Democratizing a luxury good diminishes its quality.
September 21st, 2008
Jaguar X-type
The wine world is changing. Wine is changing. Amidst recurring discussions of trends and the globalization of wine (as a result of the influence of a purported small cabal of people), and murmurs that not every wine-producing region has the stuff to make world-class, complex wines, there is one essential point that goes unmentioned:
Democratizing luxury goods – making them appealing and accessible to the average consumer – devalues them and causes a decline in quality standards.
A luxury commodity is devalued by democratization because increased supply makes the good more common and, thus, less desirable. This seems to be the basic tenet of this book. Additionally, quality inherently declines with increasing volume of production.
Democratizing a good also results in declining quality of the product because esoteric and acquired tastes do not appeal to a wide base. Often, a luxury good is wrapped in legend and is equated with status. In its true and faithful form, it may not appeal to the mainstream. Caviar and cigars are examples of such luxury “acquired tastes” as much as wine is.
Whenever a commodity is democratized, it is altered in character, nature and production methodology to give it the widest appeal possible. Because the broader consumer base is not necessarily versed in wine’s history, intricacies and nuances, the character and nature of the commodity must be adjusted to conform to what pleases the consumer.
If we think of the quality of wine in terms of subtlety, complexity, fidelity to varietal and regional typicity and other characteristics that could be grouped as “acquired tastes” as well the need for bottle ageing by the consumer, then quality must inherently decline if the product is to satisfy broad market demands. Not everyone appreciates varietal typicity, regional variation, finesse or having to wait a decade for optimal drinkability. And, let’s face it, nuances are lost on some consumers. We live in a “me, Me, ME” culture where the wine has to please the consumer on his or her terms and not by virtue of its own merits.
Yes, the majority of modern wines are clean, free of flaws and, for the most part, enjoyable. But that does not make them the pinnacle of winemaking. “Clean and enjoyable” is not synonymous with high quality. Neither is power or immediate accessibility.
The fact is though, that much of wine making today is geared towards clean and simple wine ready for consumption because it is less risky to make these wines. This is true both from a winemaking and a business standpoint. It allows the producer to deliver a consistent product to satisfy the consumers’ expectations and desire for immediate gratification.
And so, we arrive at the concept of entry-level luxury, which is luxury in name only.
Example: Jaguar: an elite car with a reputation for style, refinement and class. Now in the hands of Ford, the line offers an entry-level vehicle in the mid-thirty thousand Dollar range (X-Type). Almost anyone can buy one, but are they buying the same standard as the $95,000 model? The X-Type is more likely to be a Jaguar in name only. The same sentiment is directed at the BMW 318ti or the Mercedes-Benz C class coupe.
I am reluctant to indulge some conspiratorial thinking of a cabal of a handful of people dictating a global style of wine. Quite the opposite, I have said that those blamed for altering the style of modern wine are only validating the preferences of the mainstream consumer.
It is the masses, which seek luxury goods and find that need fulfilled by entry-level luxury goods, that drive this trend. In turn, producers, seeking more of those consumers’ business, offer ultra-premium wines made to appeal to those mainstream consumers who may be able to scrape up the extra hundred bucks to pay for the perceived increment in quality “signaled” by the higher price point.
The good still has to meet the consumer’s expectations – even if those are ill-informed and misguided. If the product doesn’t deliver, they will not buy it again. If it does, they will continue to buy it.
Consumers who make their way to wine by way of entry-level offerings which meet their expectations or preconceptions of wine advance to higher tiers of wine. Their personal expectations of wine are the engine which, powered by their wallet, directly drives the style of wine in the next higher tier.
So often, we hear that Robert Mondavi advocated for wine being a daily part of “the good life” for everyone. However, he also said that California wine has yet to attain the subtlety that marks French wines. If: 1) the majority of wine consumers are attracted to big, clean and simple wines, and 2) subtlety along with complexity, finesse and varietal and regional typicity are both hallmarks of quality and esoteric “acquired tastes”, then the achievement of high quality wines is precluded by democratization of wine.
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September 22nd, 2008 at 9:48 am
This is a great piece. There is support for this from micro-economic theory. Firms often use price differentiation as a tool to maximize profits. That is, there are different prices for (more or less) the same good depending on the customers’ willingness to pay. Airfares are the classic textbook example. Flights that include don’t include a weekend are more expensive than otherwise because business travel (which does not include a weekend) is less price-elastic than leisure travel. Students get a discount for this and that because their demand is more price-elastic.
In most cases price differentiation is good for overall welfare. Compared to the case of only one price, it allows for some prices being below this average price and, therefore, includes customers that otherwise would not buy.
Quality differentiation is very similar to price differentiation. You can cater to all kinds of consumers and include more people. In this case, by offering top-quality you include customers that otherwise would not buy.
September 22nd, 2008 at 11:38 pm
I agree this is a most interesting subject. I have a slightly different take.
In markets cut off from the world you have local tastes that develop. Chilean wine drinkers might develop a taste for oxidized whites and, though acceptable in Santiago, the wines would be rejected in Paris, London or New York. This used to be very evident a half century ago in Chile and in Italy as well. In Italy volatile acidity, acetaldehyde, and other off characters were tolerated in locales, even appreciated. Only when they sought a global market (outside of the enclaves of expatriates who only drank wines from home and too, appreciated the off character) did they have to clean up their act. Should I bring up Greece and retsina? The only thing different about France was that this went on much earlier. So if the world market is criticized for standardizing, it should also be credited with giving us more drinkable wine in certain cases. You can see that this is happening in Greece today.
The counter point to this is that if you look at it on a longer time scale, all of the wines we appreciate today were at one time local and not subjected to a world market. While there were a lot of weird “dogs” in locales all over the continent, there was also Sherry, Port, Burgundy, Bordeaux, Champagne, the Mosel and Rhinegau. These were once local odd products that the villagers appreciated. They could have been awful but they weren’t. And because they weren’t and because they were appreciated and successful in the world market, we have them with us today being imitated in all parts of the world.
So you can look at it from two standpoints. I know some people lament the global sameness of red wine and perhaps the loss of terroir in some of our unique American wines. But this is a game played over centuries and as far as I can tell American wines have not made much in the way of inroads globally. Maybe that is because we offer nothing new. Maybe we will discover (or rediscover) something that we have that is unique which could be the next Bordeaux or Burgundy…but our own. Or maybe it’s a dog. One thing for sure, it will be global acceptance that tells us the answer.