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Lately those of us in the wine media have been deluged with reports that suggest consumers are “trading down,” purchasing low-priced wines in place of high-priced wines. In 2007, the fastest growing segments of the wine market were from $12-15 and $15-20. But according to Morgan Stanley, for the four weeks of 2008 ending December 28, wine sales above $7 fell 4.5%, while those below $7 grew by 1%. It’s been well documented that on-premise wine sales have struggled all year, which also has translated into tough times for wines that retail anywhere in the double digits.
I get it—up to a point.Admittedly, there’s a lot of apprehension about the state of the economy. People fear for their jobs, their retirements, their kids’ educations. More than 1 million Americans lost their jobs in the last two months of 2008, putting the official unemployment rate at 7.2%, the highest level since January 1993. Amidst all that dire news, it’s understandable that people have been cutting back. Even the fine wine auction market—playground for the world’s multimillionaire enophiles—has cooled off.
The problem with all of this data is that it doesn’t directly address the segment of the wine-drinking public that constitutes our readership. Presumably, our readers have a deeper involvement with wine than the general public. After all, many of you spend hundreds of dollars per month on wine, even if only a few of you purchase wine at auction. Yes, we can interpolate between these data points and make the assumption that our readers are also scaling back their wine purchases, but it is difficult for us to know to what extent. That is where your comments here can really help us plan our coverage for the upcoming year.
Our previous research revealed that the majority of our readers typically spend around $15 for an everyday bottle of wine, and $35 for a special occasion bottle (retail pricing). How have your buying habits changed over the course of the past year, and how do you see them changing (if at all) in 2009?
Filed under: Industry Issues
7 Comments
January 12th, 2009 at 8:17:10 PM
Every other great wine producing country has a fine selection of $10-$15 wines available to the public. America deserves to have this luxury just as much as France, Italy, or South America and this should have been a well-spotted trend that wine makers could have seen coming 5 years ago.
I’m not at all embarrassed to admit that I’ve become smitten with some bottles of wine that retail for $7.99 in the last year. Decent daily dinner wine for less then $10, that’s been my goal.
January 13th, 2009 at 12:24:59 PM
It is true that consumers are looking at lower priced value oriented wines but a note should be added that the supply chain is forcing that also. Try showing a wine to a distributor, buyer and consumer that is over $25 these days. There is a barrier to market in frame of mine that should be discussed.
The current economic situation is global and is making wineries consider declassifying higher quality lots of wine that are in tank and barrel to show value and quality at affordable prices with new brands, once the market has turned and stabilized the wineries will have a brand that is highly rated. It is all a big circle that happens quite often. We just have to be patient and persistent and make sure to provide and find great values at all levels. Nothing wrong with finding the great value but remember that value priced wine will go up in price soon it always does.
January 13th, 2009 at 2:48:50 PM
Your averages ($15/$35) are higher than we can afford now. About ten years ago we typically paid $9-12 for a day-to-day wine. That would be more like $11-17 in today’s dollars. But we learned some time ago that we get more satisfaction out of a different strategy: We now spend a wee bit less than before and like it more by buying two bottles at $4-8 and then one at about $15-20. These days, with Argentina, Chile, South Africa, Spain, etc. producing very nice, less expensive bottles, you can get some really very complex and beautiful wines in the $15-20 range. At the same time, you can, if you are very selective and taste lots of different wines, find plenty of perfectly nice wines from places like Trader Joe’s and Total Wines for $4-8. This plan works better for our limited budget and we still very much enjoy our daily wine experience. Perhaps other readers have developed similar strategies.
January 13th, 2009 at 3:14:00 PM
I’m not deliberately trading down however economic realities in the wine industry are leading me to buy cheaper wine and more wine! Over the last few months I have purchased about 9 dozen; far, far more than I would normally purchase. Two dozen came from purchases on a recent trip to Australia and another three dozen from mail list purchases here in the US. However the majority of the rest has been retail purchases of close outs of Aussie wine from one distributor in particular. The discounts on those purchases have been anywhere from 50-75% of RRP. I imagine that I will be offered more and more discounts as wines that used to sell quite well begin to languish with importers and distributors. I don’t call that trading down but smart buying. I liken it to continuing to put money into the stock market as opposed to pulling everything out and sitting in a corner, wringing my hands in grief.
The sell off of Australian wines began well before the current economic crisis, having more to do with currency exchange rates, oversupply and a fall from grace of Australian wine in the US especially at the top end where many (Aust) wines were overpriced. For those Australian wine producers unwilling to aggressively pursue wine sales and new markets (China was a growth market in 2008) things will be tough. US wine producers will face similar problems.
The current economic situation may well become dire and indeed is dire for those without jobs or facing unemployment. The real problem, at least in the US, will be if consumer confidence continues to fall. For those of us with stable employment and discretionary income now is not the time to go hide in a corner but rather to come out into the open and make our presence felt.
January 13th, 2009 at 3:33:57 PM
I think you both have some valid points that you have made, just a couple of thoughts to place with you. When a winery is faced with a need to move wine and the supply chain is pushing back due to the price they think works; the only way to protect a current brand and it’s price integrity is to develop a new brand extension with declassified fruit. Distributors listen to buyers who see consumers pushing price down and demanding value. Therefore wineries have to react and provide in order to maintain distribution.
The other point is that the AUD and NZD are now back in line on exchange rates as they were in 2004 and value of that exchange in currency is beginning to come back into line for both countries. The only issue slowing this down is the lack of over supply in Australia. Several wine growing regions were affected by fire and drought that occurred in previous years and that is just now hitting the market with current vintages.
Great discussion and very valid points!!!
Cheers!
January 13th, 2009 at 8:43:48 PM
I work in retail and buisness is definitly slow. I think people are feeling the effects of the economy and choosing to buy wines under $15 where they would normally spend more than $20 . Malbec is red hot right now and I imagine it will continue to be. Consumers are always looking for a value and for most of them there will always be one because sadly they won’t cut back on quantity for quality. For me though, this past year has been a tough. I am a french wine lover and it has been quite a battle to find some nice wines under $15. I found myself most of the time spending between $18 and $25 but even for me I will have to cut back and will probably look to spain.
enjoying the blog!
January 18th, 2009 at 12:54:35 PM
I am surprised to see how many people are talking about $4 and $7 and $7.99 bottles of wine. I’m no snob, but it’s pretty much impossible for me to find a wine that cheap that I can tolerate. Sure, I’ve found the occasional $10 or $12 bottle that’s pretty darn good, but I find that’s rare (and it’s nearly ALWAYS from Chile or Argentina). I’ve always been a quality over quantity guy, so when times are tough, I like to stick with wines I know and love, so as not to waste my money chasing a $10 Holy Grail. Most of my wines are in the $30-$40 range, with a decent amount that near double that. I am simply buying less wine now and “rediscovering” wines that are in my cellar. For me, wine is a treat and a joyous indulgence. I’ve never really had my own “everyday wine” because I don’t drink wine every day. Perhaps 3 or 4 times a week. I’d rather open a bottle I love than drink everyday something that’s just okay. Like others mentioned, I too am finding and buying some sale wines from closeouts and distributor’s price drops. Good drinking and an improving economy to all.