Wine is recession proof

 


Its been a busy month for wine industry research reports and forecasts. Yesterday Vinexpo, in conjunction with the IWSR, released their 12th Global Study on the Wine and Spirits Market, which forecast that the US was poised to become the world's largest consumer of wine by 2012. Additionally, Gomberg, Fredrikson & Associates spoke at the Unified Symposium in Sacremento this week and said that wine sales in the US grew to 316m cases in 2008, representing a new record level (however the growth rate was lower in 2008, than 2007).
We've heard so many tales of doom and gloom across so many industries its nice to have some good news for a change.  Firstly, as I've followed the Vinexpo research for years, its nice to see that they drastically revised their data upwards since 2007. Specifically, their ‘07 prediction for the year 2010 was for a global wine and sparkling wine market of $117 billion. In yesterdays report they announced that the 2007 historical figure was $150 billion!

As an entrepreneur, its extremely satisfying to be able to go back and revise numbers upwards.

There's clearly huge variance in how individuals even in the wine industry will fare in the coming years. Yet, some of the issues are clear: many winery founders are reaching retirement age and are preparing to step aside and have no successors in place (equals a buyers market); restaurants are suffering, with many seeing a 30% drop in sales, yet at the same time off premise (ie. wine store) sales are strong (equals people increasingly entertaining at home); people are turning to the web for research, even if they still intend to shop offline (equals opportunity for wineries and stores to differentiate their brand, and to put their inventory online to serve their users better); and then the unequivocal “wine is recession proof”.

One of the most incisive articles I've yet to read on this subject comes from Grocery Headquarters. There are some quotes in the linked article with very clear meanings:

  • Wine is “a relatively recession proof industry”
  • “People are choosing to entertain inside the home” more during these recessionary times (which means more wine purchased “in-store”), and that the “increase in home entertaining presents a strategic opportunity for retailers to capitalize on shoppers' increasing desire to create restaurant-style experiences at home”
  • “With new and attractive varietals popping up on store shelves, insiders say that retailers need to make it a priority to educate consumers about individual wine characteristics. Although it is clear that the average level of knowledge about wine has increased amongst consumers, there is still plenty of opportunity to demystify the category for the wine enthusiast and novice alike.”
  • “Insiders add that with restaurant sales declining, grocery stores can offer a valuable service by cross merchandising wine with inexpensive yet upscale meal solutions.”
  • “Analysts predict the wine industry to continue to grow, with movement particularly fueled by a rapid pace of adoption among consumers ages 21 to 25. Online outlets for wine, although not traditionally used by supermarket operators, are predicted to be a main attraction for younger drinkers.”
  • “Even if a retailer does not wish to sell their wines online, they can still post information about their wines, so shoppers can discover and peruse them; if done right, traditional retailers can offer the best of both worlds:  the ability for consumers to get information online and the convenience of purchasing the wine at the store in order to have it right away.”

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Comments

  • Snooth User: Philip James
    Founding Member Hand of Snooth Voice of Snooth
    1 12,549

    Veronica - thanks. I've heard a lot of people say foot traffic was within +/- 5%, but that depending on the price range of wines they carried the revenue sung more widely.

    Specifically, if you stocked $40 wines, your revenue went down, but if you stocked $10 wines it may have gone up

    Jan 30, 2009 at 4:21 AM


  • Veronica

    We had the same amount of foot traffic in the store this year, but people were just “buying down.” Nice posting!

    Jan 30, 2009 at 12:34 PM


  • JDGless

    The reason we are not buying as much wine in the rstyaurants is that we have tired of paying 3 times retail for restaurant prices!

    Feb 01, 2009 at 11:52 AM


  • Snooth User: Philip James
    Founding Member Hand of Snooth Voice of Snooth
    1 12,549

    JD - very true. Now that I'm in the trade and know the fair value of a wine more easily, its hard to swallow (pun intended) some restaurant prices.

    Feb 03, 2009 at 3:10 AM


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