One possible solution to the problem of selling kosher wine

[Joel D Parker]

Criag's reality check about kosher wine got me thinking, though not in the direction that that thread went, so I'll have a quick stab at it...

Why doesn't a kosher wine producer purchase premium land in one of the (Old) world's most prestigious regions? I understand this is way more difficult than it sounds, and would probably be financially unfeasible to someone looking for medium-term profits. But...at some point the premium people pay for "terroir" must be greater than the premium people pay for kashrut, so why not locate kosher vineyards in a region where the premium is so high anyway that the kashrut become a negligible addition?

For instance, Deux Montilles, Frère et Soeur, has a standard Bourgogne that is fantastic and sells for about 30$. It's not even a village-level wine, and I honestly don't think it would cost any more if it were kosher--and if it did cost a few dollars more, many people would still buy it. There's a limit to this kind of logic, because the wine has to actually be good, not just from a fancy place, but seriously, it could work if anyone had a long-term vision and access to capital, the right real estate, and good vineyard labor (or was able to do that part themselves). The technology was lacking in the old days, but now there are kosher winemakers who are every bit as knowledgable as any Frenchman making wine. But no matter how hard people try, the best wines of Israel and, I would argue, of California, are not able to generate the kinds of premiums in global markets that come from the prized soils of Mosel, Alsace, the Loire, Burgundy, or Bordeaux.

And if it's actually impossible to buy a 1er growth Bordeaux vineyard, then perhaps something close by... Or instead of in Bourgogne, perhaps in Macon, etc.... What about taking over a bankrupt operation and changing nothing except for the winemaking team and adding a small kashrut symbol on the back label?

Why does every kosher winery have to start from scratch? Building a premium "brand" can take years and decades, even in the New World, so why do it?

Any thoughts?

[Mike_F]

Maintaining a premium brand in a highly competitive environment is also not trivial. And as long as the popular perception of kashrut is that it impacts negatively on wine quality (regardless of the facts, just as long as this is a widely held notion), the brand will take an expensive hit in the general consumer market the moment the winemaker's name changes and that "K" symbol appears on the back label, and it will take time and a lot of expensive marketing to bring it back to its previous level. Since one would have to pay market value for the winery/vineyard/brand in the first place, that strategy would require very deep pockets and a willingness to take a significant loss at the outset, with no guarantee of recouping the loss later on - unless there is an untapped mass of kosher consumers willing to pay premium prices for fine wines that are clamoring to open their wallets.

[Or Shoham]

I didn't really follow the previous conversation, but looking at this one - would it not be easier for a kosher vineyard to simply remove the "K" from its wines if it wants to reach a larger audience and is worried about kosher status having a negative impact? Seems a lot easier and a lot cheaper to me, and you could always release a series of bottles branded with the "K" for the kosher market.

[David Raccah]

I didn't really follow the previous conversation, but looking at this one - would it not be easier for a kosher vineyard to simply remove the "K" from its wines if it wants to reach a larger audience and is worried about kosher status having a negative impact? Seems a lot easier and a lot cheaper to me, and you could always release a series of bottles branded with the "K" for the kosher market.

Herzog tried this once or twice and from what I hear, it dis not work out as it was attempting to expand into the non-kosher world with high prices and a lack of great product, in this particular case. It is VERY hard to break into the non-kosher market (in scale). You need huge marketing to get heard above all the noise.

Do not think that going non-kosher is easier - it is WAY harder, as there is TONS more competition at lower prices, that need ZERO supervision, or have extra costs.

David

[Craig Winchell]

There are plenty of ways to hide kosher status on the label. The problem is both doing that and targeting the kosher consumer. IT seems that the second one makes a marketing move towards kosher, the fact is picked up upon by retailers and wholesalers, who find it easier to market to a niche than the market in general. To the retailer, he is looking for turnover from the facing. He sees a wine which is competing against 10 other wines in the marketplace rather than 1000, and if there is any sort of active kosher interest among his clientele, he foresees profit to be made. It depends upon the types of clientele and the needs of the retailer or wholesaler.

Purchase of an established business can be expensive, if the business is successful, because the price is based not only on tangible assets but on goodwill (the value of the business name), a multiple of cashflow, and a multiple of perceived profitability. One should already be business-savvy when making such a purchase, because one can otherwise find it impossible to maintain sales and profits. On the other hand, purchase business assets out of a foreclosure or bankruptcy, and you have the baggage of whatever made that business uncompetitive in the first place.

To make it in business these days, one needs a good business plan that can be precisely adhered to. If one starts a business from scratch, it is much easier to understand costs and other issues, and adhere to the plan. Purchasing expensive business assets is not a pathway towards profitability, unless they already are generating enviable profits. Joel mentions purchase of expensive estate land, so that the cost of kashrus is comparatively nominal. However, the name of the game is not making kashrus costs nominal but making a profit. When Domain Dujac established itself in Burgundy in 1968, Burgundy was already a great region, but even Grands Crus land was comparatively inexpensive. One could still develop a business plan that with hard work and perseverance, could theoretically generate profitability. It did in that case, not only because of the success of Domain Dujac in creating good wine, but also because Burgundy became popular and assets appreciated in value. Most of the purchases and land swaps in Burgundy (and Bordeaux, for that matter) are being done by already successful winemakers adding what they need in an effort to become more competitive, not by novices wishing to enter the fray. Most new entrepreneurs would attempt to purchase low-priced assets somewhere else, after having developed a business plan in which at least on paper, one could with a reasonable time make enough profit to make it worthwhile to establish the business in the first place. Obviously, the easiest way to justify such a kosher business is to establish it where kashrus is valued, where competition is minimal, and where assets are inexpensive. As long as the kashrus costs can be realistically justified in the business plan, does it matter what those costs are?

The problem comes in when realistic kashrus costs are not initially factored into what is initially perceived as a successful business plan. If a winery must change business plans midstream, costs had better pencil out somehow. I find it difficult to see how a winery can successfully add high costs of kashrus in a place like Israel, not to mention other places, to a business plan not initially incorporating such costs. If marketing and distribution to a nonkosher consumer base is found to be difficult to impossible, the business plan is unsuccessful, and perhaps the best strategy is to develop an entirely new but realistic business plan going in a different direction, if possible, or to call it a day and get out of the business. The path to success rarely is by piling unanticipated costs on top of costs. The world over, the best strategy to making money with wine is never to have gone into that business, and the best way to make profits in any business is to keep costs low and profits high and turning over units through well-thought-out distribution networks. If one feels compelled to enter the wine business, costs had better be thoroughly understood, and one had better have one's distribution channels in line at the outset, and one must understand where one's profits lie.

[Mike_F]

The world over, the best strategy to making money with wine is never to have gone into that business...

Reminiscent of the old joke - "How did the Yankel's make a small fortune in Israel? Simple - they came with a large fortune..."

[Ian Sutton]

Burgundy is possibly the best bet here, as big volume & high price could be a massive challenge - how many buyers are there at that level. Burgundy however offers the chance to do small volume & hand-crafted, yet still gain the benefit of the village/vineyard reputation.

True it generally means starting with some less than ideal terroir, but then to acquire parcels of land as and when they become available. See David Clark for an idea of how a name can be made starting relatively small.

[Menachem S]

Hasn't Roses decamille done this in a way?

High quality wine, sells for $200, and happens to be kosher from the start

Not sure how it is selling though, or who is buying . . .

[Gabriel Geller]

You're correct Menachem but it seems that they've "used" or taken advantage in a way of the kosher status the other way around, using it to become famous by gaining first Rogov's attention and his 95 score of the first vintage that was followed by many other raving reviews and articles in both French and English. Let it be clear that I'm not accusing them of anything but perhaps they don't "need" anymore to invest the high cost for making the production kosher again as it has already won the necessary reputation to continue selling to prestigious wine merchants and restaurants.

I do wonder how often does that happen that a brand new winery in Bordeaux can ask a price similar to some 1er crus (until about 10 years ago, Mouton, Cheval Blanc, Margaux, Cos d'Estournel etc were selling around $2500-3000/case, nowadays it's usually much more than that), and indeed, I don't know whether Nicolas Ranson still follows this forum or not but I really wonder also how well did that sell at such a price? That said, let's also not forget that Roses Camille is a very small production so even at such a high price and given it's quality, I doubt that it was hard to sell it.

Best,

GG

[Andrew Breskin]

Hi Gabriel,

Yes, Roses Camille did get a lot of attention due to its well deserved scores on the 2005 and 2006 vintages (entire kosher production, not dual labels). But since then, there have not been kosher vintages, but they are releasing three new wines from 2011 which will all be kosher and at varying price points (Roses Camille, another Pomerol, and a St Emilion Grand Cru). Since you know French you are well aware of the press and journalism on the winery. Most of the articles have focused on the more recent vintages of 2008 and 2009, which happen to have been great years for the region. But the wine was already very well received before Rogov's review, as it was already on the wine lists at Four Seasons George V Paris, La Tour de Argent Paris, La Reserve de Geneve, and a number of Michelin starred restaurants in western Europe. As you are familiar with these establishments, you can imagine there are no shortage of wineries vying to be on their lists.

And yes, the wine is briskly selling at these prices both in the US and EU.
Hope this helps!

[Adam M]

Criag's reality check about kosher wine got me thinking, though not in the direction that that thread went, so I'll have a quick stab at it...

Why doesn't a kosher wine producer purchase premium land in one of the (Old) world's most prestigious regions?
Any thoughts?

Joel - I'll one up you: why doesn't the rich Jew not only purchase the prestigious land, but also install a world renowned winemaking team and facility. That would just about do it!

[Craig Winchell]

Because the name of the game is not developing a legacy, but instead making money. Return on investment. Anyone can throw money at a problem and beat it. Rich guys can have their hobbies. But most people want a business.