If the election buzzphrase in the early 1990s was "It's the economy, stupid!" in 2008 that might be revised to, "it's the stupid economy!" Everyone is in a tizzy these days, and rightfully so. America is going through a rough patch that many believe is the culmination of decades of bad financial habits on a national level, not the least of which is our tendency to spend beyond our means on the level of the individual and the government.
Housing prices plummet, foreclosures rise, the dollar weakens, consumer confidence wavers, and of course, all business sectors are beginning to think, "what does this mean for me."
So what wine goes with recession? Most people think the answer is: any wine, so long as its cheaper than last year's.
Specifically, a lot of people in the wine industry are nervously examining their fingernails, chewing their lower lips, and wondering whether the trend lines of the last five years are going to leave their beautiful upward trajectories and tick downwards sharply.
I must admit I'm not a huge follower of economic trends when it comes to wine and spirits. I mostly like drinking the stuff, but reading through some industry commentary today I learned a bit more about the current economic outlook for wine, along with a word that I'd never heard before: premiumization.
It's quite a mouthful, but it's a pretty clear concept. In addition to rising sales across all categories of wine and spirits in the last few years, the industry has seen a growing interest and strength in the highest end of wine and spirits. Called many things (Luxury, Ultra Premium, Etc.), this segment of alcoholic beverages represents the highest priced category of wares, including those purchased for investment.
Many people seem to think that this category of wine, in particular, will suffer in a weakening economy. There seems to be consensus that wine and beer tend to be less affected by economic downturns than other industries -- after all, we all need something to drown our sorrows -- but industry types have a range of opinions on just what part, if any, of the wine industry will soften as our economy coughs and sputters its way to wherever it's headed at the moment.
I only have one data point to bring to bear on the discussion, which is the spending of some of the world's top retailers on some of California's most unique wines last week at Premiere Napa Valley. The 200 lots on auction brought in a total of $2.2 million dollars, in comparison to the $2.1 million dollars that 192 lots brought in last year. The increase in revenues was the smallest percentage gain that the auction has seen since 2001, and the average revenue per case of wine auctioned dropped $2 (from $1,777 to $1775 per case) from the year before.
Is this a softening in the demand for Napa's top wines? Well, you wouldn't know it from the enthusiasm in the room during the wine auction this past Saturday. But it remains to be seen just how Napa and the rest at the top of the wine world, weather this economic storm. Already there are rumblings about the pricing of 2007 Bordeaux futures, with some going so far as to suggest the Bordelais will ruin themselves if they continue to attempt to raise prices to "immoral" levels on what many consider to be already stratospherically priced wines.
No one knows just how long this particular downturn will last, and no one seems to know for sure just how much of their disposable income American wine lovers will want to spend on their favorite beverage as they watch those lines that used to point up-up-up, go ever more steeply down-down-down.
The best that we can do, I suppose, is face the future glass-in-hand. Bottom's up!
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