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.

The sense I get, from my part of the wine world, is that wine ?s hold on the consumer is a lot more tenuous than many people think. The people I talk to don ?t read the Wine Magazines and they buy wine based more on what the label looks like than the wine ?s score. They don ?t know the difference between cabernet sauvignon and merlot, and it doesn ?t them that they don ?t. They may drink wine more than a couple of times a year, but it ?s still only a couple or three times a month. Price does matter, and $20 is an expensive bottle of wine.

I ?ll quote Alfonso Cevola again, who makes the crucial distinction between what the bosses see on either coast and what happens in the rest of the country: ?The blatant reality is out in the streets. For two nights this week I have been in high-dollar Texas steak houses. And they have been empty. No one is picking up $150 Napa Cabs. They just aren ?t. Sorry folks, but if you were to get away from your computer screen and go out and see for yourself, we wouldn ?t have to push back so often. ?

Meanwhile, this recession is already longer and worse than most people expected, and there is no sign of it ending any time soon. So what happens if we spend the next 18 months in an old-fashioned, 1980s-style recession? That ?s the kind when fewer people own homes, real income declines, and unemployment reaches 10 percent.

What happens is that even a $10 bottle of wine is a luxury.

My point is not to spread doom and gloom; rather, it ?s to offer an analysis of what might happen, so that we can figure out what to do next. And this is what might happen:

? The industry redirects its marketing approach. The great successes of the past decade have not necessarily been built on educating consumers about wine, but about leading them to wine. In the short term, that may amass impressive numbers, but it doesn ?t teach people that it ?s OK to drink wine on Tuesday night with Chinese takeout. My Cordon Bleu students ? who were learning how to be professional chefs, for crying out loud ? were dumbfounded that I drank wine every night with dinner. ?It must be like date night, ? gushed one of them.

? Much of the industry ?s growth over the past several years has been in $15 wine. Expect this to go away, and not just because consumers trade down. It will go away because producers invented $15 brands that weren ?t worth $15, part of the industry ?s short-sighted marketing approach. We ?ll sell $15 wine not because it ?s worth it, but because we can.

? The Wine Magazines lose some of their power. I don ?t understand how a multi-billion dollar industry holds its breath waiting for a handful of people to pass judgment on their product. Do Heinz and Hunt ?s wait for ketchup scores? And, if the recession slices away demand for the more expensive wines that the magazines revolve around, why will the industry need the magazines? As a corollary to this, it may even be possible that we could see more movement away from wine made in the style favored by the magazines ? over-oaked, over-alcoholic, over-ripe, and over-concentrated ? if they become less influential.

? Pricing based on the quality of the wine, and not the cost of real estate. I am always accused of not liking California wine, which isn ?t true. What I don ?t like is over-priced wine, and some of the most over-priced wine in the world comes from California. If I spend $400 for a bottle of Cheval Blanc, at least I know I ?m getting quality. If I spend $40 for a Napa or Sonoma merlot, there ?s no such guarantee. Here ?s how crazy this is: As real estate prices have collapsed in California, vineyard prices in Napa and Sonoma have remained relatively stable.

? Consumption ? measured by both dollar sales and bottles ? declines. I don ?t see any way around this, unless the recession suddenly ends and Alfonso ?s steakhouses are once again full of $150 Napa cab drinkers. And if consumption decreases, it ?s not necessarily a bad thing, assuming the industry makes the changes to increase consumption again.

Wine is fun. Let ?s educate consumers about that, and everyone will be better off in the long run.

Part I: The experts: Why wine won ?t suffer in the recession.

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

  • By Diane Letulle - Reply

    Thanks for the interesting articles. I agree with your feelings about CA wines being overpriced. When I have visited Napa tasting rooms and am told that a fair wine is $40, I just want to ask, “Why?”

  • By Jeff Siegel - Reply

    Two reasons why. First, because they see price as an indication of quality. If they charge less, then they’re convinced no one will take their wine seriously. Second, because consumers let them get away with it.

  • By Hugh Hillebrand - Reply

    Jeff,
    Talking about any correlation between price and quality, Sam’s Warehouse at Eastchase Ft Worth, has dropped the price of Concha y Toro Casillero del Diablo 2008 to $2.91/btl! The wine is in excellent condition and it tastes just like the same vintage wine available at World Market for $10/btl!!!
    Hugh in Arlington

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