German Catalog 2006 USE THIS ONE.qxp - Michael Skurnik Wines

Gray-Marketers: Consumer-Champions
or Scavenging Jackals?
There are times the gray-market is helpful and
maybe even necessary to the consumer. Big “name” producers
sometimes manipulate supply. A few importers
gouge on prices. Growers themselves don’t allocate their
wines to accurately reflect the needs of various markets.
And if you’re a consumer, you have my blessing to obtain
my wines wherever price and convenience compels.
Yet there’s a fundamental issue of honor over which
a debate is swirling. One wine journal, which markets
itself as consumer cham-peen, has openly endorsed the
gray market and has complained about “conventional”
wine prices through orthodox channels. I wonder how
sanguine they themselves would be if challenged to open
their books and show customers what they made for
their efforts. But that’s a topic for another day.
In any case, I seem to have reached that exalted place
where one’s selections are imported through “unauthorized”
channels.
Merchants who gray-market and the people who
defend them like to claim it is the perfection of pure capitalism.
The logic seems reasonable, so much so you
might wonder how any contrary system could have come
into being. Was it actually nothing more than the predations
of greedy importers, having their ways with poor
hapless growers?
No, no and no again. The system evolved because it
was mutually advantageous to importer and grower. It
created a sustainable loyalty to and from each party, and
promoted coherence in the marketplace.
Let’s imagine that Johannes Selbach isn’t selling
wine in the U.S., and he wants to. Plus, people in the U.S.
want his wine. Let’s further imagine Johannes wants to
sell to four importers; hey, the more the merrier, spread
the risk, etc. Maybe he sets up territories, with the predictable
result they are broached and everyone’s toes are
stepped on. Or maybe he just figures it’s open season and
his four clients should just hit the pavement and sell.
Perhaps you want the wine. You get four offerings for
it. Who do you buy it from? Be honest, now! Of course;
you buy it from the guy with the lowest price. So, the guy
willing to sell cheapest sets the bar for the other three. Fair
enough, it would appear. We like cheap wine. But maybe
Mr. Discount is independently wealthy and doesn’t need
to make money in the wine business. Maybe he likes dabbling
in wine and has some capital he wants to shelter.
And even if all four can live with the margins the
cheaper guy establishes, sooner or later they all realize
it’s pointless to break your balls to build a Brand that benefits
your own competitors equally. They might be proud to
offer the wines, if the requisite cachet is present, but
they’re not going any extra lengths. This is simple human
nature. And each of the four guys will know he didn’t
earn enough trust and respect to have Mr. Selbach’s
wines exclusively, and a part of him will resent it.
Thus I argue it is
self-evidently in the
grower’s best interests to
choose whom he wants
to work with and invest
in that person. Now the
commitment flows both
ways. There is a true
partnership, without
which there can be no
loyalty.
The gray-market
advocates want you to
believe the importer
with an exclusivity rubs
his filthy hands at the
grotesque markups he plans to take. And all of us children
of the radical ‘60s swallow it whole, since every
businessperson is ipso facto guilty. These proponents of
pure capitalism neglect to consider one of its basic
tenets: If a product is priced beyond its value, people
won’t buy it. The greedy importer can gouge all he
wants; it avails him nothing if he can’t sell the wine.
People also claim that monopoly creates opportunities
for greed. Seems very logical, again, especially to us
Aquarian-Agers who mistrust merchants innately. But
the logic falls apart on closer examination. Say you’re the
sole Jim Beam distributor in your state. You gonna crank
up the prices? After all, no one else is selling Jim Beam,
right? WRONG. No one is selling Jim Beam, but someone’s
selling Jack Daniels and someone’s selling Wild
Turkey, and if your price for Beam is out of line with the
other guy’s price for his bourbon, you’re not taking
orders dude. Thus if I even wanted to push up my prices
for (let’s say) Christoffel, it wouldn’t be long before y’all
noticed Fritz Haag was the better value. Ordinary markets
suppress the temptation to price-gouge, especially a
market as compact and attentive as the one for fine wines.
Speaking for myself now, I am delighted, as are
most of my fellow importers, to offer good value to our
customers. We want you to like us. We want you to like
our wines. Hey, we want you to make money on our
wines (radical notion!). I take a standard markup across
the board in my portfolio, tweaking here and there if I
need to hit a price point. If I ever sniff a whoop-de-do
markup opportunity it’s because a grower is underpricing
his wine. In which case I tell him so. I do not
wish to profit at his expense; this is what I call loyalty
and sustainability. So, fellow wine-dogs, this dog won’t
hunt. None of us is motivated by profit per se. We are
in business to get and keep customers. We all need to
live. We all want to enjoy our lives. I want to invest in a
grower who’s willing to invest in me. And I want to sell
his wines without interference.
Now what about that whole “reallocation of product
to market demands” business. Again, it sounds fair
enough. Let’s say Selbach suddenly got boffo reviews in
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