Will the Napa Earthquake Really Result in Wineries Losing Millions of Dollars of Sales?

Two weeks ago a 6.0 earthquake hit Napa Valley, the California region famous for making red wine.  On Saturday morning the Wall Street Journal published an article stating “About 120 wineries in Napa Valley suffered an estimated $50 million in damage from the magnitude 6.0 earthquake.”  This $50 million figure is wrong. Continue reading

What Size Champagne Should We Buy For The Holidays?

The weather is cold, the semester is ending and it is time for some of us to pick up Champagne for the holidays. Champagne at this time of year comes in all sizes of bottles from a small 1/3 of a liter, good for two people toasting the New Year, to giant 15 liter bottles, good for a huge crowd. In general when buying food the rule is simple, “bigger is always cheaper.”

As a special treat for Thanksgiving I purchased a giant Jeroboam bottle of red wine.  A Jeroboam is 3 liters, which is four regular sized bottles of wine.  The Jeroboam turned peoples heads when I brought it out.  I was thinking maybe a giant bottle of Champagne for New Years Eve might be just the thing.

I went to Sherry-Lehmann‘s website (see one of the screen shots below) to price big bottles of Champagne since wines shops in my neighborhood don’t stock the giant bottles.  Sherry-Lehmann is a large wine shop in New York City.  They have prices on almost every single size of Veuve-Clicquot Yellow Label available which is convenient for comparing an identical product that only varies in size.  The result of a few minutes cruising their website was the following table:

Size in Liters Price in US $ Name Price Per Liter
0.375  $26.95 Half  $71.87
0.75  $45.95 Standard  $61.27
1.5  $114.95 Magnum  $76.63
3  $395.00 Jeroboam  $131.67
9  $1,375.00 Salmanazar  $152.78
12  $1,995.00 Balthazar  $166.25
15  $2,395.00 Nebuchadnezzar  $159.67

The table shows that the cheapest Champagne on a price per liter basis is the regular “Standard” size bottle.  Unlike when buying meat, fruits and vegetables, bigger is NOT better when buying Champagne.  As a matter of fact, the bigger the bottle the larger the price premium!  One 15 liter Nebuchadnezzar costs $2,395.  Buying 20 bottles of the standard 3/4 liter size, which gives you the same amount of Champagne, costs only $919, a savings of almost $1,500.

The lesson of this blog post is simple.  During the holidays when shopping for wine don’t buy the big size.  Stick with the regular sized bottle and spend the money you save on something else.

PS: For those of you who are not convinced by the economics, trying to pour wine out of a Jeroboam into a small wine glass at Thanksgiving proved to be very hard.  We ended up pouring most of the red wine into water pitchers so that no one made a huge mess.  The Jeroboam makes a great statement when you walk into the room carrying it, but is a real pain in the neck to actually use.


Can you really tell expensive wine from cheap wine?

A few days ago I invited my MBA students over to my house.  At the party I served three kinds of wine (all California Cabs), three kinds of cheese (all sharp cheddar) and three kinds of chocolate (all dark).  All nine items were served blind, which means the wines were in bags, the cheese cut in the same size blocks and the chocolate was served imprint side down.

The question I posed to the group was could they really tell in a blind taste test which was the cheapest and which was the most expensive.  The answers were interesting.  The group overwhelmingly liked the $30 Cabernet compared to the $15 Cabernet and the $3 Cabernet.  However, the clear favorite cheddar was the mid-priced Cabot cheese, not the organic cheddar.  The least favorite chocolate was the fair trade, organic chocolate.  More people liked the cheaper Hershey’s or the mid-priced Lindt.

The results suggest some merit in Dan Ariely’s Wall St Journal article from a few days ago about how much you should spend on wine.  He suggests many people cannot tell the difference between expensive foods and cheap foods.  If you cannot tell the difference ordering cheaper wines/foods will save you money without diminishing the quality of your dining experience.