How to Spot a Recovery in the (wine) Economy
I believe the U.S. economy, and the U.S. wine industry, will turn around in 2010. It will be a slow turn around, but visible nonetheless.
How will we know when this maneuver occurs? When news like THIS stops appearing.
The Feds announced today that U.S. employers "shed a more-than-expected 85,000 jobs in December even as the
unemployment rate held at 10 percent. The rate would have been higher
if more people had been looking for work instead of leaving the labor
force because they can't find jobs."
Recently, folks have been asking me what I thought of the economic condition of the American wine industry and the American economy in general. Why they've been asking ME is a mystery. I'm a Wine PR dude, not an economist. But who cares about that?
What I've been telling them, and what I believe, is that the best gauge to look toward for signs of a general recovery from the Great Recession is the jobs report. Once the shedding of jobs is over that's when you can expect to see general recovery. And with general recovery, with businesses hiring, that's when we spend more. When we spend more, we also drink more. Another way to put it is this: If you are waiting for a sign that more people are getting liquored up on fine wine in order to divine a recovery of the economy, you will have missed the turning point. The turning point comes when the fine wine pushers are hiring more pushers.
Where to look for the hiring of more fine wine pushers? Look to the wholesale and retail sectors of the wine market. Wineries can generally maintain efficiency without hiring more people. However, wholesalers and retailers find it more difficult to ramp up without increasing the number of employees. If you want to look to the producer tier for signs of an economic recovery, look for signs that small to medium sized wineries are making increased investments in things like tanks, barrels, vineyards, infrastructure.
Have faith.
Good point – although some small to mid sized wineries have scaled back production (creating a short delay before increased production creates a demand for more infrastructure investing) — industry trends should by that time (as you mentioned) be a sure signal that a recovery is underway.
“Hope has come again to the grape-growers and winemakers… They feel sure the era of ridiculously low prices is over, and are now looking forward to making at least a decent living.” The SF Call, March 18, 1895
Yes, it’s cyclical, baby. In challenging times wineries and growers have to cut back, drop out, or go belly up. Those of us in for the long haul will survive. But by god, we’re ready for the upswing! And thinking positively can be down right thrilling.
That does sound more like PR than economic analysis. While I agree that jobs will signal an upturn, 2010 unfortunately is likely to reveal the rotten core of the commercial lending market. The same problems that were endemic to the mortgage market are already starting to bear bitter fruit in commercial real estate. The effect on the banking industry and the economy as a whole should not be underestimated. In our own industry, wise wineries would never have believed that the demand for high-end California wine would continue to grow in perpetuity. They would never have taken advantage of the easy credit that was available to expand to meet that hoped for growth. Nope, nobody would have done that in the wine industry, right? The sad fact is that Fred Franzia is going to make more money in 2010 and good wineries are going to have trouble servicing debt as a nervous market seeks “value”.
I’d like to think it’s more like PT (positive thinking). My point was that every era of downturn has its challenges and shakeouts, but the first step to any true recovery has to begin with attitude. So whether it’s economic analysis or just gut feel, there’s room for us all. Tom’s suggestion is a good one: keep the faith.
The job market is a major concern for all of us with goods to sell, either as a winery or as some sort of a middle man. I do worry that we’re set to lose a generation of high end wine drinkers because of economic uncertainty and people wanting to save more, but I realize that feeling is only because we’re in the middle of some significant economic problems.
I’m sure the industry long term is healthy, especially given more wine being consumed in the US then ever before.