Monday, November 15, 2010

A condensed Sommelier - Wine Buyer's opinions on the actual wine market and how things have changed in the last few years

A condensed Sommelier - Wine Buyer's opinions on the actual wine market
and how things have changed in the last few years

I just realized that I haven’t written anything for the past few weeks and I missed it tremendously. However, I like to spend time with my family rather than being always on my computer; but also I was busy at the store, then went away for a week to come back just in time to start the much anticipated last 6-7 weeks of the year.

This last Friday was the gun-shot-signal for all retailers ready in their starting block to race and give their maximum to provide their customers with the best products, the best prices and the best services. By doing so, they maximize the effect of the holiday season to have an astonishing end of the year before checking and comparing revenues, profits and bonuses numbers in January.

New York Wine Market

OND (October-November-December) usually correspond to about 35-50% of the annual numbers for most retailers, more especially wine & spirits, cloths and toys stores. Normally, about 2 weeks before Halloween always corresponded to the beginning of the last stretch, with daily sales and numbers going crescendo up until the last rush of Christmas and New Year’s Eve.

Yet, over the last decade, since the crumble of the two towers in 2001, which awfully checked the financial market and the world in general, generating multiple costly wars and other incidents; then the collapse of the real estate-contractor-insurance-foreclosure-loan companies in 2006 destabilizing the American economy, leaving hundred of thousands people without home, money or even job; followed consequently by the financial crash of 2008, bringing misery to our western society standards mainly based on consumption…

… It seems that people and consumers are more and more cautious about how they spend their money and prioritize on more essential products rather than indulge themselves with unnecessary items.

Thus, it is understandable that for the past 2-3 years, the booming sales that usually happened for Halloween about 1-2 weeks before October 31st, have slowly shifted and been replaced by short and scarce momentum just before Thanksgiving, usually celebrated on the fourth Thursday in November; basically reducing and compacting the 10-11 weeks of the best retail business sales of the year into 6-7 weeks.

Nowadays, people in general have difficulty to foresee their immediate future and therefore pay more attention to their spending habits. Under $15, or should I even say under $12 has become the norm for wine buying. And $30 has become the new standard ceiling for special occasions, $35-$40 max for Champagne. Of course and fortunately, a small minority of customers will always be able to spend more and indulge themselves, but for the majority, their everyday reality is that it has become very difficult to exceed $15-$20 per bottle, making $25-$30 a premium. Anything above consequently has reach luxury status.

Consumers want very good wines for cheaper prices and have subsequently been targeting lesser expensive everyday wines over the last 2-3 years, $12 and under is the norm as I was saying earlier. The market has changed and retailers need to adapt, rethink their strategy and like anyone else work 3 times more to obtain more less the same results and numbers.

That said, we could conclude that the New York market is not anymore what it used to be even 3-4 years ago. The market is over-flooded with wines (some very good but a lot of very bad ones too) from all around the world with more importers and distributors (and even retailers) than ever before. Yet most distributors seem to have similar portfolios and offer the same types of wine. Thinking that it was so lucrative before, investors have bet on wine stores and the SLA (State Liquor Authority) have given more license over the last few years than ever before (could it be a question of Tax revenues because the law authorizing supermarkets to sell alcohol - wine & spirits - wasn't voted?).

However, there are more and more wine & spirits retail stores in New York offering unfortunately less diversity, with even more competition on the Internet, and yet people spend less and less often than they used to only a few years ago. Customers are fewer, sales decrease and average spending is in decline too. Moreover, by contrast, emerging countries pushing the demand, soaring prices on certain brands and appellations have discouraged customers and penalized the image of certain regions, and weaken smaller producers.

Only retailers that will emphasize their customers’ relationship, by enhancing their customer services, buying lesser known producers crafting excellent wines for reasonable prices and keeping their prices at reasonable mark up, will be able to continue to provide and prevail. More especially nowadays as anyone can check, compare and buy at cheaper price rates all over the Internet. Free delivery and better discounts will also be success factors. With this bad economy, no need to be greedy, better have more understanding, compliance and customer-oriented attitude.

And that is how I always try to conduct myself in the store with my personal attitude but also with the wines that I buy through out the year. I have always had an excellent nose and palate to unearth great gems under $15.

First, because these wines are the ones most of my customers are looking for, and second, these are also the ones that I drink at home. Thirdly, because the market for wines above $30 (and even more for above $75-$100+) has dramatically declined over the last two years and rare are the few remaining customers that are willing to spend this kind of money in a bottle of wine.

More especially, if we rapidly analyze the financial and psychological state of New York market over the last 10 years, we could definitely conclude that people habits have changed and adapted with the ups and downs of the market (the following New Yorkers average spending numbers are approximate to what I could see and calculate over the last 9 years working in various New York wine & spirits retail stores in Manhattan and Brooklyn Heights where people may spend a bit more than other boroughs and cities):

  • 2001 World Trade Center crumbled down and the economy with it, people are terrorized.
  • 2002 People are still shaken and NYC is still somewhat paralyzed but recovering slowly. New Yorkers spend about $15-$20 for everyday wines, $35-$40+ for special occasions.
  • 2003 The economy is somewhat restarting and Ground Zero creates a tourist Boom. New Yorkers spend about $18-$25 for everyday wines, $40+ for special occasions.
  • 2004 Things seem to be back more-less to normal and spending is back too, yet with some over-spending-buying-expectations from people and businesses too. New Yorkers spend about $18-$30 for everyday wines, $40+ for special occasions.
  • 2005 Business is somewhat booming once again, yet something is in the air, hurricane "Katrina" and other disasters occurred and it seems that over-expectations are confirmed, plunging people into stressful situations and debts. New Yorkers spend about $18-$25 for everyday wines, $40+ for special occasions.
  • 2006 The loan-company-insurance-contractor-developer system collapsed due to over-expectations and other factors, generating lack of business, closing businesses and unfinished and unpaid contracts, consequently job losses, home foreclosure, and so on... yet New York is still standing and seems to be less touched than the rest of the country, and business is somewhat OK, definitely better than other states. New Yorkers spend about $15-$20 for everyday wines, $35-$40 for special occasions.
  • 2007 The rest of the country collapse, New York is touched but still not so much compared to the rest of the country and people continue to spend, although more carefully but still quite a bit. New Yorkers spend about $15-$20 for everyday wines, $35-$40 for special occasions.
  • 2008 Consequently, two years after the collapse of 2006 and already gently declining since 2001, the financial market crashes and New Yorker who thought they couldn't be touched, started to really feel the impact of the bad economy, therefore spending less and being more cautious. Amongst other things, wine sales decreased yet spirits sales slightly increased in some ways. People are scared but yet feel that optimistic-energy-filled New York will resist and overcome the crisis, also due to the high amount per square meter of 6 figures+ salary New Yorkers, who are quintessential to the constant growth of the city. New Yorkers spend about $12-$18 for everyday wines, $30-$35 for special occasions.
  • 2009 The market is really bad for the rest of the US; lot of people are getting laid out, lose their job and their home... Bank, insurance and credit companies are in difficult positions. People have difficulty to find the light at the end of the tunnel and solutions to their situations. It is now a fact: wine sales are decreasing dramatically. People buy at the last minute and are more cautious. Yet they are more wine & spirits retailers and distributors with more items than ever for fewer consumers that spend less and less often. New Yorkers spend about less than $12-$15 for everyday wines, $18-$25 for better nights and $30 for special occasions.
  • 2010 Thinking that they were protected against all odds, New Yorkers now really feel the consequences of 2006 collapses and 2008 financial crashes. It is very difficult for a major part of New Yorkers and spending only happens when necessary and at last minute. New Yorkers spend about less than $12 for everyday wines, $15-$20 for better nights and $30 for really special occasions. New Yorkers want to be optimistic and hope for better future, even at the very last moment, they will still spend a bit. Surely less than previous years, but still, whether at home with family and/or friends or in restaurants, they want to mark the traditions of the holidays seasons. And they will.

High Prices

Regarding price increase, when I said earlier that I have been for quite some time and continue mostly to unearth great wines under $15, (because these are the wines that my customers and myself drink at home), I know that they are still fortunate customers that can afford very good wines reaching $30 and above. Yet, and don’t get me wrong, but over the last 18 years of my small wine career, I haven’t met many Sommeliers and professional Wine Buyers (including me) that could really afford expensive wines.

Maybe in rare occasions, but otherwise, as professional wine buyers, we are mostly and tremendously lucky to taste them and buy them for our most fortunate and wealthy customers. They will surely appreciate these luxury wines & spirits in most cases, but rare amongst us, Sommeliers and everyday wine buyers and consumers, are the ones that can really afford them for our personal consumption.

Bad economy doesn't seem to slow down the demand from emerging countries for luxury items. Consequently, famous estates through out the world, now mainly owned by banks, insurances, lobbyists and big corporate companies which are more into money business, don't hesitate to raise their prices. Therefore the ever increasing prices of very sought-after wines from the leading wineries are not helping the sales either, enlarging the gap between society casts and attaining unreachable ceilings for the average consumers.

Take Bordeaux for example, who can afford a bottle of 1st Growth anymore?

“En Primeur” sales (meaning when as a customer you can buy greatly sought-after Classified Bordeaux wines roughly 2 years before bottling and release) have nearly increased by 9-10 times in the last decade. These are irrefutable facts that can be verified anytime!

Here is a little chart of the WHOLESALE prices (meaning Châteaux/Negociants/ importers prices proposed to retailers before retailers markups) offered on “Première Tranche” in the New York market for a bottle of Bordeaux “1er Grand Cru Classé” for the most appreciated vintages of the last decade:

  • 2000 started around $125-$150 (“Première Tranche” meaning “first offer”)
  • 2003 started around $325-$375 (“Première Tranche” meaning “first offer”)
  • 2005 started around $525-$575 (“Première Tranche” meaning “first offer”)
  • 2009 started around $875-$950 (“Première Tranche” meaning “first offer”)

“Premiere Tranche” meaning “first offer” from the Châteaux and thus Négociants, yet prices increase even more with 2nd and 3rd Tranche (if any), and even after 6 months if demands continue, and even more after bottling when the vintage is finally available in stores; then the European market and continuous fluctuating demands and availability of certain vintages dictate the prices up as the years pass…to attain astronomical heights.

Remember that the above prices were wholesale prices, meaning without the markups of the retail stores, which normally work from 35-50% and up atop wholesale prices. Meaning, that as of today, the retail prices of some of these 1st growths goes:

  • between $950 to $1350 for a bottle of 2009 Château Mouton-Rothschild or 2009 Château Haut-Brion;
  • between $1100 and $1500 for 2009 Château Margaux;
  • and between $1400 and $1600 for a bottle of 2009 Château Latour
  • and up to $1800 for a bottle of 2009 Château Lafite-Rothschild.

My Opinions

Who can afford a bottle of 1st Growth anymore? Where will these prices go for the next “exceptional vintage” or “vintage of the decade” as the formula is so often employed to characterize the better years of Bordeaux wines? How many people will continue to be able to spend this kind of money? When will they stop to pay so much for a bottle of wine? Who will denunciate abuse and greed? It seems that these questions find more and more answers every years as prices go up. At least more people write and talk about it.

Yet, mentioning it is a really good thing, but it does not really change anything, because there will always be someone to buy these auctions-market-profit-making-oriented luxury wines to resell them rather than drinking them. Before some of these ultra expensive gems can slide along the inner face of a decanter or a collectible glassware, they probably will have seen numerous auction warehouses and private cellars around the world, going from Bordeaux to Paris, London, New York, San Francisco, Singapore, Honk Hong, Shanghai, Moscow, Dubaï and many more of the richest cities on earth.

However, for those of you who have no intention of spending this kind of money, I would like to remind you that the most prominent, thus expensive, Châteaux of “la Place de Bordeaux” only represent a drop in the ocean of wines that are produced in the 60 different appellations that constitute Bordeaux: roughly about 350 wines including around 190 wines that constitute the Top ranking in each classification systems of Bordeaux (Haut-Médoc, Graves & Pessac-Léognan, Saint-Emilion, and Sauternes & Barsac) out of the 12,500 Château, Clos and Domaines scattered within all Bordeaux Appellations. Which means that there are still quite a lot of good value wines to be found even in the most expensive appellations of Europe and elsewhere.

In short, whether the wine is coming from Bordeaux, Burgundy, Rhone, Napa, Sonoma, Carneros, Rioja, Ribera del Duero, Priorat, and any of the other appellations and regions within the 70 leading wine producing countries around the globe, Sommeliers and professional Wine Buyer (including me) have always try to find the best wines with the most appropriate ratio quality-price to please their customers, but also to make appropriate profits. Nowadays with this economy, profits will have to be minimized to encourage sales and generate rather continuous cash flow. Distributors, retailers and restaurants will have to fight harder against growing competitions yet to sell to fewer customers, spending less and less often.

In other words, the game has changed and now consists to find the best bargains and somewhat abandon part of these luxury wines, which are so hard to sell mainly due to the bad economy, but also because of the increase of information access on the internet and raising amount of wine knowledge amongst consumers. Unlike 10-15 years ago, customers have broader knowledge of what they like to drink. They definitely know better not to necessarily spend a lot of money in heavily marketed or/and rated brands when they can find lesser-known wines as good or even better for far less money.

Faster communication systems, social networks, specialized stores, wine classes and seminars, critics and magazines websites, talkative websites and specialized blogs (like have all helped the average wine consumers to become more educated and experienced wine drinkers and readers. They know what they want and refer less to critics, magazines and ratings as they used to do just only a few years ago.

Becoming more serious everyday wine buyers (like me), they more often refer to their taste buds and how much money they can spend, rather than blindly following magazines and critics. They know how to diversify the sources of their information to make a good judgment call and buy the most appropriated wines for their palate and wallet. Making my job so much more difficult yet so much more interesting, compelling and challenging than it was before.

I was already pretty difficult and really picky regarding the wines that I bought, now I will have to be even pickier (starting today) to be able to provide better wines at more affordable prices from lesser known and consequently less distributed producers, to continue to provide more delicious out of the beaten path better value wines (and continue to avoid offering the same as everyone else, yet I know certain brands can not be avoided but overall I will always try to be different, interested and true to my palate).

After 18 years in the wine business as Sommelier and 14 years as a Wine Buyer, I love my job and bad economy or not, I will continue to be the king of wines under $15 and mostly support small, artisanal producers from underrated and little-known areas, like my grand-father used to be, rather than overly marketed brands.

Despite the economy and other factors influencing sales (good or bad), I continue to optimistically believe that people in general will continue to buy wines, even if at a lesser price or less often, wine (and spirits) will always remain a human race cultural habit, part of its ancestral culinary traditions and part of its happiness.

As I always say, by selling wine I sell happiness, an artisanal drink that gather people, create moments and generate feelings whether with friends or/and family for any occasion, around the table or not.

Think about it...


LeDom du Vin

Step into the Green! Drink more Biodynamic, Biologique and Organic wines (and spirits and food) from sustainable culture and respect the environment! Support the right causes for the Planet and all the people suffering all around the globe! Also follow projects and products from the Fair Trade, an organized social movement and market-based approach that aims to help producers in developing countries obtain better trading conditions and promote sustainability. Also support 1% for the Planet, an alliance of businesses that donate at least 1% of their annual revenues to environmental organizations worldwide. "Commerce Equitable" or "Fair Trade" is evidently and more than ever a needed movement connecting producers and customers, to be aware of others and their cultural and traditional products based on high quality, natural components and craftsmanship.

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