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Recession-proof by the case – Inexpensive wines expected to flourish

By   /   Saturday, January 3rd, 2009  /   Comments Off on Recession-proof by the case – Inexpensive wines expected to flourish

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If 2008 was a year for sipping chardonnay in tasting rooms, 2009 will be a year for drinking zinfandel over the dinner table.

Central Coast wineries know that in a recession, tourism typically dwindles. And as tourism and consumer spending decline, so do tasting room visits and restaurant and bar sales. But, as Deborah Baldwin, co-owner of JUSTIN Vineyards and Winery in Paso Robles, explains, “If there’s anything that’s recession proof, it’s alcohol.”

San Luis Obispo County, home of flourishing Paso Robles vineyards, alone raked in $1.8 billion in wine revenue in 2006, making it the third-largest wine producer in the state.

“People are continuing to buy wine,” said Jim Fiolek, executive director at the Santa Barbara Vintner’s Association, the nonprofit member association for the county’s wineries. “What you may see them adjusting is the price levels at which they buy.”

Winery owners agree. “People are scaling down, and it cascades across the whole spectrum of prices,” said Shayne Kline, owner of Wild Horse Winery and Vineyards in Templeton. “But people are still buying.”

Wines in the $30-and-under category are thriving, with particular consumer interest in the $10 to $15 range, according to Stacey Jacob, executive director of the Paso Robles Wine Country Alliance. “Most of our members’ wines fall in the $18 to $20 category, which indicates that we are well-positioned,” she said.

“Wines in the trophy category – the $50, $75, $100 bottles – will be very affected by an economic downturn,” Kline added, noting that most of Wild Horse’s wines are in the $18 to $26 range.

Where consumers buy that wine and how they enjoy it will likely change from last year as well. Instead of flooding into tasting rooms or enjoying a few glasses over a steakhouse filet mignon, the average wine aficionado may prefer to pick up a bottle from his or her corner liquor or grocery store and enjoy it at home.

“We are expecting sales through our tasting rooms to go down,” Kline said. “Wild Horse, as a brand, is expected to grow next year, but we’re going to be looking at selling through different channels.”

With JUSTIN Vineyards and Winery coming out of its best year to date, Baldwin said she feels positive about the year to come but recognizes that the ratio of its wholesale sales – which account for 62 percent of total sales – will likely change with consumer spending habits. “About 60 percent of our wholesale wine goes to restaurants, 40 percent to retail stores. I expect that would shift as people start dining out less.”

When it comes to wine tourism, the Central Coast’s real blessing, and perhaps its saving grace in a down economy, is its accessibility to the rest of California.

“Wineries can choose to look at the recession as an opportunity,” Fiolek said. “Many people are going to decide not to fly anywhere, and suddenly the Central Coast looks like a really good destination they can drive to, and with really good wine.”

Still, with consumers keeping a tight hold on their wallets, marketing – both to retain existing customers and to help open up new retail channels – will be key.

“‘Connect’ – that’s the key word,” Fiolek said. “Wineries that have a tactile or emotional relationship with their customers will do well. People who work their marketing and who really give value-added service in the tasting rooms will be OK. But there has to be something beyond the wine itself.”

For many Central Coast wineries and wine associations, marketing also means furthering their efforts to the international market and exploring other sales channels, like fine retail stores and the Internet.

The comparatively weak dollar has sparked renewed international interest in Central Coast wines from Europe and Asia — particularly Sweden, the United Kingdom, Singapore and Japan — as well as Canada.

JUSTIN Vineyards and Winery currently exports to 20 countries, Baldwin said, and she expects that the international market only has room to grow.

“This is a great time to open internationally,” Jacob agreed.

In the end, coping strategies for area wineries in 2009 will come down to aggressive marketing, strong branding and customer retention through quality products and exceptional service, diversifying retail channels, and falling back on safety nets like wine club membership and package deals with local hotels.

“I don’t want to sound foolishly optimistic, but we do feel very bullish,” Baldwin said. “People still want something to enjoy, and wine is something they can go to the grocery store and buy; it’s not a huge capital expenditure.”

She continued, “If the country is going to come out of a recession, everyone needs to start thinking more positively. I say, ‘Eat, drink and be merry.’”

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