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Wine market in 2009
«Vitrina» January-February 2009

One always wishes for the best, but the crisis has already affected the wine market and will continue to do so in the near future.

Champagne has fallen an unexpected victim to the financial-economic downturn. For the first time since the beginning of millennium sales dramatically dropped in late 2008, instead of a traditional spike. According to the latest statistics of the Interprofessional committee for Champagne, exports to Russia in October decreased by 23%, and figures are approximately the same for other countries. Russians who seldom refuse to treat themselves appear to be buying fewer bottles of the expensive French bubbles or switched to more economic sparkling wines.

The crisis also threatens to destroy an established scheme of selling wine as futures. The system, known as en primeur, has been adapted for top Bordeaux wines and implies selling unbottled wine of the latest vintage in late spring — early summer of the following year. Jean-Francois Moueix, owner of the legendary Bordeaux estate Chateau Petrus, recently admitted in the interview to a French newspaper that the en primeur campaign may not happen in 2009. “If negociant houses can’t buy or obtain lines of credit for their allocations, the wine will remain at the chateaux. And if there are not enough takers of allocations, there won’t be any en primeur sales”, he said. The statement wasn’t popular in Bordeaux, but prices for top Bordeaux wines need to be reviewed. They are too inflated starting from the 2005 en primeur campaign and must go down.

In the meantime, Crushpad wine cooperative in San Francisco devised an original futures sale that takes the current crisis into account. Bailout wine, to be available on the market in August 2009, is now being sold at 39 dollars. If the Dow Jones goes down before the release date, a loss of every 100 points will mean a 2-dollar decrease in wine price. If the index will go up, the price will remain unchanged. The company that offered this scheme runs a certain risk. Managing director states that if the stock index continues to fall, Crushpad will bare financial losses.

High critics’ scores will again be an important factor for wine recognition this year. They will ensure if not financial prosperity, then at least a high probability of success for such wines among the wine trade. It is the case, for example, with wines featured in the latest Wine Spectator Top 100. The rating, done by the US magazine Wine Spectator, has become a barometre of the general wine market, not just American. It sets trends for wine styles. This time top entries came from France, Italy, Portugal, Australia and USA. The winner was Chilean Clos Apalta 2005 by Casa Lapostolle, made from red varieties Carmenere, Merlot and Cabernet Sauvignon. Chilean winemakers conquered the world thanks to mass market wines made with popular international grapes. Now they want to prove their ability to make premium wines. Clos Apalta victory in the Wine Spectator rating will strengthen their initiative. It is interesting to note that a high entry was given to a red dry wine from the Douro Valley in Portugal. This wine area is traditionally known for Port, but recently it has attracted much attention thanks to a new style of dry powerful reds.

As for wine critics and publications, the situation remains unchanged. The only novelty is that the most influential persons who give their verdicts to wine no longer work alone. American Robert Parker, founder of The Wine Advocate, now writes only on Bordeaux, the Rhone Valley, Provence and California. Wine reviews for other significant regions are done by a team of eight people. British Jancis Robinson has three permanent correspondents and four more contributors on occasional basis. American Wine Spectator and British Decanter remain the best known international magazines for wine consumers.

If the significance of critics’ scores in wine industry is unproportionately high, opinions of the same experts for an average consumer are not that important. The world’s biggest wine corporation Constellation Brands recently did a large-scale survey of American consumers of premium wine (over 5 dollars per bottle). Only 12% of consumers read wine reviews and ratings. It is the smallest of six groups into which all respondents were conventionally divided. The biggest number of consumers (23%) find the choice on the shelves overwhelming, too wide to comprehend. Although the survey was done in the US, the results are indicative for wine consumers in many countries, including Russia. Meanwhile, the most recognised wine critic for consumers in the UK is Oz Clarke, known through food and wine TV programmes. General rating confirmed that an average consumer knows best those who appear on television or write for popular dailies, rather than acknowledged experts in the wine industry.

Yet, the Russian market has it that our wine trade and final consumers never buy wine, based only on points and ratings. We look at wine in a wider context and most often rely on its taste and previous experience: “I had this wine before and like it”. Status of the brand is also important.

Will the crisis have an influence on the choice of Russians this year? Yes, and it is likely that everybody will have to cut down on spending. Wine is not an essential food product, and in our country imported wine is often found in the premium price category. Wine market fluctuations in Russia during general financial-economic downturns repeat fluctuations in the luxury sector. Analytics predict that the growth in the luxury goods market will substantially decrease in 2009. The most optimistic scenario envisages a maximum growth of 2-3%, but the market operators admit that they will be satisfied if the market volume will remain at least at the 2008 level. This remark is also true for premium imported wine.

Yet, it is unlikely that people will completely stop drinking wine or switch to other alcoholic beverages such as beer or vodka. A more realistic scenario is that consumers will remain loyal to their favourite brands, but will buy less, or will substitute them to similar, but cheaper wines. As Wine Intelligence research agency recently found out, affluent Russian consumers who drink imported wine at least once a month and spend at least 150 roubles on a bottle, most often buy wines of France, Italy, Germany and Chile and name Bordeaux, Tuscany, Beaujolais and Chianti the most popular wine zones. Time will show whether wines from these areas keep leadership in the premium segment, or whether they will be substituted with other offerings.

Perhaps, this year consumers will look more closely at premium wines produced locally. Quality Russian production is gradually emerging, and last year experts noted several companies which achieved good results. Quality Russian wines offer better value for money than imported wines with the same price tag. If Russian producers ensure consistently high quality (and not randomly, from one batch to another as it often happens now) they have good chances to capture a reasonable market share.

These are some expectations from the wine market in 2009, although the situation in Russia, like in the rest of the world, is unpredictable. We can only be sure about one thing — nobody has cancelled holidays and celebrations, so glasses will be filled with wine this year, too.