styles differently and that different areas have different topographies. For instance, we know that the American West Coast tends to make hoppier beers focusing on the cascade hop that grows well there. We know that Midwestern beers, with a few notable exceptions, tend to make more subtle, nuanced, complex beers derived mainly from the lack of availability of hops to this area for many, many years. And to some extent we recognize this with the prefix "American" in front of a style name, as in "American Pale Ale" which designates a more highly hopped pale ale in the West Coast style. But, a Minnesota American Pale Ale is a different beast, or carries a different subtext, from a true West Coast American Pale. We can do our damndest to replicate a Bavarian Dopplebock here in Wisconsin, but I'll be damned if our Midwestern sensibilities don't get in the way. The wine industry has developed different names for similar styles based on the area and technique of production, even similar styles that use the same grapes, but are produced in different places; to wit, Barbaresco and Barollo styles that use the same grapes, with the same techniques, but are produced less than 10 miles from each other and end up with noticeably different wines. The fact is, that while the macros would have you believe that a light lager is a light lager, there is a very big difference between those made in Pilsen and those made in Munich (Helles lager) and those made in the US (pre-prohibition and American/Corn-adjunct light lagers).

Third, vineyard. This is where the history of viticulture and American macro brainwashing make the biggest leap between $10 beer and $700 wine. The beer consumer, even the beer producer, has been led to believe that grain, is grain, is grain. Grain is a commodity. It doesn't matter where it is grown, how it is grown, what the soil conditions were like, how much sun that area got; it all gets mixed together in the end. The high-quality stuff is sent to maltsters like Briess in Chilton, WI; the low-quality stuff is used for livestock feed. Grapes, on the other hand, are treated like each is a mini-god. Each delivering a geographic and cultural story in its shape, and size, and liquid content, and sweetness, and bitterness, and mascerability (is that even a word?), and fermentability, and on, and on, and on. Could you imagine a central grape market where grapes from Wisconsin, grapes from "California" (where in California? Napa? Sonoma? Baja?), grapes from New York, grapes from Washington, were all mixed together, and shipped off to vintners under the names "syrah grapes" or "cabernet grapes"? Can wine connoisseurs even conceive of such a universe? Is that sentence sacrilege? Well, I would argue, the brewing industry, if they want to see $700 bottles of beer, should stop with the commoditization of raw materials. Capital's Island Wheat, and the subsequent non-stop marketing of the fact that the wheat is sourced locally, from Washington Island in Door County, Wisconsin, provides an excellent example of how non-commoditization can provide a price premium in the market. Of course, Capital has squandered this goodwill on a cheap golf-cart beer, but the point is valid nonetheless - how much of this mass-market-clone do you think they would sell if consumers had no idea that the wheat came from Washington Island? David Anderson's BrewFarm is a good step in the right direction. Lost Abbey's agreement to use hops from a neighboring hop farm is a good start. But those designations need to end up on labels. And not just "New Zealand hops" but where in New Zealand? We already do this to some extent in the brewing industry: Saaz hops were originally hops grown in a specific area that had a specific character; I think it is fooling yourself if you think that a Saaz rhizome grown in the Czech Republic will produce the exact same flower as a Saaz rhizome in England or a Saaz rhizome in the Yakima Valley. Of course, the fear is that the same rhizome grown in Yakima will somehow end up with an "inferior" reputation to their Czech brethren. But, so what? Chardonnay grapes grown in the Burgundy region of France enjoy a "better" reputation than their Sonoma Valley counterparts put people still buy American Chardonnays – and reasonable arguments can be made that the student has surpassed the master in many regards.

Fourth, vintner. Apparently, Mr. Giacosa is fairly well-regarded. And his winery happens to be named after himself, so separating the man from the apparatus is a bit problematic, but in this case, it doesn't really matter – the name Bruno Giacosa, means quality. But, so do Garret Oliver and Brooklyn Brewery. So do Tomme Arthur and Lost Abbey. So do Ron Jefferies and Jolly Pumpkin. But name alone is worth maybe, what, $20 per bottle? Mr. Arthur's beers sometimes fetch into $100 or $200. But none of these, generally regarded as three of the best brewers in the world, have sold an entire case for $700 per bottle.

To sell a case for $700 per bottle, you need 12 consumers willing to shell out $700 for a bottle. To convince a consumer to spend that much you need to tell him why he is spending that much. He's buying a beer from one of the best brewers in the world (name) made from the finest raw materials available (vineyard) to an exacting style and specification (style) in a year and batch widely regarded as one of the best of the generation (year). Investors aren't idiots (OK, sometimes they are). By providing consumers all of this information comes not only the person who knows all of this and what it means and seeks it out because they want to appreciate the hard work and craftsmanship, but also the jackass snob Lehman Brothers trader who wants to drop that kind of dough because he can and because he thinks it will impress somebody. Unfortunately, it takes both types to sell that $700/bottle case.

As you can see, a lot of factors go into making a $700 bottle of wine: the person who makes it, the place where it comes from, the style, the year. Which makes it all that much more galling when some overpaid snob jackass stores the stuff in a hot metal desk drawer and serves it in paper cups to his moron buddies to celebrate the failure of his own damn company and the impending havoc on the American economic system. What? You ran out of ice to put in the bottom of the cups? No soda water? Bah. I hope you spilled it on your tie.