The principle of scarcity

I was listening to a podcast on persuasion the other day and was struck by one of the first elements in persuading someone to buy something: the principle of scarcity.

If you have used Amazon before and noticed that an item has “only three left” or if a store salesman said “this is the last one left,” you know the power of scarcity. Numerous tests have shown that people are driven to buy something if they feel it may not be available if they think about it overnight.

It’s a principle that works in the wine industry just as well.

Screaming Eagle is the poster child, but there are hundreds of wine producers who drive up prices and sales by limiting production. In many cases, there is a waiting period just to lay your hands on a wine that can cost more than $300 a bottle. If they increased production, there would be no scarcity and thus no stampede to their door.

That was the case with iconic wines like Silver Oak, Caymus and even Dom Perignon whose productions are significantly larger than that of Screaming Eagle, Schafer, Opus One and others.

I got an offer from de Negoce, a reseller of wine owned by Cameron Hughes. The Napa Valley cabernet sauvignon was available from the producer for $195. Hughes was selling it for $27 — he gets the same wine from the producer with the understanding he won’t identify the source.

He wrote, “The winery bottled their portion and sold us the rest of the blend out of the tank so we have the exact same 100% Cabernet Sauvignon blend as the original bottling.”

In short, the original producer didn’t want to increase production and reduce the notion of scarcity.

The first growths of Napa Valley

In 1855 Napoleon Bonaparte asked that the Medoc classify its wines, perhaps so that he could determine which to buy. Only four chateaux — Lafite Rothschild, Margaux, Haut Brion and Latour — were judged to be worthy of the coveted first-growth classification. The grouping has remained largely intact — Mouton Rothschild was added in 1976 after intensive lobbying.

No other wine region has classified its wines like this, preferring instead to divide them according to time in cask (Spain), by vineyard (U.S.), by crus, price or by the vague term “reserve.” Even a president like Donald Trump couldn’t follow in Bonaparte’s footsteps and order it to be done in, say, California. However, I’ve often mused about which properties in Napa Valley would make the first-growth cut.

If history influenced the decision, I’d have to consider Chateau Montela, Louis Martini, Beringer, Caymus, Beaulieu, Heitz Cellars, Chappellet, Dominus, Opus One, Joseph Phelps, Mondavi. If I pulled in producers with less history, I would consider Screaming Eagle, Spottswoode, Sullivan, Cliff Lede, Gamble and Ladera.

The reserve cabernet sauvignons of these producers sell for more than $100 a bottle — in some cases more than $3,000. Not many people — even collectors — will pay that much for California cabernet sauvignon, especially when they can buy a second-growth Margaux for less.

What happened?

Many winemakers tell me there is more labor involved in farming mountain fruit that is often the source for the best cabernets. But, more likely, they will charge whatever the market bears. They make little of their best wines, sell it to their club members and develop a waiting list to drive the fear of being left out.

Most of them resist comparing their wines to those of Bordeaux and I get that because the soil, winemaking and blend is often different. But consumers will compare the two regions. And, winemakers insist that however unique their Napa wine, it is every bit as good as Bordeaux.