Creating world class wines has done nothing to shield the California wineries from feeling the effects of the economic downturn. Northern California wine country – just over San Francisco’s Golden Gate Bridge, in Sonoma Valley and Napa Valley saw the year’s sales come in flat, when compared to last year, and even with that, the industry has had to work harder to create the same sales.
A Grgich Hills spokesperson suggested that the group saw sales drop almost immediately when the mortgage crisis arose. People are consuming fewer bottles overall, while also moving to cheaper wines, and in restaurants, buying more frequently by the glass than by the bottle. Restaurants are reducing the number of higher priced bottles carried, and stocking greater numbers of bottles and types of less expensive wine. Online wine retailers have seen their bottle price point reduced by 20% overall, along with an increase in sales of the lower priced wines.
Even wine aficionados have not been immune to concerns about the economy and have scaled back on purchases, preferring to tap into what is already in their cellars rather than continue building or restocking as they drink. One well known wine writer cut his spending for personal wine by half for a period, and then stopped completely, turning to the nearly five hundred bottles currently in his cellar until he feels more confident in a turnaround.
The most heavily hit wineries are the boutique vineyards and smaller production facilities given that they must charge higher margins to cover production, shipping and marketing expenses on fewer bottles. In the glut of wine available, the smaller and newer vineyards haven’t established a brand that might otherwise help to sell a higher priced bottle and carry their sales through a slowdown. And as the price of everything that goes into producing and delivering wine has risen along with energy costs, the lesser established brands with the higher prices are the first to feel the effects.
The smaller California wineries also rely on sales from their wine-clubs and tasting rooms. Wine-clubs are seeing those who used to buy cases, move to buying individual bottles, and those who used to buy bottles, have greatly reduced their purchasing frequencies, or stopped buying altogether. The economic downturn coupled with the cost of gas had a measurable impact on the number of tourists heading into the local wineries in Sonoma Valley and Napa Valley this past summer. While some turned to wine country tours utilizing buses coming out of San Francisco, the downturn in visitors, and their reduced purchases was obvious and is expected to continue well into 2009.
