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The Fine Wine Bubble of the Early 21st Century

While in most media circles, the larger global economic meltdown consumes the lion's share of attention, the wine world is experiencing its own nasty correction. Many top wineries, especially those with bottle prices over $80 find themselves struggling to sell their wines as the usual outlets are simply refusing purchases that they used to beg for.

Vegas restaurants, long-standing bastions of "I don't care what it costs as long as it sounds expensive" buying habits, are dumping their allocations of high-end wines like ballast water from an unstable ship. Cult wineries with mailing lists that had waiting lists thousands of members long are now struggling to find people to buy their wines, especially if they make more than a few thousand cases.

But more than anything else, the largest bellwether of a true collapse in the fine wine market are the high end Bordeaux wines, and the companies that have pimped them along a skyrocketing trajectory of pricing whose incline was no less irresponsible and unsustainable as any of the credit-default-swaps that brought down the global economy.

My fellow blogger Keith Levenberg wrote a lovely piece about this phenomenon that I highly recommend reading.

The phenomenon is certainly not restricted to Napa and Bordeaux, however. There are plenty of other wine regions that have massively over-invested based on the impossible hope that wine prices and demand would continue to soar at the top end of the market.

It's sad to see the wine industry suffer at all, but it certainly wouldn't be a bad thing to weed out a lot of chaff from the marketplace, and bring some of the outrageous prices (and pretensions) back down to earth.

Thanks to Jack at Fork & Bottle for the tip on Keith's post.

Comments (35)

dave wrote:
05.07.09 at 2:56 AM

The problem with a lot of these wineries comes from the fact that they are only marketing their wine to the elite, wealthy, and few, who consider themselves wine critics. The issue with such a notion derives from the fact that some people believe that wine should be for these people only. In doing this, they inflate their price above the "fair value" and like you said, they become over-bloated, just like mortgages.

A winery should just focus on making the best possible wine, and let the market work the price out for its self. If wineries were really smart, they would make just a couple elite level wines and the rest should be focused on the average palate. Crisp, smooth, and delicious.......

These are the customers that will decide if a winery is successful, not a wine critic. The proof is in the pudding, and the pudding is increased sales.

Bob R. wrote:
05.07.09 at 5:43 AM

Excellent post, and thanks for the link to Keith's posting.

Randy Watson wrote:
05.07.09 at 8:22 AM

Great post and link!


ned hoey wrote:
05.07.09 at 11:05 AM

Last night, paging through the most recent WA and Burghound editions, I noticed the phrase "luxury cuvee" pop up repeatedly. It's not new, and it's been in use for a while, but it suddenly struck me. What does that mean, really? Certainly higher cost but for what exactly? Higher quality, whatever that means, or greater potential age ability? More oak? Darker color? More Power? Are those attributes luxurious? Is this where spoof comes from? Something seemed just wrong about the concept of a "luxury cuvee" as an intentional product.

I think we've reached the logical endpoint of the thrust of wine marketing of the past 50 years.
Aspirational, lifestyle oriented, exclusive, luxury, these notions have been the essence of it and it produced an industry built around "creating" these products. I see it as a very American phenomenon and like so many other American cultural phenomenons, unsustainable.

Unfortunately wine as a beverage to enhance a meal got supplanted by wine as a means to enhance one's image not only to others but to one's self. This completely distorted the industry.
How many people see that, I don't know, but maybe now wine has a chance to be a part of our
food culture first and as a luxury item second.

Sam Goth wrote:
05.07.09 at 5:51 PM

I hope you're right Ned-maybe wine will be seen as mundane as 2x4s someday, essential, background, and not expensive.

Trisha wrote:
05.07.09 at 9:51 PM

You make a good point... I have to say that there have been a good many people who have felt sort of like rock stars, being right there with these luxury, ultra-premium wines (and winemakers) that are "TO DIE FOR!"

I do understand what you mean. I have a sister and brother-in- law who drink from a 5 gallon box of wine.... heck, they like it, and that's what counts, I suppose....aside from the health ramifications that could bring.

The thing of it is, and I am not talking about Bio, but I do know a thing or two about organic....AND about making awesome wines. I just can't bring myself to drink the lower priced brands....I like the $50-$100 bottles, but can't afford them any longer, so, I don't drink anything!

I know that, the high end producer is paying significantly higher prices to produce his wine. The grapes for many of the wine varietals are grown on hillside or mountain vineyards, which cost a fortune to farm...imagine being the guy that works the vineyard on the tractor at 1,200 feet..... I don't know about you, but I would surely expect a steep increase in pay for risking my life and for being one heck of a tractor driver. For the fruit grown at cooler climate vineyards planted in lower elevations, the very talented and savvy winemaker chooses those vineyards because of the superior character and flavor profiles a certain variety, let's say Viognier, will display. Let's take note of the fact that, Viognier has a tendancy to grow like weeds on the vine, producing so many bunches of grapes that the vine has to support the growth of all of them; the grapes lose the intensity that people love in Viognier. The fragrant, exotic aromas and flavors are what a superior winemaker wants, and knows how to manipulate from high quality fruit. I know many times the winemaker has to ask the grower to drop half of the crop in order to achieve a voluptuous Viognier. The grower gets paid for a full crop.....the winery pays for the grapes cut off the vine long before harvest. You also need to consider that the winemaker pays very close attention to the barrels he purchases. The lower priced, or cheap, good deals, affect the quality of the wine. A couple of years ago I remember hearing that $1200 for a high quality 60 gallon French oak barrel (which makes only five cases of wine) was not uncommon. When a winemaker has a passion to make great wines, believe me, he is paying top dollar every step of the way. Let's not leave out the wine bottle and label....beautiful - you don't skimp on price...cork, glass and paper quality.

And, why don't you try out one of those winemaker dinners or food pairings at the high end winery.....? I swear by the fact that not only does wine enhance the wonderful flavors of great foods, the food truly does make the wine taste better too! As long as you have someone doing the menu who knows what they are doing - I've seen a few disasters in my day:>))

In no way am I putting anyone down, I just want you to think about it.....because although I have never been around biodynamically farmed vineyards, I have been around organic....and it is so true, that when the vine is healthier, the fruit it produces tastes better. Try one of those ultra-premium/luxury wines - the proof is in the pudding!

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