The title of today's Wall Street Journal article "Luxury Wine Market Reels from Downturn" by Jim Carlton and David Kesmodel, pretty much speaks for itself. The nuts and bolts of this story is that Americans are still drinking wine, they're just spending less. The secondary theme seems to be how producers are going to weather the storm. Elliot Stern, chief operating officer of the Sorting Table, a Napa Valley-based wine distributor, is quoted as saying, "If you're a $90 wine and all of a sudden you're on the Internet at $50, how do you ever become a $90 wine again?"
Stern's rhetorical question is a variant of the Veblen Goods Market Theory, which is failing in the current economy.
The simple answer here is to make great wine. Lowering your price to $50 from $90 will allow (some) consumers to continue to buy your wines. It also shows that you're aware of the challenges facing the consumer, who is daily flooded with better deals from overseas. Note: lowering prices in 2008 has only spurred demand for en premeur Bordeaux. As time goes by, and market conditions return to normal, you can increase prices.
Producers such as Claude Blankiet, whose wines I enjoy immensely, but which cost $185 this year despite the "downtown," need to be realistic. Sticking their heads in the sand (keeping prices inflated through a recession) simply won't sell wine. What's worse: it negatively affects the perception of the brand, because it shows the producer doesn't understand -- or care -- about the core consumer.
In short, in this economy, high price does not equal high quality. Cult Wine producers need to redefine and remarket themselves accordingly.
I have some problems with the WSJ article, though most of what it says is pretty uncontroversial. My feeling is that while the most expensive wines are being (and should be) knocked down a notch by the economy, much of the frenzy on the least-expensive end of the spectrum is self-inflicted. I actually just wrote a blog post on this: http://tablascreek.typepad.com/tablas/2009/07/truth-fiction-and-selffulfilling-prophecy-in-wholesale-wine-sales.html
ReplyDeleteI do agree with you that the assumption that many producers have always made that they will only be taken seriously if their wines are sufficiently expensive will have to be reevaluated. And that has to be a good thing in the long run for both consumers and producers.