WinEconomy IV: Another round...

Against the backdrop of year end and the coming shuffling of wineries and the distributors who represent them that we see in the first quarter of each new year, we are experiencing yet another round of drastic price cutting. While consumers, retailers and restaurants welcome these price breaks in the near term this round of price cuts to me as a wine professional is far more disconcerting for the long-term health of the wine industry here in North Idaho.

This time the price cutting really spans price points and appellations, where previous discounts seemed more concentrated to lower price ranges. Two California Cabernet producers on opposite ends of the price spectrum demonstrate how broad based the pricing trends are. The Huntington Cabernet which normally retails for about $14 has been cut to about $9, while on the high end the great Napa producer Groth has been cut from a retail price of nearly $60 to about $40 (these prices are based on standard industry mark up).

The other trend that concerns us is that previously the price cuts appeared to be targeted at reducing inventories of passed vintages and to a lesser degree varietals that did not sell as well. This time around though distributors are discontinuing brands, varietals within brands and entire portfolios of importers at levels up to 25 percent of their entire book of wine, drastic cuts that are unprecedented.

While capital constraints are no doubt partially responsible for the aggressive price moves, it appears that the recently passed Washington state initiatives privatizing liquor sales may be partially to blame as well. The wine distributors that serve North Idaho, with a couple of exceptions, also cover Eastern Washington and we are aware of at least one that plans to start distributing hard alcohol no doubt with more to follow, so even though financially a distributor may be in fine shape they would have to free up some capital so they can expand their liquor inventory.

While in the near term this convergence of factors provides consumers with the opportunity to pick up wine from the stellar 2007 and 2008 vintages at fabulous prices, longer term it will likely limit choices as some wines will no longer be available. Also too we are likely to see fewer new wines in the marketplace as small wineries and in some cases importers struggle to find representation with distributors who have drastically dialed back their offerings and are reticent to add any new wine to the mix.

We have always been pleased with the job our local distributors do and with the quality of the wines they carry, however it is also true that the distributor system creates some inefficiency when it comes to small wineries and importers. For distributors there are financial incentives that favor larger brands as they can place large quantities with large retailers with little fear of running short. As our choices dwindle though these inefficiencies become more apparent as smaller producers are increasingly left out of the market.

We hope that this trend will abate and correct itself as the economy improves and as the smaller harvests of the 2010 and 2011 vintages work their way through the system and reduce overall supply. However, it is also creating a great opportunity for the emergence of a small distributor start up or one that expands to North Idaho that can focus on brands that are good, sought after and fill the niche being abandoned by larger companies.

The question remains what are consumers to do when faced with more restricted choices. We encourage you as consumers to watch for these close outs and when you find some that you really like buy them in quantity. Also continue to tell your favorite wine professional about the wines you like, and order these brands and varietals. As we pass these orders on to the distributors and they see hard demand it may alter the trend so they continue to stock the wine. By letting me or any other wine professional in the area know what you want to see gives us the opportunity to tell the wineries directly that we have demand for their product so they too can impress upon the network of distributors the importance of continuing to stock their product.

If there is a topic you would like to read about or questions on wine you can email George@thedinnerpartyshop.com or make suggestions by contacting the Healthy Community section at the Coeur d'Alene Press.

George Balling is co-owner with his wife Mary Lancaster of the dinner party - a wine and table top decor shop in Coeur d'Alene by Costco. George is also the managing judge of The North Idaho Wine Rodeo and writes frequently for the online version of Coeur d'Alene Magazine at www.cdamagazine.com. His articles can also be found on the blog at www.thedinnerpartyshop.com.