Never has there been a better time to see into the future as far as the industry is concerned. Everyone is trying to predict how consumers will react, whether it’s during the holidays or over the next couple of years as we emerge from the recession. Most industry members expect a slow recovery as consumers focus on saving their money over padding their image. It’s clear that consumers have developed new habits over the past year and are much less likely to be as flippant with their spending. We are seeing signs of this through trading down in price and size, entertaining at home and hunting for deals. Nonetheless, we know that consumers still want quality products that deliver the best value, and are looking forward to “going out” while exercising restraint. It’s been a few weeks since we last shared the results of our reader survey. Our next question: “In your opinion, how is the consumer environment panning out?” was met with varying theories, so we did our best to give you a nice sample of the responses:
Distributor: Little turn back to premium brands. More consumers are who drink premium are willing to trade down in size versus trading into a different brand. Those who have fixed disposal income that is being cut every month are out looking for the "most bang for their buck". I hope that the holiday season will prove to be a turning point of people consuming premium brands once again.
Wine supplier: The consumer mood reflects the overall economic mood. While a crisis of epidemic proportion is passed, consumers have traded down and currently don't see a reason to go back to their old ways. Suppliers are forced to react, and as a result if you want to move product over $20 you better be willing to give up a lot of margin to do so. It's a good time to be a consumer in the wine business.
Wine and spirits distributor: It is definitely improving, but the landscape has changed, there is clearly a move away from big expensive wines (over $50 wholesale) and a shift towards $9 to $19 wholesale
Distributor: There seems to be a widening of the gap in how consumers spend. They are either buying cheap products or expensive. The middle ground is going away. Example: they will purchase cheap house wine or occasionally buy a single mid price wine. For spirits the same phenomenon occurs.
Distributor: I still feel as though it is a retail race to the bottom when prices are concerned. We are training the consumer that these cheap bargain brands are the way to go. The worst part is retail is not trying to trade consumers up after the bargain purchase.
Wine supplier: We see caution, and think that this year more wine business in our markets will be done in grocery stores as opposed to package.
Wine supplier: We are seeing a high low demand right now. Demand for lowest tier -$10-$15. Slow middle tier-$15-$30. Demand for upper tier-$30-$50
Distributor: There has been a tremendous change in consumer buying habits and I expect that consumers will continue to be protective of their disposable income for several years to come. This does not bode well for those brands in the premium and luxury ranges.
Distributor: Trend continuing for more off-premise consumption. Restaurants have to work harder to bring people in the door and offer good value to keep them coming back. I think this will get better for the Holidays 2009, then drop off mid-Jan-end of Feb, then be more like the last few years.
Spirits supplier: Consumers are buying down. It's becoming a lot harder to sell a $35 bottle of vodka and the $20 bottles are flying off the shelves.
Spirits supplier: Nationally recognized brands will control the higher priced categories ($19.99 to $49.99). Products selling below the $9.99 retail level will continue to show the greatest case volume.
Distributor: Consumers are looking for bargains, they are finding it in places that have competitive pricing, edgy products, and staff that can successfully promote a wine program, whether it be retail or restaurant driven. Each event I have been involved in, either a retail tasting, bottle signing on premise wine dinner has seen successful turnouts which turned into happy buyers, sommeliers, and owners. Consumer spending is available; it is all about how you market the event or product to draw them in.
Spirits supplier: Stay home, have a cocktail and hope the 401k comes back. Fine dining is done except NYC and Washington DC. $50+ wines are collecting dust; people want quality and value. If you have neither or your consumer tracking scores show a decline, watch out you’re headed for trouble.
Restaurateur: Consumers are coming out in the same numbers but spending less. Our head count is flat but check average per person is down almost $10. People are sharing more, eating less and trading down in both food and beverage.
Large retailer: Consumers are cautious, especially the younger retired group 55 to 65 yrs old. They have a strong dependence on the stock market and were the group most experimenting with higher price point wines.
Distributor: I think the LDA to 30 yr olds are at the edge of their seats waiting for the 'recession' to end. They're ready to spend money again and get back into their old habits of nightclubs and expensive dinners.
Small/medium retailer: I see that people are most cost conscience about value for their money, which in our case is a good thing...if the customer can get a great wine that they love to drink for $18.99 they will buy multiple bottles, no questions ask...so the consumers are still drinking quality.
Large retailer: Our average consumer isn't that phased by the economic climate and they continue to buy the name brands that they trust, just not as often. We have seen little trading down from premium to economy but have seen trading down from 1.75lt to 750ml etc.
Spirits supplier: Consumers are trading down and looking for value. BUT value does not equate bottom shelf, instead it means that consumers are searching out brands that are still nicely packaged and of high quality. Vodka is the best example of this with some of the hottest brands in the industry fitting this definition.
Distributor: There is lots of pent up demand for luxury and indulgence. People are just waiting for the signal that it is okay again to reward themselves.
Beer, wine and spirits supplier: Consumers have been resilient and becoming more value-conscious. The $30+ segment will never be the same. The advent of $2 Chuck in 2000 introduced a growing wine consumer base to value oriented wines. The current environment is reinforcing this behavior and I believe will fundamentally shift wine buying permanently. Retailers seeing any growth this year in the $20+ range have only done so with price compression and heavy margin investment, which is not sustainable for the long-term. Those that underestimate this shift in behavior will learn the hard way.
OREGON WINERIES HIT WITH EXCESS INVENTORY AND SLOW DEMAND
Some Oregon wineries are stuck between a rock and a hard place according to local reports. Some wineries are still struggling to sell wines from the “poorly received” 2007 vintage. Producers are also finding it difficult to bottle their 2008 wines due to lack of funds. Does this mean that only the strong will survive this recession? It’s likely, according to the article. Upstart wineries, particularly those who specialize in high-end pinot noir, could be “the first victims.” Luckily the 2009 harvest is “shaping up nicely.”
RUSSIAN BANK BUYS CONTROLLING STAKE IN STOLI PRODUCER
Russia’s second largest bank, VTB, has purchased a controlling stake in distillery Cristall, home to Stolichnaya vodka, reports Reuters. Meanwhile, Russian president Dmitry Medvedev has declared “war” on alcohol, leading some officials to call for the creation of a state vodka monopoly with hopes of bringing order to the market. About 30%-50% of Russia’s alcohol industry is considered illegal and untaxed.
Until tomorrow, Megan
When a dog runs at you, whistle for him.
Henry David Thoreau
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