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mixed case: opinion and advice

Who Gives a Flip? When High-Value Cult Wines Tempt Buyers to Resell for a Profit ...

Wary vintners are increasingly picky about who deserves a spot on the mailing list, and who's just in it for the money
Photo by: Mark Weinberg

Posted: Jan 10, 2013 12:00pm ET

By Robert Taylor

How much would you pay for a bottle of California Sauvignon Blanc?

The only wine from that category to ever earn a classic rating, the 2007 Merry Edwards Russian River Valley (96 points), cost $29, and the current vintage, 2011, is $30. So would you pay more than eight times that for a bottle of Screaming Eagle Sauvignon Blanc Napa Valley? No? Well what if I told you that you could immediately turn around and resell it for 10 times that price? (That's more than $2,500 for a single bottle of Napa Sauvignon Blanc, for those still trying to do the math, at a profit of $2,250 per bottle.)

That was the conundrum facing a select group of Screaming Eagle mailing-list members this past summer when California’s most famous cult label released 100 six-packs of a 2010 Sauvignon Blanc priced at $1,500 each. The wines started showing up at auction soon thereafter, with a six-bottle lot in its original wooden case selling for $15,535 at a Spectrum auction in June. Screaming Eagle’s representatives weren't happy, announcing that they would limit the 2011 production to just 300 bottles.

“[The Screaming Eagle Sauvignon Blanc] was for their personal use only,” Screaming Eagle direct-to-consumer manager Patrick Chapman told Wine-Searcher.com in June as the Spectrum auction bids were coming in. “And, of course, people said it was for their personal use only, but the reality [is] that it wasn’t. People are turning it over for profit, for their own selfish greed.”

Without getting into a discussion of black pots and glass houses, the frustration of having sold something for one-tenth its value is completely understandable, as is the temptation to resell a severely undervalued commodity. Your perspective all depends on which side of the cash box you're standing on at the yard sale chockablock with misidentified Murano glass, Roseville ceramics, Eames chairs and Tiffany lamps.

Just how halving the Screaming Eagle Sauvignon Blanc production will serve to deflate the hype around the wine is a mystery. If anything, the 2011 bottling's rarity will only push demand—and its auction value—even higher. Some Internet commenters have suggested Screaming Eagle's disdain for profiteering was a feigned show to further publicize the wine's desirability and secondary-market value.

What has given any potential Screaming Eagle gray market traders pause, however, is what happened a few months later. In September 2012, a small but vocal constituency of the membership claimed they had been kicked off the Screaming Eagle mailing list because they had resold their allocations for a profit, an unseemly little facet of the cult wine market known as "flipping." Some of the ousted took to online wine message boards, including the WineSpectator.com Forums, to express their outrage and suggest there may be legal recourse to be had. (There isn't.) Perhaps telling, none of the recently removed mailing-list members I contacted were willing to speak about their experience on the record.

Flipping is nothing new—in fact, its heyday passed with that of the cult Cabernets and the Clinton-era economy—but newer brands like Scarecrow, Saxum and Kosta Browne have filled the places of Napa Cabernets whose release prices have caught up with their aftermarket value. The Internet and social media have changed the game as well—it's easier than ever for wineries to spy and purge careless flippers, and the red-handed haven't been shy about lambasteing their no-longer-golden geese.

Screaming Eagle estate manager Armand de Maigret clarified the winery's policy last Friday, telling me that the members removed from the mailing list in September had been flipping their allocations during the hot summer months, when the wine could easily be cooked in transit. "If the temperature of the wine goes above 85° F, the wine is killed," de Maigret said.

"If you do not respect the wine, from the flower to the cork to the table, then the wine will suffer," de Maigret said. "If somebody has our wine and doesn't respect it in transportation from place A to place B, we suffer from it. If we realize that someone is flipping the wine in a month that it is super-hot … or when it's super-cold, and all that person is interested in is a quick buck and they don't care about the health of the wine, then we don't have any respect for that person and we will remove that person from the list."

Flipping isn’t unique to the cult wine industry. You see it virtually everywhere that demand greatly overwhelms supply, from ticket scalpers to people queuing up days in advance to buy the next Air Jordans, Apple product or Tickle-Me Elmo.

But wine lovers spend years on winery waiting lists, hoping to be offered the chance to buy just a few bottles of Screaming Eagle, Sine Qua Non, Marcassin or any of many others. Shouldn't their patience be rewarded with the freedom to do with their property as they please in America's market economy?

Or should vintners be commended for charging their loyal customers below-market prices and protecting the provenance of their products—for the benefit of those willing to shell out big bucks for wines at auction—by keeping them out of the hands of those who would profit off a spoiled product?

In part 2 of this blog, find out what Screaming Eagle's Armand de Maigret, Sine Qua Non's Manfred Krankl, Marcassin's John Wetlaufer, Kosta Browne's Michael Browne, Saxum's Justin Smith and Cayuse's Christophe Baron think about the secondary-market value of their wines, and how they deal with mailing-list members caught flipping them.

Troy Peterson
Burbank, CA —  January 10, 2013 5:10pm ET
Wow! Robert, I hope you will address how each of the aforementioned wineries defines "flipping." Is it putting up your allocation for sale within days/weeks/months of receipt? Is it putting up any portion of your allocation or all of your allocation that's offensive? What if I buy 6 bottles of something because I usually enjoy the wine but find that I don't care for the vintage when I open my first bottle a year later. Am I enjoined from selling the other 5? This is a real tricky issue.

If the folks at Screaming Eagle are being completely honest with the reason they gave for kicking members off their list then I applaud them. I can't stand it when a winery ships in poor weather conditions or late in the week regardless of weather, and conversely they shouldn't have to stand for greedy flippers damaging their babies in like manner. It harms their reputation when someone gets a bad bottle and posts a writing note in a forum.
Jim Mcclure
Ft Worth, TX USA —  January 10, 2013 5:43pm ET
Once a customer purchases a bottle, barring any preexisting agreement with the winery to the contrary, the customer should be free to do with the bottles as they choose within the law. It is their item.

That being said, I also believe the winery has the right to refuse sale to anyone for whatever reason, from not liking their flipping the bottles to them not liking the color of the shirt they wore to a winery visit. But just because they have that right doesn't make it right.

The likely effect of removing flippers from their customer list is to be that the flipping will occur in more subtle, direct person to person transactions rather than auctions and such where the parties have more visibility.
Michael Haley
Eugene, OR —  January 11, 2013 1:47pm ET
I say flip away. These cult wineries themselves are a big part of the problem. There is no way on god's green earth it costs that much more to produce their wines to justify their prices. If Merry Edwards can do such a stellar job with her Sauv Blanc year in, year out and still charge only $30 per bottle, then Screaming Eagle is darn greedy charging $250 per bottle. If someone them trumps them for their own greed and can find some stupid soul to then pay $2500 a bottle, go for it! I'd save my $1500 for the six-pack of Screaming Eagle and with the same money go buy 50 bottles of the Merry Edwards!
Michael Twelftree
Malvern, South Australia —  January 11, 2013 3:54pm ET
Nice piece Robert
I believe that once the wine is sold it is the property of the owner, as with all other purchases in life. I think for a winery to dictate what a customer should do with their wine is a pretty wrong, they asked a price and somebody paid it, good for them.
I think an equally interesting question is what is fair in balancing out your cellar, you buy 24 bottles of SQN every year for 5 years, you now have 120 bottles but your only drink 6 bottles a year, you now have 90 bottles in the cellar, you want to stay on the list but want to even out your cellar, especially if you have tasted one of the bottling’s and have not particularly enjoyed it. I believe mail list exhaustion is a major issue. At the end of the day the market is the market and it has to find a fair equilibrium, and if someone make a few bucks along the way good for them.
I hear stories about some of my better bottling being flipped all the time as I have the same answer every time ‘I just hope they went to a better home’
Flipping does the upmost by helping wineries build and maintain their image, it also gives others access to these wines, many end up on NYC and Las Vegas wine list……..Flip away.
MT
Tim Fish
Sonoma County —  January 11, 2013 7:19pm ET

Good blog Rob

I don't know if I technically flipped a wine. But I waited in line outside Heitz's tasting room to buy a case of the 1985 Martha's Vineyard. I was splitting it with my brother and I sincerely loved it when I tasted it that day but 10 years later, its classic earth-mint quality overpowered the wine for me. My brother loved it still and kept his wines but I sold my remaining bottles at auction. I made a small profit but I would have done better on the stock market.
Eugene Kim
Houston, TX —  January 12, 2013 1:04am ET
I agree with Tim. The matter is blown out of proportion, and wineries have better things to worry about - like the next vintage.
If one has the time, the patience, and the fortune of being on mailing lists that can flip for exorbitant profits, then more power to them. It seems like a tough way to earn a living.
Don Rauba
Schaumburg, IL —  January 14, 2013 1:49am ET
Very interesting piece and I'm looking forward to part two. My hopes are that it shines just enough light on the subject to cause wine buyers (who would pay such inflated prices) to think twice before buying into the kind of racket reflected in the Screaming Eagle example. The biggest tragedy is that there exists a market that pays those prices at all!

By contrast, turning a modest profit on the sale of a cellared wine is something I can't find fault with. Our tastes can change; wines evolve to places we don't always appreciate; sometimes we succumb to pressure from others to part with bottles at a price. Mr. Twelftree's SQN example is also thoroughly practical, illustrating a clever way that consumers can retain club membership but reduce overall costs by selling off a portion of what they purchase. In either case, one assumes significant risk and therefore profit is definitely not guaranteed on any bottle; losses may be just as likely.

I cringe at the notion of wine as commodity: something sold/traded in futures and thought of as investments. All it does is keep great wine out of the hands, or rather, palates of those who would rather experience and enjoy it for what it is.
Troy Peterson
Burbank, CA —  January 14, 2013 11:03pm ET
Nice to see a prominent vinter weighing in on the matter, Mr. Twelftree!

I enjoy my spot on various lists and want to keep my allocations. Many wineries offering highly-allocated wines force me to purchase my full allocation in this vintage (a sucky one) so that I can keep my same allocation in the next vintage (a great one). So I'm supposed to drink all that sucky wine for the privilege of getting the great wine?

How about we make those wineries buy today's sucky laptop/desktop/tablet computers so that in the future they can get the best tech that's in short supply? Oh my! That's actually an illegal practice! Just check with Intel's legal department. I've always had a problem with this practice and the fact that it only seems to be enforced by the FTC with respect to technology.

I can't tell you the number of times I have been told by a winery that I have to buy X bottles of their crap wine in order to get ONE bottle of their highly-rated wine. That's enough of an insult, but the idea that I am henceforth enjoined from selling the X bottles of a crap vintage (and all you vintners reading this know you have made crap at one time or another) on the secondary market is just insulting beyond the pale.

I KNOW THERE ARE MANY VINTNERS READING THIS BLOG AND I CHALLENGE YOU TO PROVIDE A REASONABLE COUNTERPOINT.
Ivan Campos
Ottawa —  January 17, 2013 12:52am ET
Good piece, Robert.

It starts with the business model and the intended purpose of the mailing list.

if the idea is to avoid retail distribution costs, then all is fair game, and it is incumbent upon wineries to monitor these secondary markets to ensure that they are selling to the mailing list at an appropriate price. over time, prices and demand for the mailing list should even out as some people self-select out.

if the intent is to keep prices modest for fans of the wines, then wineries should add a big caveat that their products are not for resale, with consequences for those who do.

simple!
Garry Mckale
Kentucky and New York —  January 22, 2014 10:21pm ET
Tricky question. I relate wine mailing lists to sporting event tickets. If you are buying for the sole purpose of selling to make money, then shame on you. You ruin it for the rest of us. If you buy and then use/hold and end up selling some down the line (not sure of a time limit) then that is fine. Just my opinion.

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