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08.26.2009

Small Signs of Troubled Times in the Top Tier of Wine

I'm not the most plugged in person when it comes to the California wine industry. I'm not a buyer, a salesperson, or a marketer, and certainly have no real visibility into what's going on behind the scenes at any wineries, even with a fair number of winemaker friends.

Consequently, I'm a bit of an outsider when it comes to measuring the impact of this recession on the California wine industry. But the picture that I'm starting to piece together from tidbits here and there is somewhat sobering -- not the calamity that is the U.S. Auto Industry, but certainly what looks like a correction, especially at the top.

In short, it seems that this is a really bad time to have your wines cost more than $100.

Just a few recent data points:

Today I attended a high-end Burgundy tasting. The owner of the distributor putting on the tasting told me that prices were down nearly 20% for these wines (many of which retail for more than $200) and that this was the first time that they ever felt like they needed to hold such a public tasting for wine buyers in order to sell what they had.

Over the weekend I attended the Family Winemakers tasting event, which I have done every year for the past five, and in addition to there being a little less excitement in the air, I noticed the presence of several very-high-end Cabernet producers. These are producers that I've never seen at such a large public tasting before, and certainly producers that in the past haven't had any wine to sell to the public anyway, having all of it snapped up off their mailing lists.

Speaking of mailing lists, I took my own advice recently and signed up to be on the waiting lists of a few wineries whose wines are sold almost exclusively to their mailing lists. Two or three months later, presto! I'm on. These are waiting lists on which people have waited for years before getting a chance to buy a couple of bottles of wine.

And finally, the prices may be coming down. One of the aforementioned high-end Cabernet producers is selling at a 25% discount to last year's release price, and I have heard of a number of other such cuts.

I'm somewhat ambivalent about all of this. On the one hand, people are clearly having a hard time and are definitely suffering financially. On the other hand, I think the wine industry, in particular the high-end of the California wine industry, was as due for as much a correction as the overall economy was. 25% price cuts probably aren't really enough, at the end of the day.

Someone in the industry could better say than I where we are in this correction. Given the slow, cyclical nature of wine, where investments made are not borne out for years sometimes, I wouldn't be surprised if things get a lot worse before they get better. Or perhaps given that margins aren't all that big in the industry, all the pain was felt up front, and as long as the economy continues to improve from this point, there's light at the end of the tunnel.

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