The Wine Collector

I don't know about you, but I'm not drinking any less wine than I did a year ago.  If anything, I am more likely to have a glass of wine when I get home to relax in these stressful times.  I suspect I'm not unique so why wouldn't wine sales be up?

All signs point to industry wine sales being down.  Winery owners report less demand from mailing list buyers.  Wine retailers are hurting, and some have already gone out of business (e.g., the Wine Cask in Santa Barbara). 

Answer to the paradox

The answer lies in unraveling a number of behavioral changes by consumers that have come into play because of the economy:

• Wine collectors may be drinking their cellars without maintaining or growing their size, leading to fewer new purchase transactions.
• Wine drinkers are "trading down" to lower price points (although fine wine prices are off 25+% so they could drink the same wines as before and just pay less!).  We've noticed a certain class of our customers are spending more per bottle because they're optimizing their personal QPR (quality/price ratio) to drink much better wines for only modest incremental spending.
• Wine investors in some cases are waiting for further price reductions before jumping back in. 
• For really stressed out people, they may be substituting hard liquor for wine.

The silver lining for the wine industry

• There's roughly $30 billion per year spent on wine in the U.S. alone and foreign markets have huge potential for growth (Asia, in particular)
• The retailing and distribution side of the industry is ripe for restructuring and innovation.  There will be business failures, mergers, and new investments which will result in better options for consumers than they have today (i.e., greater access to diverse selection and at more competitive prices).
• The consumer voice in demanding increased access to wine through online and direct-to-consumer methods is ultimately going to trump wholesaler self-interest and lobbying dollars (if only because voters will get rid of state legislators who don't support the public interest).