The the current “great recession”, as it has come to be called, has turned the wine world topsy turvy. Wine Spectator summarizes its main effect by noting that wine consumption has not decreased; rather consumers have turned to cheaper wines, “value” wines as the euphemism goes. High end wineries are responding to the problem in various ways. Some are discounting their products at the risk of damaging their image, others are staying put, and yet others are going out of bussiness, in droves.
Clever bussinessmen are capitalizing on the plight of such wineries. A fellow named Cameron Hughes, a negociant by profession, has taken to purchasing surplus high end wines and relabelling them under his name and a lot number, thereby concealing the pedigree of the juice. He is then marketing them at fire sale prices. Those who have caught on to this bussiness as customers now have the additional bonus of trying to guess the real labels of the treasures they purchased. For instance an $18 Cameron Hughes Lot 142 tastes like an expensive California Pinot Noir, but what? Hughes is not the only player in this lucrative act. Some even specialize in truely the highest of high end. According to Mr. Hughes himself, “there ‘s a guy who gets bulk wines from Screaming Eagle. No one knows who he is”. According to the Wall Street Journal who featured Hughes in their May 1-2 edition, Screaming Eagle confirmed that they “declassify” a certain amount of wine every year.
Now on to two wine professional friends of mine who seem positioned at the opposite poles of the “recession effect”. One, a U.C. Davis trained enologist, has been employed for over a decade by a Burgundy based French barrel company, selling much coveted French Oak barrels to domestic wineries. His bussiness, which used to be smooth, easy and voluminous, has crashed to an abrupt halt. High end wineries, trying to survive their financial crises, have apparently stopped purchasing new barrels, at the risk of potentially injuring the ultimate quality of their products. Now my friend wonders when they will quit playing chicken with their oak, and their oak crazed clientelle.
In the meanwhile, another enologist employed by Delicato told me that their bussiness is booming. This Manteca winemaker, which sells “low end” wines all over the world, and some of whose labels have been critically acclaimed, has quadrupled its production in the last 8 years from 1 million to 4 million cases a year. Surprised? Not at all. The low end seems recession proof.
The secret to success with wineries nowadays seems to be diversified products (low leverage also helps). A “Mercedes” label is needed for prestige, but cheap, bulk wines for the masses remains the main foundation of succes. Thus you get, for example Robert Mondavi Reserve coming out of Napa, and Woodbridge from Lodi, produced by the same company. Or Rubicon at $ 150 per bottle from Coppola at his flagship estate at the old Inglenook winery in Napa, and an assortment of unknowns from a Coppola assembly line in Sonoma, at the old Ch. St. Jean property. There are countless others who are surviving with this bussiness model.
When it comes to price point, there is a tale of two wine worlds. Those who successfully bridge them can better shelter the storm. Those exclusively at the high end are stuck with boom and bust, and all the angst this brings. Those at the low end forever suffer from lack of respect; but I suspect this is not quite as distressing when they’re laughing all the way to the bank.