There’s a little something for everyone in Silicon Valley Bank’s 2009-2010 State of the Wine Industry report.
It’s a must-read for winery owners (and would-be vintners) and anyone who works in the trade. Consumers too will find it interesting and easy to follow.
Written by Rob McMillan, founder of SVB's wine division, it’s a clean, concise, comprehensive and, in my view, an especially insightful and accurate look at the current state of affairs in American wine and where it might be headed.
I can’t say I’m surprised by McMillan’s analysis and conclusions, since they jibe with many of mine. But this is a much more thorough analysis based on SVB's close ties to the wine industry. Much of what we hear is anecdotal. SVB is a major lender to the U.S. wine industry and has access to insider information. It has some 300 winery and vineyard clients in California, Oregon and Washington.
The good news:
• Sales are flat in 2009, but better than in late 2008, when the fourth quarter was one of the worst ever.
• Wine supply is running in balance to short, meaning inventories are dwindling and not excessive.
• More electronic tools are available to support direct trade and consumer sales.
• Per-capita wine consumption continues to rise in the U.S.
• Credit is available for smaller wineries.
• Cult wine sales remain healthy.
• The fourth quarter of 2008 was the worst in memory for fine wine.
• Restaurant sales are depressed.
• Higher unemployment, exceeding 10 percent, is expected by year’s end.
• Wines below $35 are selling. Those between $50 and $125 are in a "dead space."
• Some wineries will sell at bargain prices.
• Distribution has all but ended as a viable sales channel for small wineries.
• Large credit lines are harder to find and many credit markets are frozen.
• Drought conditions persist in California.
• Sin taxes are being applied to alcoholic beverages.
• Distributors continue to drop small brands from their books.
When will we get back to "normal"? asks McMillan. "Not anytime soon."
The days of large profit margins for wineries are far away.
Value rules and will drive sales as the era of conspicuous consumption ends. Consumers will better understand and appreciate why price and quality are not related. But we will pay for authenticity.
Andrew J Walter — Sacramento,CA — May 20, 2009 2:45pm ET
Sandy Fitzgerald — Centennial, CO — May 20, 2009 3:16pm ET
Svb_wine_team — St Helena, CA — May 20, 2009 4:14pm ET
Arshavir Kouladjian — Los Angeles, California — May 20, 2009 6:15pm ET
Harvey Posert — napa valley — May 20, 2009 7:47pm ET
John Burman — Jupiter, Fl — May 21, 2009 2:30pm ET
Louis-ann Gonzalez — Chapel Hill, NC — May 21, 2009 4:38pm ET
Morgan Dawson — Rochester, NY — May 22, 2009 6:28am ET
Jason Fernandez — Boston, MA — May 22, 2009 11:33am ET
Ed Fryer — Nashville, TN — May 25, 2009 5:20pm ET
Fairway Inc — May 26, 2009 1:06pm ET
Bruce Nichols — Naples, — May 26, 2009 4:18pm ET
James Zalenka — Pittsburgh PA — May 27, 2009 5:30pm ET
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