When economic times go bad, you might expect wine prices to go down. So you might wonder why that expensive wine you want to save for a special occasion still carries the same high suggested price it always did.
I learned the secret a long time ago. American wineries expend tremendous energy, and marketing dollars, to establish a certain status for their wines, and they believe that consumers see lower prices as a cheapening of that status. So instead of easing prices to increase demand, they usually limit supply.
In other words, the $100 flagship still carries a three-figure price tag, but there will be less of it.
What happens to the wine they can’t sell at a high price? If they don’t need the cash flow, they can hold back some of it for future release, hoping to sell it for a higher price when people are spending again.
More commonly, the excess wine will simply show up under a different label. If the wine has not yet been bottled, some of it can be rerouted to the winery’s own lower-priced bottlings. This can actually improve the quality of both the high-end wine, by including only the best lots, and the lower-end wine, by beefing it up with better components than usual.
Alternatively, it can simply be sold off in bulk. Other wineries or négociants can improve their blends with it.
Once the wine is in bottle, the options are less palatable. Wineries can make discount deals to sell the unsold bottles to a restaurant chain, or a single restaurant, as a special bottling with a new label. They can sell relabeled wine to a retailer. Or they might find a négociant to buy unlabeled bottles, to be sold under the négoce’s brand.
In those cases, the source of the wine is kept secret. Insider scuttlebutt may say that Brand Q’s Cabernet is actually the famous Brand A’s special bottling, but there seldom will be anything on the bottle to reveal it. Reputable retailers won’t spill the beans. As a result, the high-end wine still has its high price tag, even though consumers can end up drinking the same wine for a lot less, only they won’t know it.
A couple of years back, when Australia was swimming in a rising sea of unsold wine, we saw a phenomenon there called "cleanskins." Instead of selling excess wine to someone who would resell it under a brand, producers put the bottles into 6-packs and 12-packs without any labels at all, only the generic information of varietal and region on the carton. Prices were kept low.
I don’t know if we’ll see anything like that in the U.S. Heck, it’s probably illegal here.
But the market will undergo a reordering as we all decide what we will spend our money on.
In the short run, it’s my guess that a market shakeout will hit hardest for wineries that rely on high-end wines and exclusivity for their revenue. That sector is dead in the water right now. Some of these producers will close their doors, or be absorbed by bigger companies with deeper pockets.
Also in the short run, nimble wineries that can revise their bottlings to improve quality in low- to medium-priced wines should do well. As the quality of lower-priced wines gets better, cheapo wines that aren’t very good should fall by the wayside.
In the long run, economic realities will weed out the weakest vineyards and wine producers, and that will make for better, more reliable wine. But that will only happen if producers remember that quality sells. These days, it’s more than that. Wineries that fail to over-deliver on quality for price won’t survive.
For us consumers, that means buying wine on how much we want to drink it, not how much it might increase in value or how much status it gives us to pour it for dinner. In the heady times, some of us got away from that idea, and that created the concept of trophy wines. A return to a more solid philosophy will be good for us all.
John B Vlahos — Cupertino Ca. — January 29, 2009 6:02pm ET
Fred Brown — January 29, 2009 8:29pm ET
Tristen Larson — Seattle WA — January 29, 2009 9:13pm ET
Don Fuller — January 29, 2009 10:32pm ET
John Jorgenson — Seattle, — January 30, 2009 3:44pm ET
Chris A Elerick — Orlando, FL — January 31, 2009 8:28am ET
Karl Mark — Geneva, IL. — January 31, 2009 7:49pm ET
John Guinasso — Portland Oregon — February 1, 2009 1:05am ET
Michael Bonanno — February 1, 2009 2:04pm ET
Tone Kelly — Webster NY — February 23, 2009 5:03pm ET
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