Wine Industry Worries About the Economy
Sommeliers and retailers see signs that consumers are still buying wine, but are being more frugal
Tim Fish
Posted: October 7, 2008
Wine retailers and restaurant sommeliers around the country are holding their breath as the busiest wine-consuming season of the year approaches. As the economy teeters and the election draws near, no one knows what the 2008 holiday season will bring.
"Do you want me to get out my tarot cards?" said Nikos Antonakeas, managing director of the Morrell Group in New York. "It has been extremely volatile, with ups and downs that don't make a lot of sense. It's almost an impossible year to read."
More than a dozen queried top wine buyers around the United States reflected Antonakeas' sentiment. Rajat Parr, wine director of Michael Mina's restaurant group, which includes 14 restaurants throughout North America, reports that sales have been generally flat. "We're probably down about 10 percent from last year," said Parr, who predicts that business in Las Vegas this season will be particularly soft.
As vice president of beverages for Ruth's Chris steak house chain, Kevin Boyer oversees wine lists for 128 restaurants. "There's been no huge trend down recently," Boyer said, "But customers have been subtly trading down in price for the past 16 months or so."
Chris Adams, executive vice president at New York's Sherry-Lehmann agreed. "We've been working harder for the same amount of money. Champagne sales have softened but crémant sales are strong, up 60 or 70 percent. We're seeing softening in the cru class level of Bordeaux in favor of petit châteaux. People seem to be looking for value."
Retailers report that sales for South American, Spain and other value-oriented regions are strong, and while offbeat whites such as Albariño are generating increased interest, restaurateurs say that customers are generally playing it safe, buying familiar names such as Caymus and Mondavi.
Customers are still willing to spend $500 or $1,000 on a single bottle for dinner, Parr said, but not nearly as often. "People who were spending $150 or $200 are now spending $100," Parr said. "People are a little more price conscious."
The last time restaurants and retailers faced this sort of uncertainty was after 9/11. Restaurant business fell drastically in the aftermath, particularly in New York and states such as California and Florida that rely heavily on tourism dollars. Wineries that focused on restaurant sales took the biggest hit, and restaurant wine sales remained stagnant for several years.
Retailers that felt the pinch in 2001 recognize familiar signs. Mark Pucylowski is a wine buyer for Sam's Wine & Spirits, a large retailer in Chicago, and he summed up what many of his retail colleagues are saying: "We're buying more cautiously. There's a lot of uncertainty. There are a lot of people who are saying 'Find me a wine for $10.'"
As they did seven years ago, many retailers are betting that focusing on value will help protect the bottom line. Indeed, Harvey Posert, spokesman for Fred Franzia, the owner of Bronco Wine Co. and the California value king behind labels such as Charles Shaw (aka Two-Buck Chuck) and Forest Glen, reports that business remains brisk. "People are trading down," Posert said.
Annette Alvarez-Peters, a wine buyer for Costco, one of the largest wine retailers in the country, says that while Costco has seen steady sales increases in the past six months, "It's not at the same clip as a year ago."
Customers, Alvarez-Peters said, have become increasingly price sensitive. "We have seen a shift in business. When our members are spending $50 to $70 to fill their gas tanks, something needs to give, and unfortunately, wine is not a necessity. We are experiencing double-digit increases in the $8.99 to $13.99 range, while the $15 to mid-$20 wines are seeing a moderate increase."
For now, wine buyers are playing it safe as 2008 winds down, focusing on stock on hand and restocking cautiously. "I'm probably going to buy a little later than usual," Antonakeas said, "just to see what is going to happen."
