Unpredictable Future for Fine Wine

FILED SEPTEMBER 1, 2009

Dear Client:

Before the recession struck in October of 2008, expensive wines had enjoyed years of success and steady growth in the US. Since then, sales have dramatically dropped off and many consumers have done a complete 180. Kevin McCallum of The Press Democrat wrote an interesting article on the subject of consumers increasingly seeking value. A major debate in the wine industry (and spirits for that matter) is whether this new “trading down” trend is here to stay. It’s certainly wreaked a lot of havoc over the past year: inventories at high-end wineries are up; lay-offs are rampant; grape prices are down; and a record number of wineries and vineyards are for sale. Wines priced above $20 and especially above $50 are struggling. Meanwhile, value wineries are benefiting from the economic shift as consumers discover good wines at low prices. Most of the industry experts interviewed in the article agree it will likely take years before consumers freely dine-out at high end restaurants and start trading up to luxury wines. To check out the full article, click here.

BRITISH DOCTORS CALL FOR BAN ON ALCOHOL ADVERTISING

The British Medical Association is calling for a complete ban on alcohol advertising and marketing, including TV ads and sponsorships, along with setting a “minimum price.” In a report called “Under the Influence,” the association claims that the £800m spent annually on alcohol promotion should instead be spent on curbing alcohol related problems in the UK. They also claim that guidelines overseen by the Advertising Standards Authority are “completely inadequate” and “weak.” The BMA also wants further research into the sales practices of the alcohol companies, distributors and supermarkets. Meanwhile, alcohol trade group Portman Group says there is evidence that “that advertising causes brand switching, not harmful drinking." We assume the alcohol companies won’t take too kindly to this report, particularly UK based Diageo, not to mention it would kill the already hurting TV, newspaper and magazine industries.

OREGON WINERY FACES OFF AGAINST FORMER WINEMAKER

Oregon winery Domaine Serene is facing off against former winemaker Anthony Rynders, who they claim have broken company policy by disclosing trade secrets and using company equipment to produce other wines. Anthony, meanwhile, is seeking to dismiss the claim. Their major concern appears to be that Anthony will use the winery’s technique in producing white wine with red pinot noir grapes. Anthony claims this practice isn’t a secret and well known in the industry. Domaine Serene is asking the judge to award it over $75,000 in damages, along with an injunction that prohibits him from disclosing any trade secrets. A hearing on the dismissal motion is set for Sept. 30 in U.S. District Court in Portland.

WSD BRIEFS:

USA TODAY LAUNCHES WINE CLUB. USA Today has launched a new wine club, joining the likes of other respected publications such as The Wall Street Journal and New York Times. Operated by My Wines Direct, the club will feature six bottles of wine each quarter for $69.99 plus $11.99 shipping.

THE FRENCH GOVERNMENT HAS AGREED TO HELP WINERIES by guaranteeing an “export credit” that will be finalized with the finance minister by the end of September. They will not give direct subsidies to wineries, however. This could come as a huge help to French wineries who have faced declining export sales in recent years, which was compounded by the recession.

INDIANA CONSIDERING SUNDAY SALES. An Indiana legislative committee is meeting to discuss lifting the ban on Sunday alcohol sales and Election Day sales. They are also considering allowing grocery stores to sell cold beer. The bipartisan panel will begin taking public testimony on the issues during its Sept. 15 meeting, and report its findings to the General Assembly in January. Indiana is one of three states that ban all alcohol sales off-premise on Sundays.

PERNOD RICARD SELLING OFF V&S. Pernod Ricard says it will sell off the rest of Vin & Sprit aside from Absolut. The list includes Explorer, Renat and Blossa glögg, along with about 40 wine labels, including Chill Out.

MORGAN STANLEY UPGRADES COSTCO. Morgan Stanley upgraded Costco to overweight from equal weight because food deflation and other pressures are starting to ease.

GAUGING THE INDUSTRY: WSD’S BI-ANNUAL SURVEY. We need your help! Please click here to answer 5 short questions about the state of the industry. We’ll post the results in the next few days. All respondents are anonymous.


Until tomorrow, Megan

“I don't know the key to success, but the key to failure is trying to please everybody.”
Bill Cosby


--------- Sell Day Calendar ----------
Today's Sell Day: 6
Sell days this month: 22
Sell days this month last year: 22
This month ends on a: Wed.
This month last year ended on a: Tues
YTD sell days Over/Under: 0

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