Happy (wine) Days Are Here Again?

Happy-Days Silicon Valley Bank, (SVB) one of the leading lenders to the wine industry, has released its "State of the Industry" report and is estimating that fine wine sales will increase this year by 8% to 12 percent. However, they warn that wineries selling bottles that cost $50 or more “will again find 2010 a difficult year."

This  is what I've been telling everyone: 2010 will indeed be substantially better than 2009.

I don't have the financial data that SVB possesses to make this call. But I do speak to a number of wineries, retailers and restaurants. And this what I know:

1. Sales in tasting rooms are up and continuing to trend up.

2. Wholesale purchasing is up, which tells me that wholesalers have begun to move through their inventories that they had been sitting on.

3. Winery-based clubs have either stopped their bleeding or have begun to accumulate more members.

4. High end restaurants are seeing customers return and buy wine.

5. Visits to Wine Country destinations are up.

All of this bodes well for wineries. The question for many fine wineries, however, is will they be able to sell those top end wines that SVB says will continue to be difficult to move if they are at the $50 and above level?

As recessions are measured, we have come out of the recession and the economy is starting to grow. Housing statistics suggests that lower interest rates and lower prices have brought buyers back to both new and existing homes. For me, the really key economic indicator is jobs.

Before credit markets loosen up, which leads to more business investments and more jobs and before lending rates start to creep up, a sign of a better economy, we will need to see some sign of sustained job growth. I'm keeping my eye on the job numbers that come out in early fall and what trend line looks like in four to five months. I expect it to be trending up and with it I expect wine sales, including $50+ wine sales to increase.

If I'm right, this is good news for everyone in the industry.

That said, right now remains one of the best times in the past 20 years to be a wine consumer with disposable income. Deals on wines abound, information on where those deals are coming from is better than ever and wine quality is continues to be outstanding.


11 Responses

  1. medieval dresses - May 3, 2010

    Wow.. I hope this will be true. This is a good new to the Wine Industry.. 🙂

  2. fredric koeppel - May 4, 2010

    a few months ago i talked to a glum owner of one of the biggest wholesale wine and liquor houses in Memphis. “Wines over $50 are dead,” he said. “They go on the retail shelves and stay there. If you find a great wine under $20, clasp it to your heart.” surely this advice will not change anytime soon.

  3. Alex - May 4, 2010

    I certainly noticed from my trip last week to Napa and Sonoma that tasting room business hasn’t lost much of its momentum. I find it remarkable that some wineries think they’ve acheived “cult” status by continuing to offer wines at $100+ for what is considered to be a good wine, not a great wine. That’s sheer ego that will kill the reputation of any brand. Not every winery needs to have a $50-$100 wine. Providing value and quality are much more important to establishing a brand than perception of quality in relation to price which is often associated by wine producers. Not trying to bash wineries, but seriously, its a “syndrome” that needs to be discussed. Thoughts???

  4. Rmcmillan - May 4, 2010

    Tom – The report we write has to start with intutiton; a thesis then fact finding. Its a ton of work. Your observations are spot on and I hope you are right about the >$50 wines. I separate that segment from true cult or consistently very high scoring wines. Its the faux cults or the mass produced $50+ wines that are getting hammered. Business spending and the high-end restaurant business has to fully recover for that production segment to see better times. For this year, there is still too much producer juice and bottled inventory to see that happen – regrettably for our customers who have already paid their growers.
    The good news and where I will disagree slightly, is the link to unemployment and fine wine sales. Wine sales are largely recession resistent. There is a correlation of course but I believe the real practical link is unemployment=poor business conditions=restrained corportate spending. So as business conditions are improving, corporate entertaining is coming out of hibernation again. Its not black and white.
    Thanks for the comments on the Report.

  5. Tom Wark - May 4, 2010

    Good point on the corporate spending.
    The issue of “Faux cults” is a tricky one. There are expensive wines (over $50) that never get scored because producers have no need to go to the reviewers to create enough interest in these wines of theirs to see them sell. I think those folks who really work the mailing lists and data bases and who have an active hospitality program are the one’s producing the $50 and up wines that aren’t necessarily “cults”, but they do sell.
    Thanks for commenting.

  6. Cortney Jacobs - May 4, 2010

    I wonder if tasting rooms are as recession proof as bars, in that they are a place where people can gather to socialize for relatively (compared to dinner and a movie) little money and still ever so slightly pickle themselves? (Let’s face it a tiny buzz after a hard day of work in this depressing economy can lift spirits when done responsibly.) We are about to open a tasting room in Houston, and hoping the trend continues to grow. Of course we are also hoping to market to the emerging younger wine market (25-35 single career oriented with a tad more disposable income). Love the blog, thanks for being cool in a world of “less thans.”
    You fans over at http://www.basic-wine-info.com

  7. John - May 4, 2010

    If Ciatti postings are of any significance, they list almost 400 million gallons of bulk wine for sale from Australia. Now I don’t visit wineries around the state of Cal nor do I talk with many people in the wine industry, and I am no genius, but this wine will go somewhere and there will be vultures out there picking these up, thus continuing the wine glut…..it is supply and demand…..Although I tend to think very positive, if you sit on the railroad tracks long enough, you surely will get run over.

  8. David R - May 5, 2010

    Does the word jinx mean anything to you Tom? Don’t taunt Baccus

  9. Lenny - May 5, 2010

    Those, particularly in a valley that shall remain nameless, thinking that the party is about to start up again are deadly mistaken. Americans are starting to loosen up their spending…a bit. That being said, there is a new frugality that will–AND SHOULD–remain in place for many years to come. The days of 100K a year accountants buying $200 bottles of wine at dinner because they’re “paper” millionaires in home equity are long gone.
    Should Americans go back on a mindless spending spree, then we all truly will deserve a real Great Depression next time around.

  10. Jake - May 9, 2010

    I believe that things are turning around. Happy wine will be here again soon.
    expensive wine

  11. Mike - June 14, 2010

    Its text was translated and copied into Portuguese by this company:
    I believe this is not the first time that they do and I met them and they are a fraud!

Leave a Reply