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Wine industry: From worse to worser

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The thing that’s so cool about Google alerts is that they can sort through the tsunami of incoming information and bring seemingly unrelated phenomena together, in a way that lets us understand the world more clearly. And what I’m understanding, after reading just 24 hours of alerts for the word “wine,” is more confirmation that things are looking very, very bleak for the economy.

I’m particularly alive to this because I just found out my savings are tied up with the Madoff scandal on Wall Street — yes, Bernie “$50 billion” Madoff, that sack of shit. Yes, I lost a bunch of money — I think; it’s all so unclear — and so you’ll have to take my pessimistic mood in that context. But take it also in the context of Tom Wark’s prescient post last week, Prepare: It’s about to get real ugly out there.

Those Google wine alerts? Here are a few that set my hair on fire.

Meetings aim to help wineries become recession-proof

Good luck to you, California wineries. You’ll need it. Here’s hoping those meetings come up with some good ideas on how to keep the wolf from your door.

America – the end of an era?

The header says it all.

Economic downturn affecting direct-to-consumer wine sales

Quote from the Santa Rosa Press Democrat: The number of bottles wineries shipped directly to consumers increased just 2.4 percent this year, compared with a 13.8 percent rise the prior year, according to the study. This echoes something Wark wrote: “I’m betting that 2009 will be the first time since 1992 that total gallons of wine consumed in America will decrease from the year before. And it won’t be a small drop in consumption, either.”

Wineries seek state aid to compete

Granted, that’s down in Arkansas. But could California wineries be next to ask for a bailout? I’m no economist, but Schwarzenegger’s call for an increase in sales taxes, including for alcoholic drinks, just could be the straw that breaks the camel’s back. I was generally supportive of that a few weeks ago, but now I’m beginning to wonder. Small family wineries could especially be harmed. That’s the thing that’s so frustrating about huge problems: Every potential solution has a downside.

Finally — my favorite:

Shed the gloom with a glass of wine and a Gallic shrug.

I’m drinking. I’m shrugging.

  1. I don’t think wine consumption will drop significantly; but the average price paid per bottle will.
    – He who is Inundated with Sales from Wine Stores

  2. Steve,

    There is no doubt that 2009 will be a rough year for the wine industry . . . and certainly a turning point for more than a few companies. I think few will be spared from the economic downturn that will, unfortunately, show its true colors in the first 6 months of the year. The real question is going to be how will wineries, and all business for that matter, react to the situation? Or better yet, what are wineries doing NOW to prepare / counter what’s sure to be coming soon?

    I’m hopeful that your blog will feature those companies that successfully rode out this storm in the near future – and hopefully share with all how they were able to do it.

    Until then, back to Google Alerts and to hearing more gloom and doom from everyone around us . . .

    Cheers!

  3. Morton Leslie says:

    Like you Steve I have been wounded by the downturn, why….I may have to go back to work. But, you know, I think for the most part this will end up being good for everyone, particularly our kids. We have lost touch with reality, live on credit from one paycheck to the next, think mowing our own lawn or cleaning our own home is beneath our stature. It will be an important lesson to our kids that frugality, savings and sensible investment, living within one’s means, and rejecting materialism and consumerism can be a prudent way of living.

    In the wine business the level of frivolity and pretention had reached unsustainable levels. There must be a hundred $100 Napa Valley wines made by people who have no vineyard or winery (maybe a name consultant.) No amount of marketing will help them. They were on borrowed time and their time is up.

    The one I wonder about is Hall Winery. How would you like to have that investment group handling your money. They purchased 3000 acres of Napa and Alexander Valley vineyard at the peak of the market. They are sinking a fortune into a Gehry designed “collasal” winery. They have the whimsical dragon flies at the entrance, and the web site, and the story. And the big prices. Next they are going to see if they can make wine.

  4. Larry: “I’m hopeful that your blog will feature those companies that successfully rode out this storm in the near future – and hopefully share with all how they were able to do it.” Gee, any suggestions? ; >

    Morton: I actually like the Hall wines (most of them) quite a bit. But you are right, the hubris of $100-plus Cabs from complete unknowns is ridiculous.

  5. @ Morton – hello Nail, meet Mr. Hammer! We need to get back to being a country that saves and does not spend beyond it’s means. My guess is the demand for quality/value ratio wines will stay strong. For the consumers still willing to spend, there may be an ocean of 500 case, “no winery, no vineyard, no tasting rooom” brands available at a discount. Not to mention, brands like these may warm up to out of state wholesalers where before they shunned them. Never burn those bridges!

    I know the economy has stalled many projects in the Paso Robles wine country. Talk to any contractor or even better, permit consultant, and they’re wrapping up existing work and looking at a pretty open calendar after that.

    Our small winery survival guide is based on customer relationships and wearing out our shoes on the streets. It’s even more important to tighten customer service as well as selling strategies.

  6. Lee, it’s hard-working honest people like you who built the wine industry and it’s people like you who will be there when the bad times pass. Good luck to you.

  7. Nearly thirty years ago Dick Shone (Shone and Sons Winery, Napa) told me that ‘the farther one gets from the farming in the wine industry the more instability and dishonesty one will find’.
    Keeping it “down on the farm” and realizing that fermentation is just our particular way of preserving the, otherwise parishable, fruit that we grow has and will continue to sustain us and our personal commitment to our clients , friends and family.

  8. I was making my annual pilgrimage to Party Source in Newport, Ky yesterday and, since my visit last Christmas, I found that 1. there were many fewer wines under $5 (some of the ones I could count on to be drinkable at $3.99 a year or two ago were $6.99) and deals galore in the $9-15 range. 2. At midday, most of the shoppers were in the other world aisles; California was almost deserted.
    There was a lot of action in Argentina and Chile, even South Africa… and France (despite latest $ figures). It could have been the time of day or it could have been, as has been noted here and there, that the price/quality ratio is better. This has no scientific value but I was surprised.
    So, while I also am hopeful for my California friends who are “down on the farm,” I think the economics of making wine in CA vs Argentina don’t bode well for the small production, good (but still expensive) qualite/prix CA wine guys. Especially as they will continue to need extra attention on the sales end from the distributors, restaurateurs, and retailers when they, too, are cutting staff and costs.

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