It's Official: We're in a Wine Recession

When the likes of the San Francisco Chronicle and Wine Spectator start writing about "budget" wines you can be certain that the world economic crisis has hit boutique vineyards. These two media outlets made the $100+ bottle of California cabernet sauvignon appear to be a reasonable buy. Now they may be signaling that we are in a wine recession.

In Sunday's San Francisco Chronicle columnist Jon Bonne writes: "The economy has forced nearly everyone to take their drinking budget down a peg or four."

This is especially being felt in the world of California boutique wines. Not long ago, spending above $50 a bottle at a retail shop meant you were buying something very special from Napa or Sonoma. Then it was $100. Then the top blew off. It was as if some winery owners had friendly wagers on just how much they could get for a bottle of wine. The wine press appeared to be in on the fun and restaurants and wine shops scrambled for their piece of the pie. Customers flush with stock market cash did not hesitate to spend freely on hot labels.

One merchant in the Chronicle story that specializes in harder to find California wines says his average bottle price is holding at $170, but he admits to selling fewer bottles. Others report that customers are cutting corners, with those who once spent $50 a bottle cutting back to $30 labels.

The current issue of the Wine Spectator runs the lead story "Savvy Shopper," with the promise of "1,000 Good Values for $20 or Less" on the cover. Inside are hundreds of wines from California, France, Italy, Chile, Spain, Australia and other locations that scored well in tasting panels, but don't break the bank.

As Marvin Shanken, Editor and Publisher, and Thomas Matthews, Executive Editor, write in the introduction to the Jan. 31-Feb. 28 Wine Spectator, "We know many people are adjusting their wine budgets in response to the economic turmoil, but that doesn't have to mean giving up wine quality. It just means buying smarter." The magazine tasted more than 16,000 wines to find it's 1,000 value picks.

All of this points to tumult in wine country. Wineries built on business plans that called for $95 bottles will feel the pinch as customers scale back. Even wineries aimed at value conscious consumers will notice shifts as some of the higher priced wines cut costs and patrons move towards what they see as fire sale wines.

The recession will reduce the number of meals consumed in restaurants and it is already cutting into the number of guests at upscale locations. In some cities the explosion of premium priced steakhouses during the last decade has started rolling back with closures taking place. This trend will reduce the number of higher priced bottles consumed on-premise, forcing more of this product into wine shops and liquor stores. Once consumers get accustomed to seeing these labels, some of which were hard to find, at retail prices without restaurant mark up it may put further downward pressure on wine pricing.

While lower prices for consumers on quality wine sounds like a good thing, the jury is still out until we see which vineyards are claimed as victims of the pricing bubble. The thinning of the herd will claim some of the pretenders, but some great wineries may also get caught in the mess. Not every expensive bottle of wine is overpriced.