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Oregon Pinot Noir Vintner Tries Transparent Pricing

Mark Tarlov's new brand Alit is sold direct-to-consumer and details both production costs and winery profits
Photo by: Andrea Johnson Photography
Mark Tarlov (left) and sommelier Andrew Rastello at Tarlov's Chapter 24 winery.

Harvey Steiman
Posted: November 16, 2016

Mark Tarlov wants you to know exactly how much it cost to make his new Willamette Valley Pinot Noir and why it's priced at $27.45 and not north of $60. A founder of Evening Land Vineyards, and now the proprietor of Chapter 24 Wines and Maison l'Envoyé, Tarlov's newest project is called Alit. "We're shining a light on places the wine industry doesn't usually talk about," Tarlov told Wine Spectator.

"I want to show our clients how expensive it is to produce wine made without compromise," he added. "But by eliminating the distortion field around sharing the wine, selling direct to consumer only, we can still deliver singular value and enrich our customers."

Alit's team made 3,000 cases from its first vintage, 2015, using grapes from seven vineyards in northern Willamette Valley. Tarlov chose a different winemaker and enology consultant for the project to distinguish the style from Chapter 24's, which are made by partner and consultant Louis-Michel Liger-Belair of Burgundy.

The big difference is the use of whole-cluster fermentations—the grapes are not destemmed, which creates more of a tannic backbone and changes the dynamics of fermentation. Liger-Belair uses no stems, so Tarlov turned to winemaker Alban Debeaulieu, recently of White Rose Estate in Dundee Hills, and enologist Pierre Millemann, who has consulted with Burgundy domaines that employ whole-cluster fermentations.

Tarlov's interest in whole-cluster goes back to his days as president of Evening Land and a special bottling called Red Queen. "[Alit and Chapter 24 vineyard manager] Ryan Hannaford and I looked at the vineyards last July and decided that 2015 would be a good year to try another whole-cluster wine," said Tarlov.

The idea of selling only direct and the notion of transparent pricing came last spring, triggered by Chapter 24's work with a team from MIT identifying vineyard microflora that influence fermentations. The scientists told the winemakers they had to "align" the wines with the natural world to "avoid distortion of the end product," said Tarlov.

"It was a very short leap for us to conclude that if vine-growing and winemaking was going to be all about 'alignment' we should also 'align' when it came to selling and talking about the wine," said Tarlov. "Convey our message with no middlemen and charge the end customer the ex-cellar price for the wine."

Alit's team figured out the cost of making the wine (see graphic below) by dividing the amount actually spent (a number checked in an audit) by 360,000, the number of bottles produced. They arrived at a cost per bottle of $15. Grapes, for example, account for $5.66 per bottle, barrels (one-third new) $1.11. Labels, corks and capsules total $1.66 per bottle, custom packaging and shipping boxes add $1.22 and the winemaking team's salary totals $2.14 per bottle.

Courtesy Alit
Alit's team shows how they calculated their wine's price and how much consumers might save in markup.

As an example of how tricky all this can be to figure, Tarlov detailed how the grape cost was figured. Half the grapes came from vineyards farmed by Chapter 24, including Black Walnut in Dundee Hills, Stardance in the Coast Range west of Yamhill and Dubay in Eola-Amity Hills. Tarlov depreciated the cost per acre over 25 years, making the land cost $1.44 per bottle. Labor, management and equipment costs added $4.46, for an average of $5.90 per bottle.

The other half of the grapes, from growers that also sell to Chapter 24, included fruit from well-regarded vineyards La Colina in Dundee Hills, Momtazi and Hyland in McMinnville, and Muska and Eola Springs in Eola-Amity Hills. At an average of $3,450 per ton, that came to $5.42 per bottle. The average cost of all the fruit was $5.66.

Alit marks up each bottle by $12.35—45 percent of the final bottle price, which covers utilities, insurance, legal, compliance and marketing costs. "With some luck [that] leaves us a bit left over as profit—25 percent, fingers crossed, for me and my partners," said Tarlov.

Part of Tarlov's sales pitch is pointing out how much his customers may be saving by buying direct. The final retail price of most wines made by small to medium-size wineries and distributed through normal channels would include wholesale, distribution and retail markups that add up to at least half the retail price.

Most wineries that sell some wines direct and some through wholesalers charge the same price at the winery that you'll see on store shelves. They don't want to undercut their partners by selling the wine more cheaply. By selling all of Alit direct, Tarlov can dodge this.

Whether others will adopt his model is anyone's guess. “Costs continue to rise for large and small wineries,” said Rollin Soles, the longtime general manager of Argyle who now runs his own family winery, Roco. That, he added, is the allure of direct-to-consumer sales. Roco sells its wines at around $60 a bottle. That's the same price range as the core bottlings—Fire + Flood—of Tarlov's other winery, Chapter 24. Soles wonders if these wines might suffer in comparison to Alit. “He could be shooting himself in the foot."

For many wine consumers, wine prices are a mystery, and they assume winemakers simply charge what the market will bear. Tarlov's goal with all of this is to show that premium wine from a specific terroir costs money to make. He's hoping customers will reward his candor. "By highlighting the cost of each step of the process," Tarlov said, "we can have a meaningful conversation about what we do and why it costs what it does."

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