2 new reports paint painful picture for Calif. wine
Silicon Valley Bank is out with their annual State of the Wine Industry Forecast and Recommendations, and it makes for sobering reading. It begins with an understatement:
“The attitudes and preferences of the U.S. taxpayer and wine consumer are in markedly different places today than they were a year ago.”
Then it cites a veritable witch’s brew of bad news:
- 4th quarter of 2008 was “the worst in memory for the fine wine business.”
- depressed restaurant sales, higher unemployment and foreclosures and lower consumer spending will continue through 2009 “as we seek a bottom.”
- wines between $40-$125 are in a “dead space.”
- winery sales “at bargain prices” are to be expected.
- Most scary of all, “Distribution has all but ended as a viable sales channel for small wineries.” (Which is exactly what I said last week.)
- Meanwhile, “credit markets are nearly frozen.”
- The secondary market for collectible wines has softened. (What?!? You mean you won’t pay me $10,000 for my bottle of 2001 Screaming Eagle?)
- And between the drought and sin taxes, whatever wineries are still standing will get hit with a double whammy.
Well, it could be worse. California hasn’t fallen into the sea following a 9.7 earthquake on the San Andreas Fault. Yet.
In this toxic atmosphere, it comes as no surprise when the report states that “Central Valley suppliers [are] the most optimistic and Napa and Sonoma suppliers [are] the most pessimistic.” That’s because all anyone can afford anymore are jug and box wines — fortunately, for the economies of San Joaquin and Madera counties.
But wait, there’s even more bad news. Small and mid-sized family wineries are facing “capitalistic Darwinism,” a dog-eat-dog fight to the death from which the weak will not emerge. The report’s recommendations are not surprising; they’ll be familiar to regular denizens of the wine blogosphere. Wineries must
- keep prices moderate
- get better at Internet direct-to-consumer selling and e-marketing. In other words, develop a “digital plan.”
- contain costs
Meanwhile, the Sonoma County Economic Development Board has a new 2009 Wine Industry Insider report that echoes the Silicon Valley Bank’s gloomy forecast. Among its findings:
“The spread of economic weakness around the world creates a
disadvantage for Sonoma County wine exports to top international
markets and will expand import competition here in the U.S.”
“Consumers are shifting away from high-priced wine purchases; high margin on-premise sales, such as those at restaurants, fell sharply… Wine drinkers and retailers are shifting to value, putting downward pressure on wholesale wine prices for local wineries. Some wineries are adapting to the shift by upping production of lower-priced wines.”
“The outlook for the Sonoma County wine industry in 2009 is for limited unit sales growth and the continuation of consumers’ shift toward value from high-priced wine purchases.”
Tough times, but good for wine consumers — if they have any money to spend.
P.S. I’m taking a few days off. I may be able to blog from the road — not sure. Check in, just in case. If not, I’ll be back on Monday.