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The Race for Shelf Space Narrows Consumer Choice

February 04, 1988|DAN BERGER | Times Wine Writer

The fun begins when one pops into a well-stocked wine shop to look for a bottle of Chardonnay. There are 50 or 100 to choose from. Or 200. Unless you know what you want, or know a lot about wine, the selection is mind-boggling.

Imagine, then, the confusion facing the merchant trying to stock those shelves. There are about 700 wineries in California, and Wine and Vines, a wine industry publication, estimates that at least 550 of them produce Chardonnay.

Add to that Chardonnays from Australia (which represent good value because of the weakness of the Australian dollar compared with the U.S. dollar), Italian Chardonnays, and white Burgundies from France. The shelf space needed for just Chardonnays could fill all the space an entire wine shop used a few years ago.

Trader Joe's, the Southern California chain that pioneered discount wine pricing after the repeal of Fair Trade in 1978, has seen the demand for shelf space grow to proportions never anticipated. At one point, Trader Joe's stores were so jammed with wine that they took up not only shelf space but most available floor space, with boxes stacked on boxes, and aisles jammed with more wine.

Last Oct. 19, when the stock market crashed, all that ended.

Stop, Look and Lighten Up

"What we did on Oct. 19 was to stop and look at what we were doing," said Bob Berning, longtime wine buyer for Trader Joe's. "Our intention for the past 12 months had been to cut down on the boutiques (small premium producers of wine), because some of them were not paying the rent on the shelf space.

"We felt that on Jan. 1, 1988, we would modify and severely reduce the number of boutiques that we would carry from 350 items to a range of 30 to 50 items."

But when the Dow Jones Industrial Average lost more than 500 points on Oct. 19, Joe Coulombe, chairman and chief executive of the 27-store chain, got together with Berning and they decided that the wine market was also oversold and it was time to cut back.

"I went through the warehouse and saw that every wine over $10 was a California boutique," said Coulombe. "I asked myself, 'How are we buying these things? Why don't we buy these the way we buy Bordeaux, by the carload and where we get a big discount?'

"There has been no physical growth in the wine business in the last five years because Americans have not learned to consume wine with their food."

By adopting a policy of buying only good values, Coulombe ended the "good ol' days" when you could stop at a Trader Joe's and buy Ridge, Heitz, Diamond Creek, Trefethen, Chateau Montelena, Burgess and a dozen more producers all at discount, and while you were there pick up a few $1.99 specials under the Trader Joe's label--wine that was purchased in bulk and bottled at Chateau Diana in Healdsburg.

'Best Pricing Thresholds'

Berning said that under the company's new buying policy it will carry only those wines "that we think are good and that are readily available, and where the winery is willing to ship it to us at best pricing thresholds."

Included in that, he said, were two 1986 Chardonnays, from Fetzer and Parsons Creek, "which we bought at maximum discount--two truckloads. We must be able to buy and use our strength to bring the consumer a better value if we're going to maintain our position in this business."

That means that some small producers of wine that previously were marketed by the chain will not be seen there in the future. Nor will some limited-quantity items.

Instead, Trader Joe will feature close-outs and special items that haven't sold. Also, the company will continue to market wines from the "off" regions of the world such as Muscadet, the Loire and Alsace, Bourg, Fronsac and Touraine (France); Spain; Portugal; Australia and Germany. And since Joe is a dedicated Rhoneophile, the chain will always have good values from the Rhone Valley in France.

"These are not the glitzy wines that the rich Swiss and Germans are buying up," said Coulombe, noting that high prices for prestige Bordeaux have forced him to consider the Cru Bourgeois wines that represent better values.

He added that the company may well buy one vintage of a particular wine and not the next vintage, ostensibly adopting a policy used by the British wine trade for years that has led to lower pricing for poorer wines, something that hasn't been a practice in this country.

Since the late 1970s, Trader Joe's has been the wine discounter in Southern Califoria, although other shops later began to offer wine at discount too.

Despite the competition, Trader Joe's chain, stretching from San Diego to the San Fernando Valley and soon with stores in the Bay Area, grew rapidly, due in part to a cleverly written newsletter that is sent five times a year to 3 million subscribers, at no charge. The newsletter sells close-out and special-purchase wines better than a carny barker.

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