The world of wine allocations — in which select quantities of limited-availability wines are offered only to particular restaurant and retail clients by local distributors — is often a competitive one. Interested buyers, particularly new ones, may not necessarily get allocations of coveted wines, and quantities offered to all accounts are not necessarily equal.
As it did with many other aspects of the beverage industry, Covid-19 threw a wrench into the allocation system when on-premise establishments shuttered and were therefore unable to take allocations of some limited-availability wines. Simultaneously, more retailers were offered increased quantities or new access to these same wines. In a system where historical sales can dictate future access to limited-availability bottles, could Covid-19 have a lasting effect on wine allocations?
Getting New Access to Limited Wines
The wine allocation process varies by state, with some states regulating the system more than others. In New York, where wine allocations are highly regulated, limited-availability wines must be declared to the State Liquor Authority with an approved allocation method, the most popular of which is based on historical sales. While state law dictates that no more than 70 percent of a wine’s quantity may be sold through a single sales channel — on-premise or off-premise — there is always talk of “restaurant-only” wines within the industry, and many see the on-premise sector as the primary market for allocated wines.
Thus, the overnight closure of on-premise establishments evaporated the demand for some of these restaurant-focused wines, requiring wholesalers to change directions. “We pivoted our business strategy to the off-premise,” says Matthew Green, the national sales director for Europvin, which allocates wines from Vega Sicilia and Clos Mogador. “What that has meant is wines that were originally more directed towards the on-premise became available for retail.”
Rather than opening up allocated wines for sale to any retailer, many distributors chose to strengthen existing client relationships by offering them larger quantities. “It’s less that I have access to new items, but that there are more to go around,” says JT Robertson, the general manager for Le Du’s Wines in New York. “With the restaurants closed, allocations which would have previously been split or even predominantly flowed to on-premise have been available retail.”
Other retailers have moved up the waiting list for highly allocated bottles. Walker Strangis, the owner of Walker Wine Company in Los Angeles, primarily built his old and rare wine retail business by sourcing wines from private collections or importing through European brokers. When tariffs on key sellers like Burgundy and Bordeaux landed last fall, Strangis increasingly turned to purchasing through domestic importers, yet found himself on waiting lists for wines from sought-after producers like Dauvissat and Raveneau.
“A lot of those things are now opening up,” he says. “It’s not in huge quantities, but the importers have been saying, ‘This producer was not available to you six months ago, but they are now.’”
Even as wholesalers have begun to adapt to the changing beverage-sales landscape, retailers continue to see increased offers of allocated wines. “We’re still getting offered things we never would have been offered before,” says Talitha Whidbee, the owner of Vine Wine in Brooklyn, noting that these aren’t necessarily expensive wines — just ones that would normally be offered to restaurants.
However, the uptick in retail business hasn’t necessarily compensated for the loss of on-premise sales for allocated wines. Green notes that many retailers were reluctant to take on higher-end wines in March and April, given uncertainty over consumer purchasing behavior. “There wasn’t this insatiable appetite,” he says. “There’s still trepidation at the retail level that things may not turn over as quickly.”
Larger retailers often had more capacity to take on additional quantities, and ones with established client bases saw the value in purchasing additional amounts of limited wines. “I felt a little guilty, like I was taking advantage of others’ misfortune,” says Robertson, “but our clients are generally the same who patronize wine-focused restaurants, so we had an opportunity to provide them with exciting wine as they quarantined.”
But importers aren’t necessarily re-allocating all of these limited-availability wines to the retail channel, knowing that restaurant reopening plans are changing day by day.
“We’re not throwing the allocation system out the window,” says Michael Gitter, the vice president of marketing for Vintus, which includes Ornellaia, Bollinger, and E. Guigal in its portfolio. “It’s important to look at how we can respectfully, constantly, and fairly execute those allocations over the year.” Vintus has extended its allocation pickup window, created both spring and fall pickup options, and held back some of the allocations destined for restaurants to allow them to purchase in the future.
Even though this requires the company to sit on expensive inventory for longer, it’s worthwhile to maintain client relationships. “We don’t have an urgency to sell the wines or to move cases,” says Gitter. “For us to be able to hold back 200 cases of something that was intended for restaurant partners, that’s a really small price to pay in order to serve them when they reopen.”
Wholesalers also understand that redirecting allocated wines entirely to the retail channel could also throw off consumer expectations in the future. “Our long-term strategy is to make sure we’re not going to pivot so radically that we flood a hungry marketplace with wines that will always be allocated,” says Green. “It will make more people upset in the long term, even if it makes them happy in the short term.”
Europvin is still taking its full allocations from the wineries themselves — a decision that could pay off in the future. “We are part of the lifeline for these family-owned businesses,” adds Green. “I would like to hope that we would get larger allocations in the future because we’ve demonstrated a partnership.”
Managing Future Demand
Because the allocation process is often based on historical sales, buyers typically expect that once they land an allocation, they are guaranteed access to that wine in subsequent vintages. At the same time, if a client passes on their allocation, they lose their historic status and likely won’t receive an allocation in the future — which could be concerning for restaurants unable to take their allocations right now.
Luckily, most wholesalers understand that these are extreme circumstances. “I think [penalizing a restaurant for not taking its allocation] is a bad approach to take,” says Green. “We all have to be sensitive to the situation.”
This could be problematic as retailers look to have continued access to these wines. If the importer can’t get more wine to satisfy demand, that allocation could be spread too thin, resulting in accounts getting fewer bottles than expected. However, retailers are already prepared for the fact that these offers will likely be exceptions to the historical allocation system.
“I’ve already been told that [the distributors] will honor those past relationships,” says Strangis. “I recently snatched up some cases of white Burgundy that came with the caveat that this probably will not be available to me again.”
Retailers are warning consumers not to expect these wines to be widely available at retail in the future, either. “We are making sure to tell our clients that they should take advantage of this time to buy many of these wines retail,” says Robertson, “because it probably won’t be this way next year.”
“I don’t think that these are going to attach to us as allocations forever,” says Whidbee. “They would instead go back to whatever was previously allocated.” However, she does hope that more importers and distributors will see the value in giving more retailers access to allocated wines, rather than heralding them as “restaurant-only” bottles.
Some also wonder if wider retail availability of allocated wines could diminish the perceived value of these wines or consumer willingness to pay restaurant markups for them. “If wineries and importers are not careful, there could be downward price pressure based upon increased exposure off-premise,” Green says.
However, the scarcity of these truly allocated wines will likely preserve their value, price, and demand. Gitter references the Bollinger “Vieilles Vignes Françaises,” of which only 90 bottles are imported, as an example of this phenomenon. “There’s no world in which the allocation system for that wine breaks down because there’s no wine to meet that demand,” he says.
“If a great producer is only making 300 cases of a great wine,” adds Robertson, “then whether or not someone gets it at a restaurant or buys it from a boutique shop like Le Du’s, it doesn’t change how rare it is.”
This shift in sales structure might actually offer greater transparency into the world of allocated wines as a whole. “It shows the market what items are truly allocated items, versus ones that are actually widely available but sold through an allocation system,” says Gitter.
In the short term, at least, importers and distributors must approach future allocations with the expectation that even if restaurants and bars reopen soon, beverage purchasing budgets and priorities will likely shift.
“It will be interesting to see if and when restaurants return to full steam in terms of bringing in new vintages of rare and small-batch wines,” says Robertson. “If I had to guess, I would say retail will continue to have access to a greater degree of the allocations for the foreseeable future, as restaurants get back on their feet.”
The unpredictability of the future will make outlining fall allocations — which some wholesalers are attempting to do now — tricky to manage. While adaptability is key, different wholesalers are approaching the process in different ways.
As the Vintus team anticipates the arrival of the new vintage of Ornellaia “Masseto” in October, they will start by relying on historical sales. “Do you throw out the rulebook when the world has turned on its head?” asks Gitter. “So far, our idea is not to do that. Our attitude is to take the same approach, but be respectful and listen to how accounts need to approach their acceptance of allocations.”
The team at Vias Wine Imports, on the other hand, hasn’t had to make any decisions yet regarding allocated wines; because allocations for reds from producers like Produttori del Barbaresco, Baricci, and Salvioni are done in the fall, most allocations were already gone before the pandemic hit. Federico Zanella, the supplier relationship manager for Vias, anticipates the fall allocation process to be quite a bit different because many of its best restaurant clients will not be open.
“We are in a position in which allocations, as they looked last year, would not exist anymore,” says Zanella. “We will have to assess the situation and see who is still open. We will try to postpone the decision as long as we can.” If a restaurant cannot pick up its allocation this fall, however, that won’t affect its allocations in the future.
While the process of allocating wines — and the accounts they are allocated to — may look different for the months and years to come, most parties agree that they hope some return to normalcy lies ahead. “Despite the advantages we’ve experienced with allocations over the past three months,” says Robertson, “I would gladly welcome a return to the way things used to be if it meant seeing the world’s most vibrant wine market return to full force.”
Published: July 14, 2020