Five years, and the five biggest changes in the wine business
The blog turns five next week, a period that has given the Wine Curmudgeon a cyber-eye view of some significant changes in the way we drink wine in the U.S. It’s not the same score-driven, pay as much as you can business that it was when I did newspaper wine writing in the two decades before the recession.
The biggest change? That consumers discovered that they can drink cheap wine without worrying about quality or what wine snobs think. This shift in drinking habits has been well documented, though rarely discussed in the Winestream Media. Head in the sand, I suppose.
But everyone I ask says the same thing (and I ask everyone I talk to). We’re selling more wine than ever before, they say, but we’re making less money because we’re selling cheaper wine and cheaper wine is less profitable. One importer was practically rueful; she said she had never seen anything like it in all her years in the wine business.
The other changes: The multi-national wine producers’ growth and increasing domination of the wine business; the return of sweet wine; the decline and fall of Australia; and the idea of local wine.
1. The rise of cheap wine. In the early part of this century, there was no Two-buck Chuck, no Barefoot, and no Cupcake. There wasn’t even a sense of cheap wine. Instead, the perception was that there was good wine, which was expensive, and bad wine, which wasn’t. Two-buck Chuck, the first competently and consistently made cheap wine, started the idea of cheap wine as something that wasn’t junk, and recession-weary consumers embraced it. Wine drinkers who had been taught they needed to pay $15 or more for a decent bottle of wine for dinner discovered they could pay $7 — and they didn’t notice a difference in quality (because, of course, the wine business never bothered to explain the difference). This process is called trading down, and it looks like it’s here to stay.
2. The multi-nationals take over. Wine was supposed to be multi-national proof, and even Coca-Cola couldn’t make it work during its wine foray in the 1980s. That has all changed, and in a huge way. Not only do a handful of wineries make as much as 90 percent of the wine in the U.S., but they are also the most profitable and growing faster than everyone else. This is why so much of the reporting about wine pricing is so wrong. It doesn’t take into account the ability of these Wine-zillas to set prices regardless of the grape supply. Their economies of scale are one reason, but they can also afford to make less profit on each bottle of wine, hence keeping prices low and retaining market share.
3. The return of sweet wine. In 2007, white zinfandel accounted for almost 10 percent of U.S wine sales, as measured by bottles sold. Four years later, it was just 7 percent. This trend started sometime in the early 2000s, and it looked like white zinfandel – once the wine that drove “serious” wine drinkers crazy because it was sweet – was fading slowly away. Which may happen, and which may be irrelevant. The wine business has embraced the new sweet wines in a way it never did white zinfandel – new brands, clever marketing, and the respect that comes from a new cash cow. Even more unbelievable is the rush to sweet red wine, which accounted for 1 percent of wine sales in 2011, as much as malbec.
4. The sun sets on the Aussies. A decade ago, the hip wine was shiraz, Yellow Tail had spawned what seemed like a million critter labels from Down Under, and Australia was the next big wine region. Today, the Australian wine industry is a mess, and retailers tell me they can’t give shiraz away. How bad is it? The Australian Bureau of Statistics reported earlier this year that the country’s wine sales declined 2.4 percent in the most recent fiscal year — the first decline ever. The Aussies were clobbered by a doubling in the value of their currency against the U.S. dollar; an almost Wall Street-like feeding frenzy in which the country’s big producers merged, merged again, and then collapsed; and government policies that encouraged production and produced an almost unimaginable over-supply of grapes.
5. Local does mean wine. The number of regional wineries in the U.S. increased 44 percent between 2005 and 2010, from 1,550 to 2,765, according to the Wine America trade group, We can argue all we want about the quality of local wine or about whether there is a need for it, but that doesn’t change the fact that it exists, and that it isn’t going away. There are two generations of wine drinkers younger than the Baby Boomers who have grown up with regional wine, and think that it’s perfectly normal in the same way Boomers thought TV was normal and didn’t understand why anyone would want to listen to the radio every evening.