Wine market update: “The new normal”

When the recession started almost two years ago, the smart money was reasonably sure that the wine business would emerge relatively unscathed. That obviously, hasn’t happened.

Instead, we’ve seen the volume of wine sold remain about the same over the past two years, while the dollar total at the end of 2009 was less than it was in 2007. That is the first time that has happened in decades.

I’ve spent the past week talking to winery officials, distributors, restaurateurs, and retailers about the numbers, and it has become clear that what one importer called The New Normal has emerged — consumers focusing on wine that costs less than $15, especially in restaurants. Wine drinkers have learned, much to the industry’s horror, that they don’t need to spend a lot of money to buy quality, well-made wine.

And no one I talked to expects The New Normal to change anytime soon.

One of the problems with tracking wine sales trends is that you can never be sure who is telling the truth. It’s not unusual for someone to say his or her sales are fine, but that everyone else in town is dying. And you can go across the street and ask the same question and get the same answer, save that the person across the street is fine and that everyone else is dying.

What’s interesting this time is that everyone seems to be telling the truth. If anything, they’re emphasizing just how bad business was at the end of 2008 and through most of 2009. One Fort Worth restaurant wine buyer told me that the difference between the beginning of the recession and past four months is so marked that he was almost giddy. “In Christmas 2008,” he said, “if you were flat, that meant you were up. Now, up really does mean up.”

Even an importer of high-end wines said there was a marked difference in the market, as consumers bought less expensive wines. And that’s something that importers of high-end wines almost never say.
A few observations from my conversations:

? Most people I talked to said Christmas 2009 and the first couple of months this year were better than they had hoped. Business still wasn’t great, but consumers seemed ready to spend a bit more. Having said that, no one was ready to predict business would improve dramatically later this year — and everyone agreed that the days of $100 wine were over.

? Prices, if not in free-fall, are still headed lower. My pal Alfonso Cevola has followed pricing for Italian wine, and there is no indication that any other part of the business is different. I’ve actually seen suggested retail prices drop, which is almost unheard of, and wineries — even those that wouldn’t have been caught dead doing an inexpensive wine in the old days — are adding wines in an attempt to reach the $15 and under market.

? The 2009 California harvest, which was the second biggest on record, will help keep prices down. Expect to see the largest producers introduce more $10 wines, because grapes will be so inexpensive.

? The worst may be over on the retail side, though some local and regional retailers may still go out of business this year. But the winery side of the business probably hasn’t reached bottom yet, and there are still lots of wineries with lots of unsold wine sitting in warehouses (including some very big names). Which ones survive and which ones close over the next 10 months is a work in progress.

For more on wine sales during the recession:
2009 wine sales: Don’t expect much
Wine, the recession, and what’s really going on
Wine trends 2009: “$10 wine is the new $100 wine”

, , ,

One thought on “Wine market update: “The new normal”

  • By Michael Wangbickler - Reply

    I sat through a Wine Market Council presentation about a month ago in which they described the “New Normal”. Don’t know whether they coined the phrase or not.
    I expect that we will see an uptick in wines made by Bronco Wine Company (2 buck chuck fame) for 2009 wines and others who will take advantage of low prices for wine on the bulk market. Not all of it is going to be good.

Leave a Reply

Your email address will not be published. Required fields are marked *
You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

This site uses Akismet to reduce spam. Learn how your comment data is processed.