The .Com Effect on Wine

The ongoing .com debacle may be bad for a lot of those Silicon Valley teenage former millionaires and their cohorts in crime, the equally arrogant suspendered Wall Street (‘never say sell”) non prognosticators.  But for those of us that are interested in improving the quality of our wine collection, it may be “The Best of Times”.

The elite French is the best. In spite of the fact that the dollar is the strongest it has been in decades in Europe and should have increased buying power for U.S. imports, there has been no significant price reduction in the Grand Cru category. Instead the vintners and the distributors are putting the extra Francs in their pockets. They just love the fact that their country’s currency is weak and that the American dollar gives them more Francs.

However, look for French Champagne prices to drop in the fall. Champagne has become a high volume competitive business with some excess capacity. In this case the weak Franc should translate to better prices before the holidays.

Look for prices to drop in the serious wine lovers target area of $25-60. That’s the market that the kids from Silicon Valley have vacated. That is the area that the downturn has softened and loss of market share is imminent.  $600 tax refunds won’t help much either. Look for more promotions in this category and then  “Buy a Case” of your favorites for the extra 10% to fill the holes in your wine cellar. . Big quality producers such as Beaulieu, Mondavi, Beringer, Kendall Jackson and Joseph Phelps along with many mid size producers will have to offer price incentives to maintain their position.

Paradoxically, there will be little price movement in the low end $7-15 category.  Wines selling in this price range generally have small margins with which to operate.  Value priced wines such as Napa Ridge, Columbia Crest and even the misunderstood Gallo have gotten more popular all the time. Their prices have been competitive since they now have to compete for market share with the invasion of Australian libations. There is not much room for them to go lower.

The advent of Australian wine in this country has been the biggest story of the decade. As the world economy became truly global, quality products that were unknown in the past became acceptable. Australia had a wine industry dating back to the mid 19^th century. When its currency devalued, it was able to offer great quality and values in the $10 class.  Don’t look for much price movement there because the wines are very fairly priced now.  Further all of these wines will be in more demand as the .comers will have to trade down from their  “Buy a Case, it’s only  $600” habits to meet the payments on their BMW’s and multi million $ tract homes.