Recessed, Depressed, and Undressed

I was talking with a couple of veterans of the wine business last week when the talk turned to the current recession/depression. Recession or Depression? To-ma-toe or To-mat-oe?

In any case, the talk was depressing or recessing or something. The wine business is always changing, part of why it's so attractive to so many people--that and the endorphin factor. But rapid change is not something an agricultural-based industry handles well, especially one based on slowly maturing vines and slowly maturing wines.

This economic nosedive has been relatively sudden for the wine business. Restaurants have been hit particularly hard, as fewer consumers have the dollars or think they have the dollars to spend eating out. More are staying home, drinking still, and even entertaining.

So the great shift is on. More wine sales in grocery stores, less in restaurants. Not such a big deal, right? Well, it is. Besides the loss of more than a few terrific restaurants and the jobs that go with them, consumers are stair-stepping down from their usual comfort level of wine affordability, even in stores. Those for whom a $30 bottle appealed are now looking under $20; those comfortable with $20 bottles are finding comfort in $12 wines.

And although volume is not dropping overall, the slide in sales for the high-end spells trouble for a lot of recent start-up wineries. A shake-out is inevitable, but how broad is any body's guess.

Americans drank an estimated 317 million cases of wine in 2008, a record set even as the economy tanked. In March, dollar sales were +0.1%, even though Easter, traditionally one of bigger bumps to wine sales, was in March last year. This figure is only a measure of what is scanned in food and drug stores nationwide, but it shows, especially without the Easter bump, that we're drinking wine.

“It’s almost like people hit the reset button, and all of a sudden we’re back to 20 years ago where people are looking for wines under $10,” said Jon Fredrikson, president of Gomberg, Fredrikson & Associates, one of the leading wine industry analysts. In a speech earlier this month Fredrikson said the recession has caused people to eat out less, driving down wine sales at restaurants last year by about 10 percent, a figure likely to increase this year.

A big fear in the business is what consumers will do once this economic crisis passes. Will they be content with the lower-priced wines they're now drinking, or will they return to their old ways and once again be swayed by the romance of the marketing and the fear of loss in the supply-demand equation? Will they rather save their money, drink their cellars, and forgo this year's allocation of that formerly hard-to-get boutique Cabernet Sauvignon? Scary stuff.