Who’s making money? Who isn’t?
As a reporter, I’m constantly barraged by press releases and other forms of information. Sometimes it’s contradictory. And then you always have to wonder who the source is and if it’s trustworthy. The big question of the past year in the wine industry has been, of course, who’s financially up, who’s down and where it’s going. As I’ve long said, none of us knows with certainty what’s going on at any individual winery unless we’re the CFO and can see the books! Which we obviously can’t. Thus, what we know is largely anecdotal. Here’s the conventional wisdom:
– Anything over a certain price ($12-$15, in most scenarios) is dead. This has just been confirmed by Jon Fredrikson, at Gomberg Fredrikson, who reports that “California wine shipments dropped in 2009 for the first time in 16 years,” especially for “wines above $15 a bottle.” I have used Gomberg Fredrikson as a trusted source for many years.
– Nothing appears to be bulletproof, including (or maybe especially) the cults. Everybody’s reducing prices, but you can only go so low.
– People haven’t stopped drinking. Far from it. They’re just drinking cheaper.
Everywhere I turn, I hear “We’re scaling back…the bottom’s falling out,” even at wineries owned by very rich people. At Wine Enthusiast’s Wine Star Awards dinner last Monday, I talked to lots of senior execs (in some cases very senior) at wine companies and distributor companies, and everybody said the same thing: dead or near dead in the super-ultrapremium category. Which leads to the biggest question of all: If this is true, how come we’re not seeing a wave of bankruptcies or sales? Which we haven’t. Winery failures over the last 12-15 months in California don’t seem any more frequent than usual. I asked people this question, and the typical answer was, “They’re riding it out.”
Yes. That’s what companies usually do during downturns. They lay off staff, cut costs, and hope that down turns up after a while. But what we have in America is unprecedented. While there’s lots of hoping and praying things turn up, there’s no guarantee they will. What if things don’t? After a while, even the most stalwart owner will have to give up. Maybe some of the billionaires out there can afford to ride the tiger for years. But most families who own wineries are not super-wealthy. What do they do if, in another six months or a year, things don’t turn around?
I would think that by this summer we’ll have much more clarity about the ground situation in California. Since there doesn’t seem to be any improvement in the country’s economic situation, with experts predicting continued 10% unemployment (much higher if you count under-employment) and a federal deficit that the Congress seems unable to fix, it’s hard for me to imagine the average wine consumer thinking, “Okay, I’m feeling better, I’ll start spending $40 again for a nice bottle.”
The wine industry understands it’s coming through the worst market in its life. They’re hoping that 2010 will be better. But they know that events ultimately are far beyond their control.
Speaking of profits, I’m moderating a panel at the Wine Writer’s Symposium called “Wine Writers, Ethics & Income Streams.” They told me the subtext is “How to make money through social media.” As someone who’s earned (at last count) $1,495,989.59 through this blog (O.K., I’m exaggerating, the actual figure is $0), I thought that’s pretty ironic. I do have some thoughts on monetizing this stuff, but I’m not going to steal my thunder. It’s nice to have developed a secondary reputation as an “expert” in blogging. Just shows how bizarre life is.