Well done. I would add to the current wine industry's woes interest rates and inflation costs. Remember James Carville's famous statement years ago "It's the economy, stupid". The sun will come out tomorrow and I am with you on 2 years.
Austerity periods have hit this industry more often than consumers realize. Wine buyers only know what they can see. Upheavals in the wholesale trade; changes in regulatory law, bad medical news, and logistical issues often are at least as damaging to the infrastructure, which the consumer rarely hears about. And despite all of the ups and downs, the industry survives.
When I first moved to Napa, I was surprised at how much wine people consumed. It was a daily occurrence, at every event, etc. That was 35 years ago. Not true anymore. I no longer drink, and most of my friends have only an occasional glass of wine. My adult children, in their late 30’s., rarely drink a glass of wine and usually it’s with a meal. It’s no longer assumed that wine will be served at meals when dining with friends. However, the seltzers and beers seem to be popular with the younger folks. This is just what I am
I certainly understand that there are generational changes that can affect the wine industry, and the current "alternative beverage" category should not be dismissed as a mere fad. But I'ill remind you that 30 years ago or so, wine coolers were seen as a threaten to fine wine.
I hate to say this, but I have not bought a Napa Valley wine in years. I buy excellent wines from other countries and these wines are favorably priced for my budget. Oops, I forgot! I do buy Napa Valley sparkling wines.
Many Napa Valley wines represent what is considered by some people to be the pinnacle of quality. As such, pricing of them has risen beyond the wines of many other regions. This does have a way of pricing locals out of the market. This situation probably will not change anytime soon because the cost of land has risen to heights most people never imagined. Those who cannot afford Napa wines still have alternatives, however,.
Having moved to Napa 6 years ago and being a part of the industry, I continue to watch the premiumization of wine prices, the elevation of corkage fees to $75 in many cases and tasting fees approaching the cost of concert tickets. It didn’t take a rocket scientist to see this is not sustainable. As Warren Buffet states, “Mr. Market will come into play.”
I remember a period in the 1980s when I saw Dom Perignon deeply discounted -- a situation I never thought I would ever see. This was due to a particularly aggressive gray market. Fine wine experts were calling this the end of Dom as an icon. Today., the national average price for this Champagne is more than $380 a bottle. So, yes, Mr. Market has yet to weigh in.
I always appreciate Dan Berger's insights and opinions. I agree that the current crisis will resolve itself, but I think it will take longer than 2 years and the wine industry in the U.S. will be significantly smaller when all this bottoms out.
One of the points that I did not make is that for the next couple of years, inexpensive wines ($10 to $14) may be noticeably better than they have been because the amount of quality wine available now in the bulk market is as cheap as it has been in more than a decade. However, wines with the appellation "American" and selling for $4 to $6 a bottle may actually represent even better value!
You make a very good point. I'll be looking for some good bargains. FYI, I am CEO of 5T Wealth, LLC in Napa. We have several clients that own wineries and/or vineyards. My take is that this is the biggest downturn the industry has seen in my time in the Napa Valley (nearly 40 years) and will take much longer to completely resolve. But there will be a very healthy wine industry in the end. Thanks for all of your good work.
In 2005, in my private wine newsletter, I commented about the oversupply of wine that existed throughout California then. There were several reasons for that. Primarily it was due to the typical roller coaster that agricultural products often go through. Back then., several wineries were screaming gloom and doom. By 2007, things had stabilized.
Well done. I would add to the current wine industry's woes interest rates and inflation costs. Remember James Carville's famous statement years ago "It's the economy, stupid". The sun will come out tomorrow and I am with you on 2 years.
Robin:
Austerity periods have hit this industry more often than consumers realize. Wine buyers only know what they can see. Upheavals in the wholesale trade; changes in regulatory law, bad medical news, and logistical issues often are at least as damaging to the infrastructure, which the consumer rarely hears about. And despite all of the ups and downs, the industry survives.
When I first moved to Napa, I was surprised at how much wine people consumed. It was a daily occurrence, at every event, etc. That was 35 years ago. Not true anymore. I no longer drink, and most of my friends have only an occasional glass of wine. My adult children, in their late 30’s., rarely drink a glass of wine and usually it’s with a meal. It’s no longer assumed that wine will be served at meals when dining with friends. However, the seltzers and beers seem to be popular with the younger folks. This is just what I am
Seeing….out here outside of the wine world.
Yvonne:
I certainly understand that there are generational changes that can affect the wine industry, and the current "alternative beverage" category should not be dismissed as a mere fad. But I'ill remind you that 30 years ago or so, wine coolers were seen as a threaten to fine wine.
I hate to say this, but I have not bought a Napa Valley wine in years. I buy excellent wines from other countries and these wines are favorably priced for my budget. Oops, I forgot! I do buy Napa Valley sparkling wines.
Catherine:
Many Napa Valley wines represent what is considered by some people to be the pinnacle of quality. As such, pricing of them has risen beyond the wines of many other regions. This does have a way of pricing locals out of the market. This situation probably will not change anytime soon because the cost of land has risen to heights most people never imagined. Those who cannot afford Napa wines still have alternatives, however,.
Having moved to Napa 6 years ago and being a part of the industry, I continue to watch the premiumization of wine prices, the elevation of corkage fees to $75 in many cases and tasting fees approaching the cost of concert tickets. It didn’t take a rocket scientist to see this is not sustainable. As Warren Buffet states, “Mr. Market will come into play.”
Tobin:
I remember a period in the 1980s when I saw Dom Perignon deeply discounted -- a situation I never thought I would ever see. This was due to a particularly aggressive gray market. Fine wine experts were calling this the end of Dom as an icon. Today., the national average price for this Champagne is more than $380 a bottle. So, yes, Mr. Market has yet to weigh in.
I always appreciate Dan Berger's insights and opinions. I agree that the current crisis will resolve itself, but I think it will take longer than 2 years and the wine industry in the U.S. will be significantly smaller when all this bottoms out.
Paul:
One of the points that I did not make is that for the next couple of years, inexpensive wines ($10 to $14) may be noticeably better than they have been because the amount of quality wine available now in the bulk market is as cheap as it has been in more than a decade. However, wines with the appellation "American" and selling for $4 to $6 a bottle may actually represent even better value!
You make a very good point. I'll be looking for some good bargains. FYI, I am CEO of 5T Wealth, LLC in Napa. We have several clients that own wineries and/or vineyards. My take is that this is the biggest downturn the industry has seen in my time in the Napa Valley (nearly 40 years) and will take much longer to completely resolve. But there will be a very healthy wine industry in the end. Thanks for all of your good work.
In 2005, in my private wine newsletter, I commented about the oversupply of wine that existed throughout California then. There were several reasons for that. Primarily it was due to the typical roller coaster that agricultural products often go through. Back then., several wineries were screaming gloom and doom. By 2007, things had stabilized.
Just today, I read that some wine companies have decided to drop tasting room fees for a month or two. Could this be the beginning of a trend?
Too many vines, too many wineries. Too much emphasis on hospitality rather than agriculture.