It has been known that El Nino/La Nina changes very much affect the California Wine crop and Winery Industry and this year’s switch over will be no different. It should also be realized that the global market for wine is expanding, perhaps you have heard; the Chinese are drinking up a storm. Therefore, I am not so sure all this negativity in the Northern California wine sector is correct. One could say that the real estate bubble caused many to pay way too much for winery properties at a point that they could never get a decent ROI on their land.
These extra costs are not a product of a failing wine market, rather they are the irrational purchasing by speculators or wealthy folks that perhaps wanted a tax write-off business and always wanted to retire in the wine country. One could say that any economic strife from those sorts of winery business models, or boutique wines is merely a “reality check” coming back into free-market conditions, while the next boost and long term growth cycle in the sector awaits. Remember the wine business too is somewhat cyclical.
Also, realize that the global economic crisis did challenge consumers, and mid-range products due to price sensitive buying behavioral changes, again temporary, especially considering all the new wine consumers coming online world-wide as folks emerge from poverty. Now then let’s discuss all this in more detail, shall we?
El Nino weather changes “supply” of yields and thus, prices (supply and demand), meanwhile, the Two-Buck-Chuck syndrome where low-cost wine became trendy did reduce the allure of the middle range products, and softened upper ranges, and the economy of course as a whole effects “elective” consumer spending as most of the winery industry articles in the Wine Trade Journals suggest and indicate.
Further, like all luxury brands in all categories have gotten slaughtered lately, many of which currently in deep-discounting survival mode, all of this should have been expected. Wineries must use low-cost branding tactics and go with low-cost high-volume type strategies for now. This will soon change, and the California Winery Region will be open for business with high-end customers again.
Too, the “California Wine Property Rush” was spectacular indeed, way out of control, and the thought of ROI based on those high real estate purchase prices and increased competition – simply not doable under the market conditions, and economic factors. So reality will bring it all back. But Whooyah! The Chinese upper-middle class demand is coming online too. Yes, I bought some Trader Joe’s wine the other day $5.99 a bottle, the stuff is excellent, so I bought a case. Why break out the good stuff after the first bottle when guests are visiting? They don’t care, and the $5.99 stuff is excellent, it actually tastes better.
If you’d like to think more on the winery business branding strategies needed to excel, I’d recommend that you read the book; “Zag” it’s pretty good, and there are ways to survive if you are a winery. Now then, back to the property cost challenges.