By now most of you know I have an intense passion for wine.
In recent years I have begun to really invest significant time in the business side of the wine industry and I have even had the opportunity to consult with a few of the larger wine producers as it relates to acquiring and retaining talent. It is so awesome to combine your profession with your passions!
Silicon Valley Bank annually issues a State of the Wine Industry report and the 2009-2010 report was issued on May 1, 2009. It took me until now to finally ready it cover to cover and I wanted to share it with our readers because there are not only lessons for the wine trade but business in general. That said, it is an absolute must read for those in the wine business and anyone who has a passion for wine.
The author is Rob McMillan, EVP and founder of SVB's wine division and it is incredibly insightful, well written and shows an enormous amount of foresight as it relates to the American wine industry. There is a cacophony of noise around the poor economies impact on the wine industry and most of it is just speculation and outright guess work from people who are not in the know. SVB is one of the largest lenders to the U.S. wine industry (winery and vineyard clients in the major wine making regions of the U.S.A number into 300's) and therefore has access to information, data, business plans and strategies of those who actually have to execute and deliver results. Bottom line is, if you care about wine, the U.S. wine industry and business in general you need to listen what Rob is saying.
Read the report through the link above but if you just want a quick overview the Good News / Bad News, taken directly from the Executive Summary of the report, is after the jump.
GOOD NEWS
On a year-over-year basis, we predict slightly improved sales in Q2, flat sales in Q3 as the economy continues to bump on the bottom, and positive Q4 sales. We believe the year will end essentially flat in terms of overall growth in the fine wine segment, and show modest growth in higher volume segments. Wine supply is running in balance to short. More electronic tools are available to support direct-to-trade and consumer sales. Per capita consumption continues to rise in the U.S. Credit is available for smaller wineries, though spreads have widened over Treasuries, the Prime Rate and LIBOR. Cult wines sold out their allocations in Q4.
BAD NEWS
Q4 2008 was the worst Q4 in memory for the fine wine business. Restaurant sales are depressed. We expect higher unemployment (exceeding 10 percent by year end), higher foreclosures and depressed consumer spending through the year as we seek a bottom. The economy will not return to the market experienced during the past decade. Price points below $35 are selling, but wines between $50 and $125 are in a “dead space,’ with only established labels selling. Some wineries will trade hands this year at bargain prices. Distribution has all but ended as a viable sales channel for small wineries. Large credit extensions to single entities are harder to find, and syndicated credit markets are nearly frozen. The secondary market for collectible wines continues to soften. Drought conditions persist in California. Sin taxes are being widely applied to alcoholic beverages nationwide. Distributors continue to drop small brands from their books.
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