The results of a recession

 What has been left in the wake of devastated financial portfolios and stagnant professional growth is a new appreciation for bargains. Americans who never clipped a coupon for laundry detergent are now happily doing so and actually feel a sense of accomplishment from saving 59 cents.

The wine world has not been immune to bargains. Although couponing is not an acceptable form of marketing (some silly state laws prohibit it), we are seeing bargains on the shelves today that have not been seen for more than 15 years, if ever. And we are seeing wines of exceptional quality at prices that only two years ago would have seemed quite extraordinary.

What’s happening and why?

Big surprise: You are partly to blame.

In the “good ol’ days,” going back to 2007, major wine producers at the release of every vintage increased the price of their product. What did they do to earn a price increase? Nothing. How could they increase prices without justification? Because you would pay.

You and/or your friends just had to have the latest issue from Bordeaux. You would pay for it long before it even was sent to America. “Wine futures” were made popular by folks like you paying for wine they had never tasted before it left the châteaux, all because some critic told you the stuff was pretty good.

On the domestic front, have you heard of such brands as Screaming Eagle, Harlan, Abreu or Bryant Family? These wines never saw a retailer’s shelf. They were traded in private, and you had to know someone just for the opportunity to pay hundreds or thousands of dollars for a wine that, here again, you probably never tasted.

Those days are pretty much gone. Yes, there are no doubt still people out there who are scooping up these labels, but there are not as many people as there used to be, and they are not paying what they would have a few years ago.
The crash has hit. People who formerly drank only those wines that cost upward of $70 are now drinking only those wines that cost a mere $35. And people who used to drink only those wines that cost $35 are now drinking wines that cost less than $20. Another factor is that these high-flier wine-drinkers are drinking wines from their cellars. Some of these folks are currently not buying wine at all, merely living off “The Stash.” Retailers hate it.

Sales of high-end wines are off by double-digit percentages. Merchants who have some of these treasures in their inventories are holding on and hoping some still-well-off customers stroll through the door. After all, the retailer has already paid for them, and the wines will not go bad for a long, long time.

The point here is that those merchants are not ordering any of the new vintage, or at least they are not ordering as much. The pipelines are full.

So, you ask, what about those mid-range wines that cost about $30? They are holding their own –– nothing spectacular, but sales are OK.

The really sweet spot of the market is wine in the $15-$22 range. Those are doing well. Overall wine sales volume is up in this country, and it is in this price range that great growth is occurring.

Because the laws of supply and demand are immutable, let’s do the math. Formerly higher-priced wines are languishing in sales, and there is no grand demand from the marketplace for the latest harvest. Where then does that juice go? Grapevines have no idea there is a recession going on. Like so many people today, they are not readers of newspapers or magazines, nor do they get their news from television or radio. And they are still doing what they do best, putting out fruit that can be converted to a darn pleasant beverage. 

The growers and winemakers are taking those fine grapes and placing them in lower-priced wines. Can’t let it go to waste. The lower-priced wines that are ready to come to market have within the blend some grapes that formerly went to the high-priced bottling.

Wait, it gets better. Many wineries are not honoring their growing contracts. Wineries are telling their contract growers that they, the wineries, do not want the fruit that is ready to harvest for 2009. There is already too much product in the marketplace not moving, and wineries do not need to stuff more wine into the distribution system.

The growers are stuck. They have raised some beautiful fruit, all to the specifications of the winery. Now, there is no winery with money to buy the fruit. What are the growers going to do?

They will make arrangements with a contract winery to sell the juice to middlemen who will sell it in bulk to those wineries currently operating in the sweet spot of the market, that $15-$22 range, which in turn, in the coming year or so, makes the wine that falls into that economic category an even better bargain than it is today, based on quality levels. These wines will be released later, 2010 through 2012.

Or the growers will create their own labels and sell the wine with a new, and probably unknown, label affixed to the bottle, which means we all have to be on the lookout for some great wines fronted by labels that we have never heard of before –– and probably won’t again after one or two vintages.

There are more factors that will contribute to you and me having better wine at excellent prices in the very near future. The point is that it is happening. We are the beneficiaries of something pretty good coming out of a recession.
Although we never wish anything bad on anyone, sometimes it happens. We will all get through this. And indicators are that we have bottomed out. But as long as it is happening, I want to take full advantage of market circumstances that are in my favor and out of my control.

I’m committed to enjoying great wine at low prices. It makes me feel like I am doing my part to be a good American. Maybe life really is not too short to drink cheap wine.
 

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