California winemakers feel the pinch as consumers switch to cheaper wines, cut down binges
Bloomberg 25 December 2008
(SAN FRANCISCO) Producing vintages that delight the palate and impress the nose won’t be enough to make this a good year for California winemakers. ‘People have money but they’re afraid about the future,’ said Paul Hayashi, California sales representative for Grgich Hills Estate, whose Napa Valley wines retail for US$30 to US$135 a bottle. ‘When the mortgage thing hit, it was a sharp drop.’
Aficionados feeling the economic pinch are drinking cheaper wines, buying less or consuming what’s already in their cellars, slowing sales growth. This year’s US sales of California wines will be about US$19 billion, little changed from US$18.9 billion in 2007, said Jon Fredrikson of wine industry research firm Gomberg, Fredrikson & Associates, in Woodside. The cutbacks may be most damaging to the state’s small, independent wineries, which typically need to charge more than big winemakers to cover costs and make a profit, Mr. Fredrikson said.
‘Consumers are trading down,’ he said. ‘Higher-priced wines are getting hurt because 40 to 60 per cent are sold in restaurants. People aren’t springing for the big celebration.’ The shift can be seen at New York restaurants, said Danny Meyer, whose Union Square Hospitality Group operates Gramercy Tavern, Eleven Madison Park, Shake Shack and other eateries. ‘Wine sales by the bottle are down, while wine sales by the glass are up’ at his Blue Smoke barbecue restaurant, Mr. Meyer, 50, said. The increase in purchases by the glass pushed up wine revenue almost 15 per cent in the past two months.
His Union Square Cafe, ranked the city’s most popular restaurant in Zagat’s 30th annual survey, is doubling the number of wines offered for less than US$75 a bottle, Mr. Meyer said. The new choices are from Italy and France, joining 23 California wines in that price range, said Michelle Lehmann, a spokeswoman.
Online retailer Wine.com is experiencing a similar trend. Its average selling price dropped 19 per cent in the first half of this month from a year earlier to US$24.50, while the number of bottles sold increased 11 per cent, said Rich Bergsund, chief executive officer. Demand is still strong for some expensive vintages. Some wineries have long wait lists for bottles that have cult followings and sell for hundreds of dollars, Mr. Fredrikson said.
Those who do pay lower prices may not be settling for inferior quality. Sales of wines rated 91 points on critics’ 100-point scale increased 44 per cent by unit volume in September, while the price dropped 27 per cent, Mr. Bergsund said.
Alder Yarrow, who writes the Vinography.com wine blog, said he cut his wine spending by half to US$200 for six months, then stopped buying altogether because he was worried about the economy. ‘It’s a good excuse to drink the wine I have,’ said Mr. Yarrow, 34, who estimated that he owns more than 450 bottles. ‘I’ll save my money.’
Some artisanal producers are being hurt because they haven’t been around long enough to develop a wide following, said Sean Thackrey, a winemaker in Bolinas. ‘The days of opening a boutique winery and charging US$75 a bottle, we’re way past that,’ said Brian Zucker, co-owner of San Francisco-based retailer K&L Wine Merchants. ‘There’s just more and more wine out there.’
Small wineries also are being squeezed by rising costs. Prices for barrels, corks, fertilizer and shipping all increased along with energy this year, said Paul Kronenberg, president of Family Winemakers of California, in Sacramento, which represents more than 700 producers.
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Wine Lovers Uncork Cellar Stock, Drain Sales
California winemakers feel the pinch as consumers switch to cheaper wines, cut down binges
Bloomberg
25 December 2008
(SAN FRANCISCO) Producing vintages that delight the palate and impress the nose won’t be enough to make this a good year for California winemakers. ‘People have money but they’re afraid about the future,’ said Paul Hayashi, California sales representative for Grgich Hills Estate, whose Napa Valley wines retail for US$30 to US$135 a bottle. ‘When the mortgage thing hit, it was a sharp drop.’
Aficionados feeling the economic pinch are drinking cheaper wines, buying less or consuming what’s already in their cellars, slowing sales growth. This year’s US sales of California wines will be about US$19 billion, little changed from US$18.9 billion in 2007, said Jon Fredrikson of wine industry research firm Gomberg, Fredrikson & Associates, in Woodside. The cutbacks may be most damaging to the state’s small, independent wineries, which typically need to charge more than big winemakers to cover costs and make a profit, Mr. Fredrikson said.
‘Consumers are trading down,’ he said. ‘Higher-priced wines are getting hurt because 40 to 60 per cent are sold in restaurants. People aren’t springing for the big celebration.’ The shift can be seen at New York restaurants, said Danny Meyer, whose Union Square Hospitality Group operates Gramercy Tavern, Eleven Madison Park, Shake Shack and other eateries. ‘Wine sales by the bottle are down, while wine sales by the glass are up’ at his Blue Smoke barbecue restaurant, Mr. Meyer, 50, said. The increase in purchases by the glass pushed up wine revenue almost 15 per cent in the past two months.
His Union Square Cafe, ranked the city’s most popular restaurant in Zagat’s 30th annual survey, is doubling the number of wines offered for less than US$75 a bottle, Mr. Meyer said. The new choices are from Italy and France, joining 23 California wines in that price range, said Michelle Lehmann, a spokeswoman.
Online retailer Wine.com is experiencing a similar trend. Its average selling price dropped 19 per cent in the first half of this month from a year earlier to US$24.50, while the number of bottles sold increased 11 per cent, said Rich Bergsund, chief executive officer. Demand is still strong for some expensive vintages. Some wineries have long wait lists for bottles that have cult followings and sell for hundreds of dollars, Mr. Fredrikson said.
Those who do pay lower prices may not be settling for inferior quality. Sales of wines rated 91 points on critics’ 100-point scale increased 44 per cent by unit volume in September, while the price dropped 27 per cent, Mr. Bergsund said.
Alder Yarrow, who writes the Vinography.com wine blog, said he cut his wine spending by half to US$200 for six months, then stopped buying altogether because he was worried about the economy. ‘It’s a good excuse to drink the wine I have,’ said Mr. Yarrow, 34, who estimated that he owns more than 450 bottles. ‘I’ll save my money.’
Some artisanal producers are being hurt because they haven’t been around long enough to develop a wide following, said Sean Thackrey, a winemaker in Bolinas. ‘The days of opening a boutique winery and charging US$75 a bottle, we’re way past that,’ said Brian Zucker, co-owner of San Francisco-based retailer K&L Wine Merchants. ‘There’s just more and more wine out there.’
Small wineries also are being squeezed by rising costs. Prices for barrels, corks, fertilizer and shipping all increased along with energy this year, said Paul Kronenberg, president of Family Winemakers of California, in Sacramento, which represents more than 700 producers.
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