Consumers "Trading Down"

WINE TALK
1

Last night I attended a Piedmont dinner with a high-end wine retailer. He’s been in wine retail for 25+ years with a shop located in an affluent community. He offered a few thoughts.

  • On average, customers have continued to “trade down” over the past few years. They’re still doing it, i.e.: $100/bottle buyers down to < $60. $60 bottle buyers down to < $40.
  • Many have been willing to explore different wines/regions to meet the desired price points.
  • An appreciable number of regular customers have discovered that they can drink surprisingly well at lower prices, ie.: it was a revelation for one client who believed a wine had to be $100+ to be “good” enough to open for friends.
  • The “Super Rich” continue to buy $150+ wines and ignore most everything else. Supply and provenance mean more than price. $60 - $120 is a bit of a dead zone.
  • Bordeaux futures are dead. As much as 25% of his annual revenues are gone. With 2012 (possibly 2013?) not looking spectacular, there’re no signs of a revival.
  • Customers are increasingly willing to explore Italy, the Loire, Germany, Spain, the Basque region and more to assuage their Burgundy itch.
  • “Restrained” US wines are being paid more than lip service. Younger energetic winemakers are finding/building a market. There’s no appreciable risk to the “riper” establishment.

RT

2

I can’t find anything there to disagree with at all.

3

Sounds about right to me, although $60-120 is no dead zone if you’re talking Burgundy, in my little world.

4

The only surprise I see is that he’s only lost 25% of his annual Bdx revenues. I would have guessed more than that.

5

Yeah - bizarre to me too. This price range contains the great bulk of 1er Cru Burgs and top village Burgs. Also, in terms of Piedmont, this price bracket has most of the Barolo and Barbaresco I would buy. In my neck of the woods, most such wines sell out…and fast!

Cheers,
Blair

6

We find that, after four years of not being able to sell anything over $50 except one at a time as gift bottles, people are buying sixpacs or mixed cases of $50-$125 stuff pretty regularly. Amarone in particular is on fire.

Champagne was the only area which was immune to the financial meltdown.

Yes, people are ACTIVELY seeking out wines from all over the place more and more.

7

At least in the US, many more wineries are making a higher quality product.

8

I read it as total revenue, not Bdx revenue, which makes more sense if he had significant Bdx futures sales in the past.

9

Bordeaux sales are down because we haven’t had a vintage of the century in two years. If 2013 is another vintage of the century, it will sell. Even if it’s only the vintage of the decade, I bet it sells.

People are actively seeking out more areas than Burgundy, Bordeaux, and Napa, but there are also more wine buyers in the market and more wines in the market. So it’s not like there’s some trend, it’s just more stuff all over, which is a good thing. And for retailers who want shelf-talkers, there are now so many reviewers and critics out there that it’s no problem to find someone somewhere who gave a wine 90 points or five stars. But what I’m noticing is that people are increasingly looking to their friends and associates for information, much like they do for restaurants.

10

Robert, you’ve developed a nice niche that most brick and mortar retailers would struggle to share.

RT

11

Total revenues. It was a big contributor.

RT

12

There are actually two fewer now. Keeping in mind that unless they bought the commercial subscription to Wine Advocate retailers probably are running afoul of copyright (though not clear how TWA will enforce) if posting their scores on shelf talkers, and of course no more Rhone Report either. I’m on a couple panels next month in Rutherford and one is discussing cult wines. Based on my background of seeing a few of them before they became cults it will be interesting what comes out of it.

13

Me either.

14

Spot on

15

Yep, you Burg-heads are just getting warmed up! [wow.gif]

16

That range is for the Tuesday wines.

17

Who is replacing the $100 buyers that supposedly are trading down? Because I still see an awful lot of $100 bottles moving.
Is it new buyers? Are people trading up as well?
Just not sure I agree with that first point.

18

Jonathan Newman has found a nice gig, where 90 is only a starting point.

19

Sounds like he’s the new J Miller.

20

This is intriguing and provocative. But I was curious to see what kind of statistics I could dig up, and what I found conflicts with his take.

While he may be right about the upper end of the market, as a generalization about the U.S. market, his assertion about consumers trading down is not borne out by the overall U.S. wine statistics from the California Wine Institute. They show that, while the average price per case dropped about 8.5% from 2007 to 2009, it has been rising again since 2010 and is now 4.2% higher than in 2006 and only 1.4% below the peak in 2007.

The total value of U.S. wine sales rose 9.7% in 2011 because of increased volumes and increased average prices, and the value rose another 5.2% last year. Not bad in a fairly stagnant economy with high unemployment and very low inflation. Many industries would be thrilled with those numbers.

The story may indeed be somewhat different at the high end of the market. What he says is consistent with what a friend who works for a major, high quality wine distributor told me in 2009: that sales at that company were down about 30% though the number of bottles shipped hadn’t changed. I heard other similar figures at the time. My friend’s sales have rebounded substantially but aren’t back to 2007 levels, last time I checked.

A store that relies heavily on Bordeaux futures obviously isn’t a barometer of the wider market. Moreover, it may be particularly vulnerable. Overall, Americans seem to be trading up again.