ENTHUSIAST'S CORNER May 2001

IS WINE RECESSION-PROOF?



Is Wine Recession-Proof?

Fortune seems to favor both the wine consumer and the producer-through good times and bad, wine sales growth is unabated.

In a recent issue of The New York Times, there was an article about a job fair in Texas, where representatives of multinational corporations had assembled to compete for top talent. Businesses such as Intel, Motorola and General Motors were making their best efforts to encourage recent college grads to consider exploring careers in their industries. Representing the wine industry was the E&J Gallo Winery. Their recruiters were grabbing the attention of attendees with this bold claim: The wine industry will flourish even in the most dire economic times. In other words, the wine industry is recession-proof.

I began to wonder about the truth of this statement. One thing a lifetime in business teaches you is that you can't be complacent; you're only inviting trouble. Yet the performance of our company over the past 20 years confirmed the Gallo claim: Through good times and bad, Wine Enthusiast Magazine has increased its readership and catalog accessory sales have grown. But, I wondered, was this true of wine sales as well?

I reached out to wine industry guru Vic Motto of Motto Kryla & Fisher, a Napa Valley consulting firm to the U.S. wine industry. Vic provided me a blizzard of statistics, a number of charts (one of which is reproduced here) and some common sense.

Bad Times, Good Times—Always Wine
"Wine sales growth has not been affected by the economy because wine is not a mature marketplace," Motto says. A mature industry is one that reaches most, or all, of its potential customers. The market for automobiles, for example, is mature—everyone who wants a car and who can afford one, has one. "But that's not true of wine," says Motto. "Twelve percent of the population consumes 88 percent of the wine, according to the Wine Market Council. When you look at it in reverse it tells you that wine has a huge untapped market—maybe the largest of any consumer product." The automobile comparison is also useful in illuminating a simple fact: In bad economic times, people may delay purchasing a car, but not a bottle of wine.

Wine and its Enthusiasts: Getting Better with Age
Also contributing to this stability is the demographic quirk of the Baby Boomers. Here again, the numbers favor wine. "The people who consume the most wine, the middle-aged people, are the fastest growing segment of the population," says Motto. "The number of people in their fifties is going to increase by 50 percent in the next 20 years. The number of people over 60, by 65 percent."

But beyond the statistics, what is truly driving large numbers of people to try wine and continue to enjoy it is simply that the quality of the wines being produced the world over is rising. New winemaking techniques and viticultural research are two important reasons, but there is a third: Winemakers are communicating with one another, sharing their discoveries and successes as never before. As a result, the quality-to-price ratio has never favored the consumer more than it does today, and the healthy sales reflect that.

I hope that the economy is booming as you hold this issue in your hands. But if it isn't, you can give thanks to wine's strong position in our economy, whether you're in the industry or not. An affordable glass of great wine soothes the troubled mind like nothing else.
Cheers!

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