Tag Archives: wine and the recession

Update: Wine prices and the recession

The weather has finally cooled off in Dallas, and one local sales guy asked me if that would help business. "Everyone's mood has improved, right? So they'll spend more money on wine?" Because, he said, it looked like he was going to need all the help he could get going into the holiday season.

The wine business has been eagerly awaiting the end of the recession, and almost every news story that has come out over the past nine months has been forecasting a return to the good old days, when the price of wine didn't seem to matter to consumers. The reports have been heralding every quarter-to-quarter increase in sales as soon as it has been reported, and you could almost hear the sigh of relief from retailers, distributors and producers.

But that enthusiasm seems to have been wishful thinking (and it has been even worse in Texas, oddly enough, since we've supposedly handled the recession better than elsewhere). More, after the jump:

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2011 wine price update

Some thoughts to follow up on the December post about what the experts are calling consumer-friendly wine prices in 2011:

? Italy invented pinot grigio as a wine to sell in the United States, but the recession may have helped change Italy's pinot grigio dominance. Alfonso Cevola, the Italian Wine Guy, has done an analysis of selected U.S. pinot grigio sales for 2010, and California looks like it will replace Italy as the varietal's top producer. There are a couple of couple of caveats, says Alfonso, but his conclusion looks solid. And the reason California is passing Italy? Cheaper wines, such as Barefoot, which are replacing Italian brands that cost $10 or more. "Value wines still reign," he wrote.

? How far have white zinfandel sales fallen? So far that Beringer, which is among the top two white zinfandel producers in the country, is not only price cutting, but marketing. And the last time anyone needed to market white zinfandel in the U.S. Never, probably. Beringer is giving away a downloadable single from crooner Michael Buble, and has teamed with Buble to pair wine, songs, and food. This is a lot of trouble to go to sell a $7 wine.

? The Wine Economist blog has put much of what has happened over the past couple years in perspective, and has discovered consumer-friendly pricing in the process.  "As I am writing this, the neighborhood Safeway is offering an extra 20% off any wine selling for $20 or more," noted Mike Veseth, who posted that the sales increase in more expensive wines that has the industry so excited is almost certainly coming from this kind of discounting.

? A few Dallas-area, very consumer-friendly prices from the past couple of weeks of shopping: Rodney Strong chardonnay, about $15 list, for $10; Wente chardonnay, about $15 list, for $10; and House Wine, a very nice red blend from Washington state, usually $12 or $13, for $10. Looks like it's time for a House Wine review.

Winebits 152: Wine Trials, states and wineries, alcohol consumption

? Wine Trials 2011: This is the third edition of one the best guides to cheap wine ever done. Robin Goldstein and his colleagues, using blind tastings, have found 175 wines for $15 and less that are always well worth trying. I'll have a full review later this month; it's enough to know for know that the book includes three Bulgarian wines.

? State spending on the wine business: There was a very odd article in Bloomberg Business Week that detailed increasing state spending on regional wine. Why odd? Because the article inferred, given the budget crises facing so many states, that money spent on developing local wine was money poorly spent. Yet it never quite got around to saying that. Texas spends more than $3 billion annually; wine gets $2.3 million. The Wine Curmudgeon is an ardent supporter of regional wine, but I'm an even bigger supporter of good journalism. If someone at Bloomberg wants to say that state spending on wine could be put to better use, then say so, and let's discuss it.

? Booze and the recession: Do people drink more when the economy is bad? That's the conventional wisdom, that we drink away the hard times. But it's not necessarily true, says a new study by a California state agency. The Board of Equalization, which deals with tax policy, found that U.S. spending on alcohol, before the 2008-09 recession, rose 2.4 percent. In contrast, during the 2008-09 recession, spending on alcohol declined by 1.7 percent. This is an especially relevant report, given that so many states are considering booze tax increases to make up recession-caused deficits. It seems to imply that if states are going to raise consumption taxes, they should do it when the economy is good, since new taxes will bring in more money.

Gary Shansby and the dilemma of wine education

Gary Shansby tells the story with an almost wistful air. A good friend of his, who is smart and wealthy, will only drink Grey Goose vodka. Gary, who owns Partida Tequila, offered to buy his friend a Partida. No thanks, says the friend. I only drink Grey Goose. Can I buy you another kind of vodka? asks Gary. No thanks, says the friend. I only drink Grey Goose.

Why do you only drink Grey Goose? asks Gary. Because it's the best, says his friend. How do you know that? asks Gary. Have you tried any other vodka? No, says the friend. Have you tried my tequila? No, says the friend. Then how do you know that you don't want to try anything else? Because I don't, says the friend. I just know.

Shansby finishes the story and I laugh. He has outlined, neatly, the dilemma facing those of us who do wine education. Yes, this story is about tequila and spirits, and I usually don't do much of that here. But Shansby is also a wine drinker who knows how the business works, and Partida makes some damn fine tequila. I was especially impressed with the blanco (about $45, sample), which had almost nothing to do with the cheap, poorly made tequila that one sees around Dallas.

Besides, the principle is the same, whether we're talking about tequila or pinot noir. It's not enough that wine is confusing. We also have to fight the prejudices that consumers pick up, many of which are fostered on consumers by the companies that sell wine.

"There are so many great wines all over the world — from Chile, from parts of the U.S. — that it's just so confusing to the consumer," says Shansby. "But that also means that they are so many great wines to try at so many attractive prices."

In fact, he says, those attractive prices are going to be around for a while. The recession is the main reason (and he expects its effects to be with us for a long while), which is something we've discussed here many times before. Producers are stuck with unsold wine, with more wine in the production pipeline, so they are cutting prices to move it. Shansby says it won't be unusual to see discounts of 20 to 40 percent. So why not take a chance and experiment? Why not try a wine from a different region than your usual? Why not try a different varietal?

Just don't, says Shansby, let your prejudices make your decisions for you. And who can argue with that.

Wine terms: Previous vintage

wine terms: previous vintageRegular visitors here have seen a lot of references to the term “previous vintage” over the past 18 months, particularly in regards to wines that are on sale. That’s because, thanks to the recession, store shelves are full of wines that aren’t the current vintage, but wines from previous vintages.

Typically, wineries release a new vintage every year, starting in the spring; the process is much the same as the one auto makers use when they introduce their new models every fall. In 2010, for example, most wineries released their 2009 whites and 2008 reds. That’s called the current vintage.

But what happens when retailers haven’t been able to sell all of the previous year’s current vintage? It becomes the previous vintage, and retailers cut prices to get rid of those wines to make room for the current vintage. In other words, every wine that isn’t the current vintage is the previous vintage. Note that this system doesn’t exactly apply to high end wines, which have limited distribution and are bought to age. But it is true for the other 90 percent of the wine in the world.

Again, the sales process is similar to what car dealers do. Most retailers don’t have the shelf space to carry the previous vintage and the current vintage at the same time, and most of them don’t want to anyway. Customers get confused if they see the same wine with two different years on the label.

The transition from previous to current vintage is normal, but it has been complicated by the recession and the slump in wine sales. Starting at the end of 2008, many retailers stopped buying new vintages altogether, and focused on getting rid of what they had. The wineries, figuring the good times would never end, had made too much wine, and retailers were stuck with wine they couldn’t sell.

Today, almost two years later, the situation has improved a bit, but talk to retailers and distributors, and they say it will be another couple of years before the excess of previous vintages works its way through the system. So expect to continue to see significant price reductions from retailers on previous vintages. Some retailers, in fact, have specialized in buying previous vintages and selling them at steep discounts over the past couple of years. I can’t tell you how many $15 and $20 wines I’ve seen marked down to $10 and $12 at these stores.