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Good News for the Wine Economy

December 2009
by Jim Gordon

At the beginning of this year I wrote perhaps the most pessimistic column of my life. Because of the great recession, enabled by the Bush administration and a debt-loving public, the second half of 2008 saw wine sales revenues plummet. Restaurants emptied, distributors stopped ordering and vintners checked their spreadsheets to see what revenue cuts in the neighborhood of 30% did to their bottom lines.

Now, at the end of the year, the wine economy doesn't seem so scary. Positive news for the wine industry has been popping up often:

• Vintners and growers continued to plant and build.

• Domestic wine sales in big stores grew 4.9% from a year ago.

• The stock market rebounded dramatically.

• The wine industry won millions of dollars for research and marketing.

• Wine writers and the public discovered scores of new value wines.

• A profusion of new brands and styles refreshed the image of domestic wines.

New wineries

Two of our most widely read online Headlines articles during the past month were Jane Firstenfeld’s reports about the many new wineries and tasting rooms that opened across North America in late 2009 (see them in this issue, too, pages 16-17). Entrepreneurs in Connecticut, Michigan, Kentucky, Kansas, British Columbia and California hauled in their first harvests or sold their first bottles.

It shows that while times are tough for many vintners, many others are bursting with optimism and moving ahead with their plans.

Wine sales up
The latest wine sales data from The Nielsen Co. show that domestic wine sales through Oct. 17 were up 4.9% in dollars over the previous 52 weeks. Nielsen tracks wine sales in big box stores, supermarkets and major liquor chains, and that is where much of the wine-buying is happening now, as consumers look hard for bargains.

The core good news here is that consumers aren’t giving up wine in tough times. They love it. They incorporate it in their meals, their lives and their new tight budgets.

Stock market up
As I write this, the Dow Jones Industrial Average has hovered around 10,000 for three weeks, having recovered from a low of about 6,500 in March 2009. In past stock market recoveries, high-end restaurants and boutique wineries have recovered along with the Dow Jones. When company officers and stockholders feel more wealthy, they make more deals and celebrate those deals with great meals and fine wines. Big business lunches and high-fiving dinners can play a big part in a small winery’s success.

Specialty crop grants

Not only has wine earned increased respect among consumers, the grape and wine industry has finally won more respect and cash from Congress and the U.S. Department of Agriculture. In California alone, grants worth $16.3 million plus matching funds of $8.4 million have been awarded to specialty crop researchers, growers, processors and marketers.

Critics and consumers

Consumers, led in some cases by enlightened retailers and wine writers, are finding better bargains among domestic wines than they have in a least a decade. San Francisco Chronicle wine editor Jon Bonné in a recent column touted great-value wines recommended by California retailers. He ranked among his favorites a Hedges CSM Columbia Valley White at $12, a Montevina Amador County Zinfandel at $8, and even a rare bargain Russian River Pinot Noir, Feeding Frenzy, at $15.

New generation of wines

The recession forced many wineries to cut their prices. This in turn helped spawn a new generation of domestic brands, sometimes created to give a winery cash flow without diluting the main brand’s equity. These new brands, mixed with new varietals, varietal blends, novel AVAs, alternative packaging and creative marketing, have brought lots of new life to the wine market.

That is good news, even if it did come as a result of hard times. I think that wine drinkers young and old are energized by the new dynamic of the wine marketplace. Some of these upstart brands, new vineyards and new wineries in far-flung parts of North America will thrive and become the wine industry icons of the future.

The times are still tough, but they are changing. I believe that as the New Year approaches, they are changing more and more for the better, in stark contrast to the way 2009 began.


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