Readers Respond: Summer a Mixed Bag


Dear Client:

Summer is pretty much over leaving some in the wine and spirits biz with the summertime blues – and we don’t mean the kind associated with back to school. Instead, summer was a mixed bag for the industry with a large group reporting moderate to dismal sales, while others reported flat sales (which is the new “up”), or slight growth. We got a huge response from our readers in our latest “Gauging the Industry” survey which tells us that people are eager to speak their mind and hear from other industry members. We’ll publish your responses as room permits with more “timely” industry news taking precedence.

As we said responses varied but there were a few trends that everyone agreed on. When asked how your company performed over the summer, just about everyone agreed that the on-premise is still dragging while off-premise business is good. Another common trend: trading down is a definite reality, which is killing some businesses and actually helping others. Many respondents saw improvements in July but August was mixed with some having a good month and others have a “terrible” month. May and June were not strong months overall.

Here are a handful of responses that caught our eye:

Wine and spirits supplier: “Business has been difficult and complex although there are signs of light in the tunnel. Wine sales have showed the consumer threshold/sweet spot has gone from $19.99 in Jan to $14.99 in May to $9.99 in July and August in the NYC market was painful.”

Wine and spirits supplier: “My company focuses on the luxury end of wine & spirits. Q1 was difficult in that the pricing pressure stretched lower than ever before. In other words, we knew +$20 would be a challenge, but pricing was compressed in the $10 - $20 category as well. We responded and were able to have a stronger summer, but consumer brand building activities are shrinking as price support is everything!”

Wine supplier: “June was off due to bad weather and slow tourism (-4%), July was up 10% despite retail/restaurant woes and more bad weather, and August was up 11%.”

Restaurateur: “Decent. Our business stayed about even with last summer. Revenue was down just a bit but with some belt tightening and tweaking we kept profits good.”

Wine and spirits distributor: “Given some products being up and others being down, I would have to say that we are overall up for the year thus far. However, I don't believe that we are up as much as we would like. Brands like Ketel One are performing better than expected - probably due to a long-overdue, new marketing campaign.”

Wine and spirits distributor: “Partly encouraging...partly discouraging. Boxes continue to build, revenues per case continue to decline.”

Wine and spirits supplier: “Was doing well before the reorganization and distributor consolidation. Now they are in the shitter.”

Small/medium retailer: “Up and down sales week to week, but overall encouraging. As we get later into the summer "low end" wines (under $10) are slowing while medium to high end wines($15-50) are still selling decent.”

Large retailer: “May-June-July remained flat with August down about 10% mostly due to the Labor day weekend ending August last year. Customer traffic was up about 5%.”

Distributor: “Our high end wines are completely stuck. We are decreasing our margins and looking for buyers anxious to 'get a deal.’ We are ready to give one! The lower level wines (the so much spoken 'below $20.00') are moving on a steady, not exciting way.”

Spirits supplier: “Good but not as good as the growth was last year. However, when "flat is the new 'up", and we are "up," I feel pretty good about the mid and high end spirits industry.”

Distributor: “In managing the fine wine division of the company I work for, our sales data for the months of June, July and August show a declining trend in On Premise (down 3.2% cases versus SPLY) and the slightest increase in Off Premise (up .4% cases versus SPLY). Revenue was dramatically different. We observed declining revenues in comparing the summer months of 2008 versus 2009. On premise showed a reduction in revenue by 10.5% and down by 10.7% in off premise. The market has certainly traded down during the summer months of 2009 versus 2008. The average case price sold in On Premise during June, July, and August of 2008 was $191, and in the same period of 2009, was $177. The average case price sold in Off Premise during the Summer of 2008 was $210 and in 2009 was $187.”

Restaurateur: “Down 5-8% over last year; less than the industry norm in our metropolitan area.”

Small/medium retailer: “Flat...Actually I think the weather in the Midwest (mild summer) in combination with the state of the economy kept people home.”

Distributor: “Generally good. Experiencing some trade down among brands for both spirits and wine. Off-premise account business is good, on-premise is hurting. Finer dining, catering/event business, and high-end hotels and resorts are down the most.”

Promotions staffing company: “I work for the largest liquor promotions staffing company in Colorado (clients are RNDC, SWS, BDC, Western among others). Jan-Feb of this year saw a drastic drop in promotional activity. March-June saw promotions begin to be booked once again but with little marketing collateral involved. July to present campaigns have returned to last year's level and POS is also being used making promotions more effective.”

Distributor: “We're in the northeast - down July - lots of rain and less blue collar vacation people. August - better weather and more white collar vacationers.”

Nightclub bar owner/employee: “Down, down, down!!! Booked parties' down 50%.”

Distributor: “On-Premise was ok. Illinois had a tax increase go into effect on Sept. 1 making August a really good month.”

Large retailer: “Tough on-premise, manageable off-premise.”

Wine supplier: “Solid in Argentinean wine, solid in family owned domestic brands (less than 25,000 cases produced), slow in France and Spain. Argentina outsold everyone by 5x as many cases so far this year.”

Distributor: “Below average, but that was largely due to deep discounts made available to retailers late spring to boost depletions in-house. There continues to be considerable backroom inventory.”

Distributor: “Slower then 2008, especially wines and premium spirits, except Smirnoff's Vodka and Bacardi products.”

Wine and spirits supplier: “Struggling but seeing some improvement in spirits. Wine is having nominal success, Champagne & Sparkling very difficult.”

Wine and spirits distributor: “We shifted our attention to value brands and it has been the strongest part of our portfolio. The trick is to provide equal or higher quality at a better price.”

Restaurateur: “Better than expected/planned for in July, and as expected (low expectations) in August.”


Beam Global’s Maker’s Mark Distillery has filed a federal lawsuit in the Western District of Kentucky against Jose Cuervo Reserva de la Familia and Diageo North America for alleged trademark infringement. Maker’s Mark claims the red wax coating on Jose Cuervo Reserva can be mistaken for Maker’s red wax seal. Jose Cuervo Reserva and Diageo have yet to respond.

In the lawsuit, Maker’s Mark states the following: “The red wax-like neck coating that Defendants chose to use to identify their competing distilled spirits product is an imitation of the distinctive Red Wax Mark that Plaintiff uses. Defendants’ actions thus constitute false descriptions and representations that the Reserva Product is associated with Plaintiff’s product, or that the Reserva Product is somehow authorized, endorsed, and/or sponsored by Plaintiff or is connected in some way with Plaintiff or its whisky.

“Upon information and belief, Defendants’ use of a red wax-like neck coating for their Reserva Product that closely resembles the Red Wax Mark was deliberate, intentional, and willful, and was done with full knowledge of Plaintiff's prior (and incontestable) rights in its Red Wax Mark.”


The phrase “feast to famine” aptly describes the current state of the champagne industry. Two short years ago producers warned of underproduction and even lobbied the government to grant geographical extensions. Now, they’re leaving thousands of grapes on the vine in effort to maintain price and champagne’s luxurious image. In our survey, readers told us that champagne sales are dismal and not likely to pick up too dramatically during the holidays (although New Years always prompts an uptick).

A WSJ article by Alice Feiring notes that “with millions of cases withering in warehouses,” champagne houses and distributors alike are exploring new ways to generate sales. This includes reaching out to a new kind of consumer. Champagne Krug’s (owned by LVMH) new head, Margareth Henríquez, believes the answer lies in “luring the new middle-class drinkers” and marketing champagne as an “everyday bottle of wine” rather than a drink for special occasions. One of LVMH’s strategies is to offer “fire-sale style prices” of Krug and Dom Perignon to various “hot-spot restaurants.”

The people interviewed in the article agree that champagne is indeed undergoing hard times but will surely make it through. They’re not kidding. The article notes that “one of the biggest distributors in the United States [report] sales are off 50 percent for the basic stuff, and down 85 percent for the fancy.” A Manhattan retailer agrees, claiming no one is buying Champagne above $45, but on the upside consumers are increasingly purchasing prosecco as an alternative.

In recent years champagne has been touted as a party drink enjoyed by rappers and celebrities abound. The article puts it best: “Elsewhere champagne was becoming its own overblown bubble, full of flash and sometimes trash. Silliness reigned.” Now champagne houses are trying to tweak their image to one of authenticity hoping to appeal to more cost conscience consumers they’ve perhaps discounted in the past. For example, LVMH is replacing its “Be Fabulous” campaign which was headed by supermodel Petra Nemcova in 2007 with a new international ad campaign centered on the beautiful Scarlett Johansson. (We suppose this is their idea of a more down to earth approach.)

There are concerns that slashing prices will make it very difficult to implement price increases in the future. Nonetheless, price wars are practically inevitable this holiday season. Alice notes that “if history repeats itself, those with the most to move will rage a slash-and-burn price war in November and December—when practically 50 percent of the year’s bottles are usually sold.” She says that “at least one high-level distributor” drew up plans in July to reduce prices on its unsold Champagne by 25% in the first 90 days and to drop prices another 25% if bottles are still unsold by the 180 day mark. In all, there may not be much profit in champagne this year but the industry could succeed in improving its image and perhaps even gaining new loyal consumers.


WSJ wine critics Dorothy Gaiter and John Brecher skewered American chardonnay in an article last week, claiming that the majority of them have become complacent in maintaining quality, while refusing to offer discounts in the recession. Comparing chardonnay to the “Cadillac of the wine world,” Dorothy and John point out that their core audience is older, financially secure consumers stuck in their ways. Translation: they’re going to buy the brands they’ve always bought, so “Chardonnay producers have decided that, as long as the bottle is just as heavy and the label is just as nice, they can take advantage of those customers by shirking on quality.” Ouch. Even the article’s title goes after American chardonnays, claiming there are “too many ‘stupid, insulting wines.’”

They tasted various American chardonnays from 2006 and 2007 that fell in the $40-$70 price range. Expecting to find good deals amid the recession, they were surprised to learn that “the the prices on these are not as flexible as we would have guessed” in retail stores. “It's as if most wine stores these days are like developers who built homes on spec and now refuse to lower prices even in the face of weak demand.” They eventually discovered that 2007 chardonnays were better than 2006 “but not so much better that they saved the tasting... we were amazed that so many storied wineries put their names on them. We would have been embarrassed.”

They ultimately deduced that higher end American chardonnay is not a good value right now. Of course they named several chardonnays that were good with most coming from newer wineries. To check out the list and the full article, click here.


CANNON WINES WILL WORK WITH BRONCO WINE to take Naked Earth organic wine national through Bronco’s subsidiary Domaine Napa Wine Co.

BEAM’S HORNITOS TEQUILA says it will be a part of a new frozen margarita, called the “Cowboyrita” at all Dallas Cowboys Stadium events during the 2009 season.

WE’RE CURRENTLY ATTENDING the Wine Industry Symposium in Napa, so there’s a lot of good stuff to come. Stay tuned...

Until tomorrow, Megan

“There is only one difference between a madman and me. I am not mad.”
Salvador Dali

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