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Wine at a Good Price Doesn't Have to Be 'Cheap'

Chris Morris|Special to CNBC.com
Tuesday, 22 Dec 2009 | 4:57 PM ET

Don’t be surprised if you’re not holding a glass of Dom Pérignon or Moët when the clock strikes midnight on New Year’s Eve. These days, it’s more likely to be Prosecco or Cava.

AP

The recession may be forcing people to cut back in some ways, but holiday parties are still going strong this year. In a nod to the economy, value wines are being poured a lot more frequently than they were a few years ago.

“Consumers, both affluent and less affluent, are still drinking a lot of wine, but they are spending less per bottle,” says Bill Deutsch, founder and Chairman of W.J. Deutsch, a wine importer whose portfolio includes Yellow Tail, HobNob and Geyser Peak. “They seem to be buying wines in the price ranges between $5 and 15. They are diversifying their purchases and experimenting with labels based on recommendations that are made to them.”

Beyond people’s personal economic situations, the declining strength of the dollar is also having an impact on which wines are selling. Case and dollar growth is off sharply for products from France, Italy and Australia, according to AC Nielsen. (Shipments of French wines, for example, through mid-November were down 11.5 percent.)

Some brands are managing to buck the trends of their countries of origin, though. Deutsch says sales of Yellow Tail are growing and the wine seems to be gaining a greater share of that country’s overall sales. Also, this year’s Georges Duboeuf Beaujolais Nouveau has been a hot seller.

Consumer Nation Holiday Central Edition
Consumer Nation Holiday Central Edition

“It’s an established category and only comes out once a year,” he says. “And the press on it was very, very favorable. People read that press and hear about it and jump on it because it’s a good vintage.”

The fact that both wines can be purchased for under $10 has helped considerably as well.

Not every overseas grower is suffering. Vineyards in New Zealand and Argentina, which have low production costs, have had a banner year in U.S. stores. New Zealand wines have seen a dollar growth of 15.5 percent this year, while Argentinean varietals have recorded an impressive 42 percent dollar growth.

Both countries offer a wide selection under $10. The trick is convincing people that “cheap” wine doesn’t necessarily mean bad wine.

“You don’t need to spend over $10 for a solid bottle of wine,” says Mike Brenner, general manager of Joe Canal’s, a liquor store chain in New Jersey. “A lot of customers do perceive that quality is determined by price. They’ll ask: “If I’m only spending $8.99, how good can it be?” … But it could very well be that that wine is produced in greater quality — but that doesn’t mean it’s not a good quality wine.”

Wine purchases overall are actually trending upward this year—by approximately 3 percent—as people cut back on trips to restaurants. Because liquor store prices are always considerably cheaper, customers tend to be more open to buying more.

“They may not spend as much for a single bottle of wine, but they buy more bottles because they’re staying home more,” says Brenner.

Some people are also using this as an opportunity to expand their palate which could give value wines stronger legs, even when people are more comfortable with their job stability and income.

“You’ll find older people are pretty much brand-loyal,” says Deutsch. “[Younger shoppers] are trending towards experimentation. … They’re not necessarily becoming affixed to one specific brand and many people are beginning to vary their purchases.”

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