Thursday, November 13, 2008

"Market Corrections" and Fine Wine

After months of booming business in the fine wine trade, it looks like the wine markets are beginning to feel the effects of the world-wide financial crisis. (photo "at auction" by kflaim)

In late September, two of England's oldest and most distinguished fine wine operations--Berry Brothers and Rudd and Christie's--reported that they were on track to report record profits. The reason why was in part linked to high-rollers and investors looking for alternative places to park their assets to ride out the ups and downs of the stock markets. Christie's sold almost $3,000,000 in Burgundy and old Claret at auction in the space of a few days during this fall. That's a lot of fine wine.

Yesterday, however, Reuters reported that over recent weeks the prices of fine wines have been plunging. Many coveted labels saw 10-20% decreases, and wines that had been the darlings of Russian and Chinese investors were hardest hit.

What does this mean for GWU$20 drinkers? I think we might see these "market corrections" filtering down into wine stores near us in the next six months. Nothing will change immediately, but as the days go by and consumers continue to worry about their finances, demand for the pricier wines is going to soften and merchants are going to find themselves with stock on the shelves that they want to move. I'd keep my eyes out for $50+ wines dropping the most, with smaller decreases in the $20-$50 wines and very little difference in price among the wines you and I drink most.

However, if you've had your eye on some more expensive bottlings, you might be able to get good deals on them in 2009. Isn't it a good thing that you don't pay too much for wine in the normal course of things? You may actually be able to afford a little splurge come spring.

7 comments:

Chief Executive Researcher said...

Dr D,
A timely and astute posting. If the flurry of offering emails that deluge my email in-box daily are any indication, I'd say the downward trend in price has already started. I've noticed a more aggressive tone and steeper discounts over the past couple weeks.

Unfortunately, this trend also coincides with the annual bombardment of Wine Spectator Top 100 offerings, so I'm not yet seeing deals on anything I want.

Cheers!

Joe said...

No surprise here, been predicting this for months. The marginal buyer sets the price...the trickle down will be fantastic. But I wonder - how will the wine regions that depend on super high prices fare (I'm thinking Napa, where everything with "Cab" on the label costs $50...)?

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Charles said...

Chief took the words out my mouth. I too have already seen prices falling. I have seen it on a small extent at my local wine shoppes, but have really seen in the past few weeks in grocery stores. Lots of steep discounts on just about every brand and varietal

I think that especially with the holidays coming up, wines that would be a luxury otherwise are going to fall fast.

Dr. Debs said...

Falling prices are a good thing in this economy--at least for the consumer. And Charles is right--the supermarkets are full of sale flags. I wonder if the normal holiday sales aren't supercharged this year because of the financial pinch. People trying to clear out their stock?

Óscar said...

And with the dollar going up and the oil going down, transport costs are now lower and European wines are now much more afordable in US.

Chief Executive Researcher said...

Are wine prices really that responsive to cost-side phenomenon? I have no idea.