Wine trends 2009: “$10 wine is the next $100 wine,” part II

2009 wine trends This is the second of two parts looking at wine prices and consumption this year, and how they will affect those of us who drink cheap wine. Part I is here.

Talk to the experts and parse the numbers, and it doesn ?t look like wine will suffer during the current recession. Some high-end wineries may fail, some cute label imports may go away, and prices may drop a little, but otherwise, all will be well. Consumption remains at an all-time high, Americans are more knowledgeable about wine than ever before, and the industry has done an excellent job of marketing its product. Wine isn ?t seen as nearly the luxury that it used to be.

And maybe this is all true, and wine will ride out the recession with, at worst, minor losses. But this is what makes me wary. U.S. wine consumption has increased every year since 1994, topping out at around 3 gallons per adult last year. Not coincidentally, we ?ve only had one recession since then — the short, sharp slump around Sept. 11. And this period of almost unparalleled economic growth may be skewing a lot perceptions.

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Wine trends 2009: “$10 wine is the new $100 wine”

This is the first of two parts looking at wine prices and consumption this year, and how they will affect those of us who drink cheap wine. Part II, which with my take on the situation, is here.

It isn ?t very surprising, given the economic doom and gloom around us, that wine prices and consumption will shrink this year. What is surprising is that most of the people I talked to don ?t expect wine to suffer as badly as housing, the stock market or any of the other parts of the economy that have collapsed since last summer.

Their thoughts: First, that we ?ll will drink less expensive wine, but not appreciably less expensive. This is what the business calls trading down. Second, consumption probably won ?t decrease, although sales might ? since we ?re drinking less expensive wine. Third, prices for imported wine, and especially French wine, will decrease slightly, and we should see that by the second half of the year. Fourth, there will be a shakeout among producers, mostly but not limited to Australia and California. Low-end wineries will go out of business Down Under, while we ?ll see California wineries making $35 and up wine close.

In this, so far, the numbers bear out their predictions. The Wine Market Council, an industry trade group, says sales gained 1.5 percent in 2008, compared to an earlier projection of 2.1 percent. Not bad, certainly, but is it the entire picture? Maybe, maybe not.

Consumption matters because it affects prices. If consumption drops, so will prices, as supply and demand work its magic. Consumption could drop because we ?re switching to beer, which is less expensive. It could drop because we order a glass instead of a bottle at a restaurant. Or we could eat at home more often, where many of us don ?t drink wine, instead of going out, where we do. And we could just cut back because we can ?t afford wine.

?There is not going to be a huge drop in consumption, ? says Robert Smiley, professor and director of wine studies in the UC Davis Graduate School of Management, who probably knows as much about this stuff as anyone. ?I think the $12 and up category is going to hurt a little more, because people are going to trade down and they ?re going to eat out less. But unless the economy really goes into a tailspin, there won ?t be a big drop. ?

The first casualty will be wine around $15, which has been the fastest growing price category over the past several years. We ?re already seeing anecdotal evidence of this, as my pal Alfonso Cevola has noted: ?They wanted to send palate after palate of overpriced wine into already bulging warehouses. As if they have been taking a siesta these last six months and think things are just as they have been. Business as usual. What a rude awakening they are in for. ?

And the numbers are starting to look that way, too. In December, wines priced above $11 lost dollar share, and wines priced $5-$7.99 also lost share. Boxed wine gained share along with wines priced below $5 and wines priced between $8 and $10.99. Or, as one headline put it: ?$10 wine is the new $100 wine. ?

The key for producers, says Bill Terlato, the president and CEO of Terlato Wine Group and Terlato Wines International, is not to panic. He says some cult wines, which never had a reason to exist other to get high scores, will disappear. They ?ll be victims of consumers trading down and their own finances, which were based on getting $100 a bottle for their product.

Terlato says he is already seeing some high-end producers dumping their product to generate cash. And some analysts are warning high-end producers and growers to prepare for up to 18 months of bad times, with fewer lenders lenders willing to finance cult efforts.

Two other points for those of us who care about cheap wine: First, Terlato says we will see better prices for imports, and especially French wine, later this year. It will take about six months to work through the inventory that was bought with weaker dollars. Second, Smiley says to expect dull, unimaginative wine lists as long as the recession lasts. Restaurateurs, facing a cutback in wine consumption and traffic, will stick with wines they know people will buy and won ?t take any chances.

Part II: Is this all, or will there be more serious ramifications?

Wine Curmudgeon podcast: John Bratcher

image Here it is, as promised: The first in what will be a regular series of podcasts with wine people ? winemakers, wine writers and the like — sharing their knowledge, tips, and advice about the business and cheap wine. John Bratcher, of course, is my cohort in Two Wine Guys and a pioneer in the Texas wine business.

But we don ?t talk about Texas wine. It ?s mostly John ?s insight on finding cheap wine when you don ?t know how to start the process. It ?s about 10 minutes and less than 10 megs, but we cover a fair amount of ground. To download or stream the podcast, please click here.

Turned out pretty well, if I say so myself. There are a couple of technical things I need to improve, but the sound is clean and adequate. All in all, not bad for the Wine Curmudgeon, who hasn ?t played with a tape recorder since they were actually tape recorders.

A couple of notes: As always, comments are much appreciated. If you have a suggestion for the podcast, or someone for me to interview, let me know. And if anyone can offer any technical pointers, they ?d be much appreciated.

Wine of the week: Ste. Genevieve White NV

This was one of the first wines to make the $10 Hall of Fame when I started it for Dallas ? Advocate Magazines almost 10 years ago. It was called Texas White, cost $2.99 and you could buy it at 7-Eleven.

The wine dropped off the list after a couple of price increases and a drop in quality. The winery, Texas ? largest (it also does Peregrine Hills), went through ownership changes and the fate of this kind of vin ordinaire wasn ?t high on the agenda. So when I saw it recently for $3.89 and re-labeled as an American wine, I thought I ?d try it. I didn ?t have high hopes.

Which, once again, shows why one needs to taste the wine before judging it. The Ste. Genevieve ? a blend of chenin blanc, chardonnay, French colombard and pinot grigio from Texas and California — is a bit thin on the back, but not unpleasantly so. Otherwise, it can hold on its own with any $10 wine. There is a floral nose with a hint of sweetness, some green apple, and not enough oak to bother anyone. Buy a case, keep it cool, and open it anytime you want a glass of white wine.

Availability note: If you aren ?t in Texas or surrounding states, it will be difficult to find this.

Tuesday wine bits 61: $100 inauguration wine, crummy restaurant wine service, U.S. wine consumption

? A new direction for White House wine? Mike Steinberger at Slate takes the Bushes to task for serving uninteresting and too expensive wine, which was good to see. But Steinberger ? like too many wine writers ? is hung up on serving California wine when we have other options. How he can suggest that the White House serve Chinese wine without mentioning the quality wine available in the rest of the U.S? And doesn ?t Steinberger realize, in suggesting that Obama serve the 1996 Ch teau Montelena (certainly a nice wine) that most of us consider $100 a lot of money to pay for a bottle?

? Restaurants don ?t know how to sell wine: This is not a surprise to the Wine Curmudgeon, but a new survey has found that most people think restaurant bottle prices are too high and that wine service is lousy. The study, by Women & Wine, found that 70 percent of wine drinkers 29 to 44 thought restaurants overcharged for a bottle and just 17 percent said the server actually listed the name of the wines by the glass or offered assistance on wine selection. What ?s even more interesting about this study is that most restaurants say this age group is the focus for their wine efforts. And that ?s the best they can do?

? We ?re drinking more wine: U.S. wine consumption increased in 2008, despite the recession, say figures from the Wine Market Council trade group. It was up 1.5 percent,down from original estimates, but not bad. A couple of other points: 16 percent of us drink 91 percent of the wine in the U.S., and those of us who fit in that group drink more wine at home, buy mostly wine that costs between $6 and $20, drink red and white evenly, prefer domestic over imports two to one. Coming Friday: My take on what will happen to wine consumption and wine prices in 2009.

More changes at the blog

Those of you who subscribe by email and RSS feed (mostly if you use Google Reader, I think) may notice advertising in the email and on the RSS feed. This is a test, and I ?m not sure if I ?m going to keep it. Like the advertising on the site, it ?s more an opportunity to see how this works.

The third-party vendor that does the feeds was bought by Google, and it ?s now easier to add the ads. Besides, I want to see if the ads are the usual sort of Google mix or if they take a step up for a classy site like this one. Let me know, either in the comments or by sending me an email (that ?s the link on the top of the page), what you think.

I have also added a Facebook link to the posts. This is a major step for someone as cranky as the Wine Curmudgeon, but one must adjust to an ever changing world. It also means that the Wine Curmudgeon is probably close to appearing on Facebook. How will the cyber ether deal with that?