Buying cheaper wine?

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Permalink Reply by Ed Thralls on November 25, 2008 at 6:13am

Ryan,

I would be interested in discussing this issue with you from a couple of perspectives. For one, me, my wife and close friends are always looking for those "value" wines below $15 and the economy has definitely driven us to be even more diligent in this perspective. But also, this year, I have been considering starting a wine business in which I would make wine using an outsourced wine facility. Using very specific high-end vineyards in California, OR and WA this results in luxury premiums wines that I'll have to price at $42 or more to make a profit and this may affect my decision to start this business.

Ed Thralls
404-308-9226
ethralls@winetonite.com

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Permalink Reply by Brooke Herron on November 25, 2008 at 11:15am

I think those who used to buy very expensive wines-still do. Those who were, perhaps, willing to purchase $30-$40 bottles occasionally or from their favorite wineries may be tightening their belts a little. This could be due to the general heightened sense of awareness that our economy is not so hot and may not be looking up but possibly down for a while or due to these folks actual changes in circumstance. It think in the case of the 1st reason-those same people may go back to their original consumer behaviour once they realized their personal situations haven't changed.
I've been watching my pennies more partly just due to the constant talk about, news about, online articles about, and general public conversation about: the economy and unemployment. The focus on these subjects makes us all think about them more than we would if no one waws talking about them..... I'll probably get back to my normal spending tendacies after the holidays and after my taxes are done :)
And: your right about the economy hitting small, boutique wineries with a higher cost of doing business, therefore a higher price of wine. We are really feeling it. Wine Clubs and Shipping costs are the biggest stabs right now though.....

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Permalink Reply by Alex Hill on November 26, 2008 at 10:03am

As a wine consumer I've found myself trying to be more of a savvy shopper. There's plenty of value out there if you know where to look. Great value wines include red wines from Spain (Jumilla, Yecla, and Toro), Argentina, Portugal, Australia, and '07 Côtes du Rhône. White wines from Argentina (Torrontes), Germany ('07 Kabinett level Rieslings are stellar), and the Loire (Muscadet, Chenin) often overdeliver. There's no shortage of outstanding wine priced under $20.

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Permalink Reply by Joseph on November 26, 2008 at 11:42am

Ryan,
You pose an interesting matter.
I believe I know good wine when I drink it, but I'm not in a position to drink good wine every day.
So, for my Monday through Friday wine consumption I dare admit that I shop for inexpensive wines that suit me.
For example, lately I've been buying Lindemans (Australia) 2007 Cabernet Sauvignon (Bin 45) at our grocery chain, Kroger, for $5.95/bottle. I've also had their Pinot Noir, Shiraz, and Cab/Merlot blend (almost as good to me as the CS).
Okay, I can develop a list of wine adjectives these wine don't possess. However, I find enough qualities in these wines (and other inexpensive ones) to suit me.
If my choice is to forgo a meal without wine, or drink a reasonable, well-crafted, inexpensive wine that suits my taste, I'm going to continue to search for & drink them, and save my "treasures" for the weekend.
Joe (aka Westoakland)

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Permalink Reply by Jeff Munsey on December 7, 2008 at 12:38am

As a small winery, less than 2,000 cases, we are not planning for any issues related to economic concerns. We produce two brands, one under $20 and one with limited production reserves generally priced above $30. We split the odds on the revenue stream with feet on both sides of the fence. As a consumer direct winery with 90% of sales initiated in the tasting room, value is a much different equation that what is factored at a wine retailer. In a tasting room environment, Value=(Packaging+Environment) x Wine Quality. Notice no $ figure association. In our business model escapism replaces price point. Standing in front of a wine rack at a retailer, value is factored differently.

Consider this, 2,000 cases equals 24,000 bottles. Deduct the bottles we use for tastings, personal consumption, and trade 2,500 and I now only need to sell 21,500 bottles. Our tasting room is located 2-3 hours away from 9 million people in greater Southern California area. Add our consumer direct web based sales in the mix and we aren't worried about anything including our prices. If I produced 15,000 cases, I would have already called Henry Paulson and asked to get in on some of the Federal TARP funded bailout because at this volume and larger the ripple effect is going to be big. Downturns in the wine market are going to be significant in the on premise market (restaurants). Thats where I think you will see the greatest weaknesses. Perhaps the consumer will benefit as restaurants may need to adjust margins becuase Cost of Goods will be less important that percap spending. No more 250% mark up.

The larger wineries that survive the economy are going to be those that are savvy about leveraging the concepts here on OWC. Ed, regarding your start up, by the time you have your juice pressed off and in the bottle, the entire country will have either been sold at auction to China or things will be getting back to normal. You should be able to get your $42 and work on a 48%-55% cost of wine. Good luck and do everything you can to keep your S,G&A expenses tight and you'll do well.


Jeff

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Permalink Reply by Hoke on December 9, 2008 at 7:21pm

Many people seem to forget---or never realized---the wine business, indeed the total beverage alcohol business, is and has always been cyclical. The reaction to this recession---not the US recession, the global recession---is just another part of the volatile cycle.

We had a huge hit in bev al not more than a few years ago. The events of 9/11, combined with encroaching aggressive markets (primarily Australia), massive overproduction, and the flagellation of the US dollar changed buying habits and preferred styles. Things seesawed for awhile, the 'sweet spots' changed on wine lists, and some varietals went out of favor, some came in.

The same thing will happen again. Leaving aside trend reports and the companies who analyze and predict in this biz, I will say that almost virtually every retailer I've spoken to within the last few months has told me that the people are still buying, they're looking for more bargains, their price range is dropping lower...but they still have certain standards of quality and style they want to maintain. I'll go out on a limb and predict that volume will stay pretty high, but price points will continue to moderate for a while. People will flush wines through the system at lower prices, because they have to, and some of us will benefit from that.

Some people will have an opportunity to try wines they might not have been able to try before (and they may be disappointed in many of them, perhaps delighted in a few.:^))

In the restaurant biz, the local restaurants are doing better than the tourist/luxe places, and the ultra high-end resort spots are faring very, very badly right now. Expect they will for a while.

I think these 'market corrections' are actually good for the wine biz. Yes, some people will get hurt---but then again, some people who got used to luxury pricing will get a bit more down to earth and sensible.

And let's be honest here: there are very, very few wineries that "have to" sell their wines for more than $20. Will the Napa Cult producer pantheon get thinned out a little? Well, boo hoo. Will we also lose some small and more artisanal producers? Yep, inevitable. But that means they weren't very good business people in the first place, or they weren't well funded, or they were mediocre winemakers.

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