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In an Uncertain Market, Wine Sellers Report Buyers More Focused on Value

Although a slow economy has hurt restaurant wine sales, retailers say business is strong as people are drinking more at home and buying for the holidays.

Tim Fish
Posted: November 29, 2001

Thanksgiving kicks off the high season for wine consumption in the United States, and while retailers and restaurateurs are hoping for a little light at the end of the post-Sept. 11 tunnel, no one is sure what this holiday season will bring. But while the stagnant economy and reluctance to travel are still hurting restaurant wine sales, retail sales appear to be recovering as people entertain more at home.

Even before Sept. 11, there were signs that wine sales were softening. Except for red-hot 2000 Bordeaux futures, demand for high-end wines was generally flat in the first part of 2001. The dot-com bust of 2000 hit the pocketbooks of many big wine spenders. As the stock market soured, businesses began cutting back on travel and expense accounts, putting a crimp on wine consumption at restaurants and hotels.

Then came Sept. 11, and the last thing anyone in the United States seemed to be thinking about was wine.

Todd Hess, wine director of Sam's Wines & Spirits, Chicago's largest wine retailer, summed up what most wine shops experienced: "The immediate aftermath of Sept. 11 was almost a cessation of wine sales. No one was in the store."

Restaurants, hotels and resorts had it even worse, as Americans stuck close to the TV and sought refuge at home.

"Wine sales, of course, were horrendous," said Danielle Corning, national wine coordinator for the Smith & Wollensky Restaurant Group, which owns 14 restaurants nationwide, including seven in New York City.

High-end restaurants in large cities and tourist areas -- the places that account for the bulk of restaurant wine sales -- have been hardest hit. "We've heard of everything from a 10 to a 60 percent drop, depending on the market," said Steve Anderson, president of the National Restaurant Association.

Chambers & Chambers of San Francisco -- a key wholesaler for popular restaurant labels such as Turley, Flowers, Araujo and Peter Michael -- saw a 21 percent drop in California sales in September, compared to a year ago, according to Carol Hastings, vice president of sales and marketing. Its wine sales in Hawaii dropped 43 percent for the month.

Most of the evidence is still anecdotal, said Juanita Duggan, CEO of the Wine and Spirits Wholesalers of America trade association, which won't have compiled hard numbers on fourth-quarter wine sales until January. "But I'm hearing in some places it's down as much as 25 percent, mostly in restaurants," she noted.

While some restaurants are beginning to recover, they haven't seen anything like the jump in sales many wine retailers have experienced since late September.

"After the first week, we were having Christmas business," said Patrick "Chip" Cassidy, wine director of Crown Wine & Spirits, one of Florida's largest wine retailers.

Jeff Zacharia had a similar experience at Zachys, his family's well-known wine shop in Scarsdale, N.Y. "We were concerned obviously after the bombing," he said. "But things have been pretty busy."

Compared to the same periods in 2000, Zachys' sales were even in September, slightly down in October, and slightly up in November, he said. "The only area of sales that really hasn't recovered is the top-priced wines," added Zacharia. "We're still selling them, but not at the pace we were."

At Costco, one of the largest wine retailers in the country, wine director David Andrew said, "It's not a great time to be happy about your sales, but we're booming, frankly." He noted that fine wine sales were up 23 percent in late October, compared to the year before.

The reason, Cassidy said, is obvious: "People are drinking, but they're drinking at home."

With the restaurant boom of the 1990s, wine sold on-premise -- an industry category that covers restaurants, hotels and resorts -- has been the dominate force in wine sales. That may be changing.

"People are eating at home or gathering together with friends and family," Andrew said, crediting that for Costco's boom in sales.

Hess said he sees a similar pattern with his Chicago customers. "People are buying wine they can drink tonight."

One of the biggest trends reported by retailers and restaurateurs alike is a renewed interest in moderately priced wines.

"A year ago, the sky was the limit," said wholesaler Carol Hastings. "The interest now is anything below $25 for retail and that translates to about $50 or below for a wine list."

At Smith & Wollensky restaurants, Corning said, "People just aren't spending the money anymore. The $100-and-up price point has slowed significantly. We're selling a lot more in the $50 to $60 range."

Although wholesale prices on high-end wines remain firm on paper, Hastings said that discounts -- once unheard of -- are easier to come by. "There's a lot of wine out there," Corning added. "There's a lot of dealing.

In addition, retailers are now beginning to get their hands on wines once out of reach, as many restaurants cut back on pricey wine purchases. Wines that were once on strict allocation now have wider availability. Don't expect to find Screaming Eagle at Costco, but you may see larger-production collectibles like Dominus, Phelps Insignia and Mondavi Reserve Cabernet become more available on the retail shelves.

But at Bacar, a wine-focused San Francisco restaurant, wine director Debbie Zachareas continues to buy high-end and cult bottlings for the cellar. She says customers still demand California cult wines, though she admits there are now fewer customers.

"It's a complex situation," she said. "The average price [spent] per person hasn't really gone down for us. While people aren't dining out as often, they don't seem to be spending less money when they do."

Others in the industry have noticed that dichotomy, and it's one reason many see hope that the holidays will bring their usual boost in sales. While consumers are being more careful, they seem to need the occasional splurge. If Sept. 11 taught us anything, it's that life is short.

"All of my friends have been really feeling the need to drink their good stuff," Corning said. "People who have bought great wines in the past are drinking them. It's the times, not knowing what tomorrow will bring."

Zacharia agreed. "People are saying 'What are we waiting for? What are we saving these wines for?' "

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