The fine wine market is amazingly fragmented, with styles, countries, appellations and prices all over the board.
But the underlying force of the market’s economics is that it operates on a supply and demand model.
Lately, demand has been sitting on the sideline, taking a much-needed breather, leaving supply in a similar mode.
There are still wines that are in high demand, so when a reader asked if prices for some of California’s (or for that matter Bordeaux’s or Tuscany’s elite wines) will be coming down, I expect that they will. Certainly they cannot go much higher, and always in wine there’s another vintage just around the corner. We’re only seven months away from vintage 2009. Some prices will come down rather quickly and others will slide through attrition.
Just this moment I was forwarded a first for me, a buy one, get one free offering from Kathryn Kennedy winery, whose wines sell in a range of $19 for Sauvignon Blanc to $145 for its top-of-the-line Cabernet. The winery isn't lowering its prices, per se, but if you buy one bottle, you get the second free. Buy three, get three free. Buy four, get four free.
I’ve also heard a few wineries are either raising prices or holding back their releases, no doubt hoping the recession is short-lived rather than extended. That way a winery can still hold its price, which is tied to its image.
Cutting prices is usually brutal for high-end wineries. Once they devalue their wine, people who paid a higher price earlier, or for earlier vintages, feel robbed.
Holding prices when demand slackens only works so long. Declining revenues now is hurting most companies. Those who don’t need the cash can hold out longer. But for many wineries, they will have to decide soon whether holding unsold inventories makes more sense than lowering prices. And that is playing a hunch that things will turn around sooner than later and that the market won’t suddenly be flooded with discounts, along the lines of the Kennedy offering.
If indeed we’re in an era of deflation, where prices for most goods correct at lower levels, those who guessed wrong will be hung out to dry.
Sandy Fitzgerald — Centennial, CO — February 26, 2009 6:58pm ET
James Rego — Redding, Ca., Shasta County — February 26, 2009 8:16pm ET
John Valenti — Detroit, Michian, USA — February 26, 2009 9:48pm ET
Eric Stenta — California — February 26, 2009 9:55pm ET
Apj Powers — Dallas, TX — February 27, 2009 3:49am ET
Richard Scholtz — Austin, TX — February 27, 2009 10:35am ET
Ted A Hunt — Fort Lauderdale, Fl — February 27, 2009 1:10pm ET
Brad Kanipe — Atlanta — February 27, 2009 2:40pm ET
Ryan Sadowski — Minnetonka, MN — February 27, 2009 4:12pm ET
Andrew J Walter — Sacramento,CA — February 27, 2009 11:11pm ET
Dennis D Bishop — Shelby Twp., MI, USA — March 2, 2009 10:48am ET
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