“teetering on bankruptcy”
This is the stuff of nightmares: “A significant part of France’s wine industry is teetering on bankruptcy [and] wine players around the globe, from Italy and Spain to New Zealand are struggling to meet adequate margins to finance the investments that are instrumental in preserving their future.”
America, including California, is doing a little bit better, according to the new report from Rabobank, a Dutch bank specializing in food and agribusiness. That’s due to “a growing domestic market” that’s “migrating towards higher priced wines.”
What? I don’t know when the research behind the Rabobank study was conducted, but if anyone thinks that American consumers are “migrating towards higher priced wines” they’re living in cloud cuckoo land. That might have been true last year, when Wine Institute released this rosy scenario. But it can’t be true anymore. A little common sense is called for. Unemployment is going up. Peoples’ 401-Ks are diving down. Shareholders are dumping their stocks. Cities and counties are broke. People are scared. How can Americans be “migrating towards higher priced wines”?
Answer: They can’t, and they’re not. Just yesterday, Eric Asimov blogged, in The Pour, about how “All over the United States, people are spending less for wine.” He quoted the respected wine industry analyst, Jon Fredrikson (Gomberg, Fredrikson & Associates): “People are clearly trading down.”
So let’s not hear about anyone migrating towards higher prices.
California faces an additional problem: Its share of the domestic market has fallen from 74% in 2006 to 61.3% in 2007, and while exports were up earlier this year, that situation has to have changed recently, for a simple reason: The recession is worldwide. The U.S. wine industry’s traditional export markets, including China and Britain, are hurting as much as we are. That means export is threatened, too.
But Americans are not about to stop drinking wine. What California brands will they buy? One clue to that is to see who’s hiring in the sales, marketing and finance areas at winejobs.com. The Wine Group. Don Sebastiani & Sons. Henry Wine Group. Bronco. Gallo. Brands, in other words, that hope to be competitive in 2009’s tough economy.
It may be instructive to compare this current economic collapse with the Great Depression and see what wine prices did. Of course, there was no American wine industry then, courtesy of Prohibition. But there was in France, and thanks to Eddie Penning-Rowsell‘s 1969 masterwork, The Wines of Bordeaux, we can see exactly how prices were affected. In 1926 the average price for Lafite was 40,000 francs per tonneau. It averaged 20,000 francs in 1928 and 1929, when the Depression struck. By 1934, it had sunk to 10,000 francs, a 50% drop in just 5 years.
Even the mighty cults may find themselves in a precarious situation. Sooner or later, every bubble bursts. Bordeaux always came back. So will we.
Oregon and the NW (especially Walla Walla) should be included. Bill Hatcher in a guest column with the “Oregon Wine Press” (11.08) pointed to a nasty matrix where too much attention is focused on AVA’s that have only recent history, wine pricing related to “scores”…not open market competition, and acreage that is threatening to flood the Willamette Valley on a scale not seen since the great Missoula floods (yes..hyperbole but not far off the mark)
Where do we lose sight that at its core this an agricultural product grown on farm land and is vulnerable to the boom/bust cycles that have been
the bane of our family farms since the founding of this nation?
I actually disagree with you a bit here. As the wine director for a full ecommerce site as well as a main st store front, I can say first hand that my high end wine business has actually increased, and while my customer count has fallen slightly, my avg dollars per sale YTD is up over $8 per.
While on the whole, yes…the American wine consumer is spending less on wine. There will always be markets where this isn’t the case.
Louis,
Thanks for sharing. . . . Curious though whether you have sales figures broken down pre and post mid-Sept, when the market collapsed?!?!??
Cheers!
Regarding your comment Bronco expanding their work force, they are actually, just replacing people who have left the company to better treatment. True they are expanding in their Wholesale Division, but have just focus on their so called “Super Value” Brands, and not really expanded their mid-price and higher priced brands such as Forest Glen, Napa Ridge, Coastal Ridge, Forest Ville, etc.
Plus the taste profile on these brands have really changed over the last two years, so consumers are purchasing brands outside of California, that provide the $$ Values.
Cheers!
I think you’ve misinterpreted the data. When the Dutch bank states that Americans are migrating to higher priced wines, they are drawing a distinction between jug wines and fighting varietals. Franzia boxes are still far and away the most popular selling wine among the wide spectrum of consumers, but nonetheless, a percentage of these drinkers are stepping up to $5 and $6 vino. That more serious wine drinkers are moving down the price point scale doesn’t contradict this phenomenon that Rabobank draws attention to.
Tom, you may be right, but the summary of the report didn’t make that clear. Also, I have my doubts that people are moving up from jugs to bottles at this time. I don’t have any evidence, just a strong hunch.
Just peruse the “Real Estate” section of winebusiness.com. There are some brands for sale. There are some romantic, boutique opportunities for sale (because we are all so romantic, especially during crush, bottling, endless sales journeys, budgets, compliance – those all make me hot).
Dead leaves, time to shake yourselves out.
This blog says this and that blog says that and this “respected journalist says this” Whatever. There is absolutely not data to support that people are buying any less wine or any less expensive wines. Fortunately or unfortunately depending on what wines you are selling, most the people losing homes and 401k and other monies are not the ones spending 100$ + on bottles of wine. The luxury wine consumer is overall well-educated, more educated about the wines they buy, and has more disposable income than the other 99.9% of wine consumers who buy their wines at the grocery store. These peoples palates are geared toward a specific quality level that in turn equals for the most part a specific price point and they would rather have a vodka tonic than drink a wine that was sub par to their usual palate level. The luxury wine consumer is still out there spending money and while the category may not be growing it is still holding steady. The reality is that there is only so much wine of quality and the vast majority of it is just plonk. Gallo, Bronco, Constellation, etc. are hiring because they need more man (woman) power to sell the same amount of commercial grade junk. These businesses are feeling the pain more than the niche luxury wine market. Unfortunately the “bloggers” are generally not out in the market everyday and so have no sense of what is really going on and maybe they have one or two contacts that they rely on who also haven’t got a clue. Wine blogs tends to mimic the amount of quality wine produced in the world . . . about 99.9% is garbage.