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Consumer Demand Blunts Crisis
By Robert Whitley
Nov 4, 2009
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Seems hardly a day goes by that I don’t encounter another tale of misery and financial pain in the wine industry. The pain is real, and I suspect it will get worse before it gets better.

Vineyard values, winery values, grape prices, even the price of an ordinary bottle of Cabernet rode the dotcom bubble and housing bubble to unsustainable levels. There is a reluctance to accept the new reality: Few wine-related assets are worth now what they were a year ago. The pain I observe most is the anguish of falling prices set against the hopeless struggle to maintain unrealistic price points.

I’m so over it. Time to move on. While it’s true the ground shifted underneath the wine industry, the world didn’t come to an end. Everyday people continue to drink wine, and some recent numbers point to a robust recovery. Winebusiness.com reports, for example, that domestic wine sales rose seven percent in October, the second consecutive month they’ve seen an increase. And the October sales figures were four percent greater than those from the same period one year ago.

The sky is not falling. Americans who’ve taken their lumps in the financial and real estate markets haven’t abandoned their love affair with wine. They are merely being careful and buying smarter.

So as we barrel toward Thanksgiving, I thought it would be appropriate to take a step back and consider the positives rather than dwell on the negatives.

There are the loyal wine enthusiasts who’ve continued to put wine on the table despite the need to pinch pennies. This is no small thing. Beer is much cheaper and easier to figure out. Wine, on the other hand, varies vintage to vintage and offers mind-numbing options, such as level of sweetness and readiness to drink.

The strength of the euro has made wines from California, New York, Oregon, Washington and Virginia far more appealing because wines from the euro zone are automatically 50 percent more expensive at the current exchange rate. Given that quality is comparable, this gives the edge to the domestics.

Wine quality has never been better. Across the board, in every country where wine is produced, improvements in farming and winemaking have elevated the discourse. Nowhere is this more evident than in the wines of Chile, Argentina, the south of France, and certain wine districts of Spain.

Falling prices may not be good for winery owners who are upside down on the value of their buildings and land, but it’s a boon for the wine consumer and, ultimately, the wine industry as a whole. The vast majority of all wine consumers started at the low end of the price spectrum and gradually moved up as their tastes became more refined. Lower prices on wines at the higher end will entice many to move up more quickly than they otherwise would have.

Opportunities for new ventures abound precisely because prices have plummeted. One example is the Toolbox project soon to be launched by Napa Valley vintner Thrace Bromberger, co-owner of Gustavo Thrace winery. Toolbox will offer barrel-aged Napa Valley wines from outstanding vineyard sources with such designations as “Hammered” “Nailed” “Plastered” and “Screwed.” You guessed it – Napa Valley wines at $12 to $15 a bottle.

Others will surely follow, for grapes were cheaper by as much as half up and down the West Coast this year.

The sunny side of this otherwise stormy picture is that the foundation for future growth is solid. Americans, particularly younger Americans, have embraced the culture of wine and food. Hence the growing popularity of wine bars, and bistros that have become pseudo wine bars because wine is suddenly hip and cool.

No doubt the recession has been a setback, but that’s mostly been on the bottom line. Sadly, some wineries and brands won’t survive the upheaval within the price structure and they’ll simply go away. Yet this is a natural evolution. The cycles of business have gobbled up the weakest in the past, and will again in the future.

Be thankful the heart and soul of America’s vibrant new wine culture – that would be you – is alive and kicking. This Thanksgiving, raise a glass to yourself. As long as there are customers for wine, there will be vintners to make the stuff. Maybe better, certainly cheaper.

Email comments to whitleyonwine@yahoo.com.