Rarified Retailer: Dennis Overstreet, Owner Of The Wine Merchant Beverly HillsOctober 21, 2011
The Wine Merchant Beverly Hills is one of the Los Angeles market’s leading wine and spirits retailers, boasting a rarified international clientele. Five years ago, proprietor Dennis Overstreet relocated from his high-rent 25,000-square-foot store on Rothbury and Santa Monica Boulevard to a 2,000-square-foot shop on Canon Drive in the Beverly Hills Triangle. He conducts dinners and tastings at a 40,000-square-foot wine cellar in West Los Angeles, three and half miles away from the store. Overstreet’s total revenues were $4.5 million last year—with 80% of sales in wine and 20% in spirits. He expects to hit $5 million by the end of this year. Overstreet also owns and operates two restaurants, The Dock and The Porch, in Newport Beach. Shanken News Daily recently spoke to Overstreet about trends in his retail business.
SND: You’re in a unique, upscale market. Has your business been impacted by the difficult economy over the last few years?
Overstreet: It certainly has affected it, but I think the upper high-end is immune. When you’re talking about limited editions, it’s sort of like women with Birkin bags. They’re still on a waiting list for things like Scarecrow, Screaming Eagle and Domaine de la Romanée-Conti. But the prestigious, limited edition bottlings that aren’t driven by the collectors have certainly slowed. The things that have picked up are certain types of spirits—Cognac, aged Scotches and such. Those items have come alive, not only because of the packaging, but because they’re rare. They’re not seen in the big box stores. We’re trying to be on the cutting edge by offering products with limited availability.
SND: Have you seen much trading down?
Overstreet: When someone says, “That price went up,” you certainly try to transition them to an item that’s in a category price-point where they feel comfortable. There’s a lot of that. There are collectors who drive prices, and then there are the elite who seem to be somewhat immune but are very sensitive about appearances. They’ll drive their Prius to a very nice restaurant because they don’t want to flaunt their wealth. Even when they’re entertaining, they don’t want to flaunt it. But behind the gates and the doors, they’re still enjoying the specialties.
SND: How have the 2010 Bordeaux futures been selling?
Overstreet: It’s been very slow.
SND: Did you take a big position?
Overstreet: We did not in general, but we did with the first growths. Those are investment-grade. It’s like, “Okay, if the whole world is going to hell, the only thing I care about is gold bullion, guns and first growths.” Those prices are just astronomical. Thirty years ago, great Bordeaux wines were very accessible to a younger generation. Now the younger generation has sort of transitioned to high-end spirits—which is another way to show status, to show you have taste, without having to buy a $200 bottle of wine. Now you can order a prepared custom-made cocktail that sells for $20. We might have lost part of a generation just because of the pricing. Younger people—those under 35—who were very enthusiastic about wines have found a new niche. And very expensive wines now are things that aren’t necessarily shared. They’ve become heirlooms that are collected and not opened.
SND: But as you were saying, people are still willing to pay for the first growths?
Overstreet: Yes, but that’s a very narrow group. I was just going through our records to see how many of our customers are on the Forbes billionaires list and we had 23 of them. So we’re in a very elite category of clientele. We’re in a unique position because not only are we in a very high-rent neighborhood (at $15 a square foot), but we also have a large storage facility. This is a specialty business. This isn’t a store that people drive to, carry out cases of wine and load up their cars. Our business is entirely delivery. We have customers from New York, London, Singapore and Hong Kong coming into the Beverly Hills area. They’re familiar with the lineup of great products here. They’ll buy and we’ll send over to the storage facility. We might not see them for a couple of years. But they’ll continue to buy, and then at some point their agents come in to arrange delivery.
SND: The 2009 and 2010 Bordeaux vintages are both potentially great. Was there price resistance on the 2009s, or was there more interest in the 2009s than the 2010s?
Overstreet: We bought the 2009s, and we sold a lot of them. I think there was more of a positive outlook 18 months ago when those offerings were made. The 2008s came in at a very accessible price. They were a bargain. The drums were beating for the 2009s and everyone was very excited about them as a once-in-a-lifetime opportunity, and the economy seemed to be turning around. And then 2010 came out and it’s possibly greater than the 2009s. But, people, I think, are very leery about spending that much money now on a gamble.
SND: How much risk is there for you with futures?
Overstreet: Well futures tie up so much capital. When you’re writing those checks, even though you’re making a partial payment, if you don’t come up with the other part, you’ve lost your down payment and that’s a lot of money. We’re talking millions of dollars.
SND: How are sales of Burgundy?
Overstreet: There’s strong demand for Burgundy, but it’s minuscule.
SND: How much of your wine business is California wine?
Overstreet: A good 55% is California. France is next with 35%. It’s strong, and it’s primarily Bordeaux. That’s the locomotive that drives the wine market for us. My customers automatically think in terms of what are the outstanding vintages for Bordeaux. The remaining 10% of our wine sales are Italian and everything else.
SND: What about Champagne?
Overstreet: Champagne is still strong because we’re an entertainment town here in LA.
SND: Do you deal mostly in prestige cuvées?
Overstreet: No. The Roederer non-vintage is a big seller, as is the Taittinger non-vintage. Those are the good, strong sellers. But even here, it’s a holiday thing. Champagne still hasn’t busted out of the gift-giving category. But it’s always festive and fun and always a very easy sale. You suggest it and people are very open to it. And the prices are very reasonable.
SND: You mentioned before that people were drinking spirits—especially younger people. What are the trends within spirits?
Overstreet: Scotch is the biggest surprise for us, especially single malts. We’re starting to see young people—we call them “the suits” out here because they’re in the entertainment business—who used to be curious about Bordeaux. But they’re now moving into single malts. Vodka, needless to say, has been going strong for a long time. We have numerous vodkas that do well, such as specialty items like Ultimat (Patrón) and Stolichnaya Elit. The more mainstream items—like Smirnoff or Absolut—don’t even budge unless they have a specialty item. People are going for the high-end here. Spirits now account for about 20% of our total sales, and that’s up from 15% a few years ago.
SND: Do you use social media to promote your business?
Overstreet: We’re not good at social networking. But social networking sometimes works in reverse with Facebook. People will say they were at a party and the host was bragging that he got something at The Wine Merchant Beverly Hills. We don’t know how to do this very well, but it works in reverse. By saying I refuse to be part of Facebook, that makes you even more chatted up on Facebook. So while I’m not going to talk about my customers, my customers are going to talk about me. And that works better. For instance, customers might ask, “How do I get invited to one of those special dinners?” Well, you have to be on the list. We do not advertise them. Chateau Margaux recently held a dinner for our customers. Corrinne (Mentzelopoulos) and Paul (Pontallier) have done very large events in LA, but when they did it here, we gloated by saying, “Well, we don’t advertise these things.” We don’t let those events exceed 48 attendees. They’re private and very special. And that works to create demand.Subscribe to Shanken News Daily’s Email Newsletter, delivered to your inbox each morning.