High-End Wineries In U.S. Are Reeling From The Poor Economy

Yes, I’m sure this news does not come as a shock. Anyone who has perused a local wine shop lately has witnessed the deep discounts on big-dollar wines, especially those produced in Napa and Sonoma. Last month the prestigious Auction Napa Valley, a fundraiser for charity and a semi-official barometer of the wine market, raised $5.7 million. In 2008, they took in $10.4 million.

A few years ago, I attended a wine marketing seminar led by a panel of wine experts. My notes from the sessions fried with my last hard drive, so I can’t go back and get the exact quote. But I believe it was Josh Wesson who claimed that no wine in the world costs more than $50 a bottle to produce. What you pay over $50 goes to advertising, marketing, and brand.

So where am I going with this? Last week the Wall Street Journal ran a story, dateline St. Helena, California, which detailed the troubles of luxury vintners in Napa and Sonoma counties. Money quote: “The slump comes as Americans continue to drink more wine overall. Recession-weary consumers, however, are buying more mid- and low-priced wines, causing a sharp falloff in sales of wines priced at $25 a bottle and higher.”

Read the piece. It outlines the behind-the-scenes business of wines and how some are surviving by using Facebook and Twitter as marketing tools. You might even weep a little for the hard-hit wineries. I don’t like to see any business go down, but I can’t help but feel that  U.S. consumers are finally finding quality at a lower price. Instead of picking prestigious labels from Yountville and Oakville, they are turning to those printed in Chile, Argentina, Spain, and the rest of the world.

We’ve never seen a market adjustment like the one we’re witnessing right now—a market that has affected the buying power of the super-rich. However, I find comfort in knowing that people are still enjoying fine wine and they have learned it does not have to come with an inflated price tag. Why do we drink wine? According to Wesson: “For taste. It makes the people sitting around us funny. It increases your chances for having sex.”

(H/T: WG for the WSJ link.)