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Sunday, February 21, 2010

2009 California Wine Sales

Current State

It's not a surprise 2009 sucked for retail sales, but not including wine!

Sales of California wine were down in '09. No shock maybe, but at the same time U.S. consumption of wine was up (guess you have to drown your sorrows).

From a Santa Rosa Press Democrat article the small and medium-sized wineries are hurting. The larger ones are able to import bulk wine from less expensive overseas countries. People are buying wine, but buying less expensive bottles. That shouldn't be a surprise.

The French aren't immune either according to this Business Week article.

Just a couple years ago you'd read about the lower end wines not doing so well, but the premium ones doing quite well. So things have changed. But for how long? Is this a short-term phenomenon or is it more permanent? That's the sixty-four thousand dollar question all retailers are asking.

Current Prices

The other question is what price ranges are affected and in what ways? For instance, is under $12 wine growing a lot, $12-$25 holding, $25-$75 falling fast, over $75 holding steady? (Or whatever).

When I look around locally I find $45 Pinot Noir, $35 Zinfandel, and $50 Cabernet everywhere. Well, it doesn't cost anywhere near 45 bucks, or 35, or 25, to make a bottle of Pinot. It's all about supply-and-demand and the demand isn't there now. It's pretty simple -- if you've lost your job or are afraid of losing it you are now eating hamburger instead of NY strip steak. Are you going to drink a $50 Cab with your burger or an $8 Malbec?

Most established wineries can survive with lower prices. Some wineries won't be able to because they're too far in hock. Too bad.

Reaction to the Economy

There are things wineries will do while waiting for the good ol' days to return:
  • Live in denial believing that people will always buy your wine and will not trade down to something less expensive. After all, if Screaming Eagle can sell out ...
  • Heavily discount to wholesalers. Instead of the middle-man paying, say, $25 for their high-end Pinot they're getting it for $15.
  • Run their own specials at the winery.  This works if most of their sales are direct-to-consumer.
  • Create a new, second label with the same juice at a lower price.
  • Sell their juice in bulk instead of processing it themselves. Sometimes I wonder how much Rutherford Cab is winding up in boxes.
  • Just lower their prices. Problem is the marketing-types have lots of theories as to why you shouldn't do this. California has a history of holding prices in past recessions.
Drinking Cheap
I was in the Safeway market looking for an inexpensive Pinot Noir. I was surprised by how many on the shelf were $20 or less.   Later I was in a discount liquor warehouse finding lots of local wines selling for half -- or less -- of suggested retail.

In California you can find blends, sometimes just labeled as Red Table Wine, that are inexpensive and quite decent. Other ideas are to search out appellations that aren't as expensive (such as Napa vs. Lodi) or varietals (such as Cabernet vs. Mouvedre).

In fact, if you still want the premium wine, but on a lower budget "trading down" on the varietal is a good way to do this. If you like white wines try Sauvignon Blanc or Pinot Gris instead of Chardonnay. The best Sauv Blanc in California is probably Merry Edwards and retails in the upper-$20s -- a lot less than the high-end Chardonnays. If that's still too much there are plenty of Sauv Blancs priced in the teens. If you drink Cab look for inexpensive Merlots. Merlot is somewhat out-of-favor now so that has affected the price.

I was reading through the Wine Spectator's list of 100 top wines of 2009. There are a number of them under $20 -- mostly from South America or Australia -- just a couple white wines from California. What's with that??