Wine Clubs and the Economy
The success of the wine industry is dependent on the state of disposable income. In other words, wine is not a staple in American life, but rather a luxury. Granted, their are a variety of ways one can luxuriate with wine be it through a bottle of "Two Buck Chuck", a nifty 15 Australian Chardonnay or with a $60 Napa Cabernet. But no matter what, it would be a mistake to disregard the fact that wine purchases are not like cereal or energy purchases.
I’ve often looked for ways to evaluate and measure the state of the American economy and the health of the wine industry. One very simple way of doing this is to look at sales trends? Are wine sales in general selling more? Are higher priced wines flying off the shelf? Are consumers trading down to lesser priced wines? These figures can tell you quite a bit.
However, yesterday it hit me that there is another type of measurement that can tell us not only the state of the wine industry but of consumer confidence: Wine Club Cancellations.
Anyone who runs a wine club follows cancellations in club memberships very closely. At the very least the level of monthly, quarterly or bi-annual cancellations in a club’s memberships tells one the satisfaction level of its members.
Tracking membership cancellations is tricky and dependent on how the club works. For example, every club sees more cancellations right before or directly after a shipment of wines is made. This is for the obvious reason that the person’s membership is not top of mind between shipments. It only arrives there when the shipment is imminent or has just arrived. It’s only then that the financial consequences or satisfaction level of membership is evaluated.
Still, a certain number of cancellations will occur between shipments also. The good club manager keeps a close eye on cancellation trends and knows what to expect at any given time.
So how about this: My informal survey of a few wineries shows that cancellations of wine club memberships has increased over the past two or three months to a rate not ever seen by some and to a point for others that correlates to times in the past that were clearly recessionary.
This informal survey makes sense. We appear to be moving through an economic moment that is somewhat perilous and consumers confidence in the future of our economy is not great. I’m not an economist, just an observer. But neither am I blind.
The Consumer Confidence Index hasn’t been as low as it is now since March of 2003. This measurement of consumers’ confidence levels in the American economy has fallen for six out of the last seven months, an ominous movement that correlates to the late 2002/early 2003 period when the run up to and launching of the war in Iraq hit folks like a brick. If you negate the 2003 plunge in the CCI a related to confidence effected by a war rather than an economy then the last time the CCI was at this level was 15 years ago.
Wouldn’t it be interesting for someone to work up a Wine Club Cancellation Index. I have no doubt that were it being done for the past 15 years we’d see that at this moment that Index will be in a severe downward trend.
Of course when economic times such as this are with us we learn where the creativity, business acumen and solidity really exists in the wine industry. This is the moment when agile companies and business people put their ingenuity to work. Perhaps those that rely on wine clubs will institute a new type of club that allows the wine lover to still indulge in their periodic box of vinious surprises without breaking their bank. Perhaps some retailers will will find cost effective ways to reach out to previously unappreciated consumer sectors.
Whatever must be done, I think we can say that we are moving through an economic moment that will challenge many in the wine industry.