European Wine Consumption vs. other Countries

For several years I have heard murmurings about the decline in wine consumption by Europeans, especially in France and Spain. Here are some recent numbers which illustrate the pain European wine industries are going through:

Wine consumption in Italy, as in other traditional European producer countries such as France and Spain, has fallen from 37 million hectolitres of at the end of the 1980s to less than 25 millions today (-30% in 20 years). On the contrary, new consumption is growing in other areas: United Kingdom (+94% compared to 20 years ago), USA (+47%), Russia (+63%) and China (+160%).

This puts increased pressure on all wine producing countries as Spain, France and Italy produce huge amounts of wine that are pushed through the economy.

HR 5034: The Prohibition/Monopoly Legislation

For more than six months I have been made crazy by the concept that 151 of our Congressman feel that the wine, beer and spirit wholesale companies need protection from the big, bad small producers and the consumer!

The idea that a legislation is needed to protect big business is silly. As they saying goes in politics, just follow the money. And there is plenty to follow in this battle, the NBWA (National Beer Wholesalers Association) is the 4th largest political contributor. They have contributed 2.6 million in the most recent election cycle.

In Long Island, we have an expanding wine industry with more than 40 wineries. Tim Bishop is one of the sponsors of the HR 5034 Bill, which makes no sense at all as it is anti-winery. Alas, Mr. Bishop has taken as much as $30,000 in campaign contributions from the NBWA. Oops, that seems to have back-fired as he is in a major race to stay the Congressman. Right now there is a recount happening that shows his opponent about 400 votes in the lead. Very interesting as there are 40ish wineries...hmm, 10 votes per winery going against Bishop!?! I just wonder.

Deflation

For many years we have heard about the danger of deflation and how certain moves by the Federal Reserve could keep that from happening and other moves could increase the likeliness of deflation happening.

Well, I believe we are seeing serious signs of deflation happening now in the wine industry. Every week now the new vintage of a wine or a wine region is released and most of the high-end wines are being released at prices that are lower than I have seen in several years. This is a good trend if it is only effecting the wine industry at the higher price points. Wine prices have been out of control since the 2000 and 2003 vintages of Bordeaux were released. But I am worried about how this will shake out in the larger or Macro view of business.

Now this trend is going the other direction for the 2009 Futures market from Bordeaux. But that has to do with the 300 million middle and upper class citizens of China and the change in the import tax on wine in Hong Kong. Seems that some wineries are aware of the opportunity in China and are working to get their wines into that market. China has the most potential in the wine industry for growth, with India, South America and North America trailing just behind. Actually it has been predicted that the US will be the largest consumer of wine in the year 2013, but we might not hold that title for long.

Wine in New York Grocery Stores & Chains

New York is the third largest wine producing state, behind California and Washington State. Both of those states have wine in grocery stores and thriving (though currently suffering from a weak economy) wine industries. So why should New York be different? First and foremost is because, the New York SLA (State Liquor Authority) has had laws in place that have made the small wine and liquor retail establishments stay that way. The laws in place make it illegal to have multiple stores, illegal to have buying co-ops with other stores and many other laws that have made it difficult to do business for wine stores. To change all that overnight so that the Governor can add a couple of percentages to the budget is anti small business, but to keep the laws the same is anti free-trade. SO there must be some kind of a compromise, and the little added nuggets to placate the small wine stores owners is not enough.

If this law is changed without more adjustments to it, there will be a ripple affect that will start with wine & liquor stores and bounce all through the New York wine industry and when that happens it will come back to haunt the government. As of now there are many attacks on this legislation from within the wine industry and many advocates that want in. What's best for the consumer and the small businesses and employment? I personally don't believe passing this as is will be good for those and will mostly benefit big corporate america. Hurray, wasn't it big corporate america that caused the economic downturn that means Governor Paterson needs to find more revenue for the state? So giant corporations broke it, lets give big corporate america a payoff so the Governor can add a few million (less than $100M) to a multi-billion dollar problem.

Don't get me wrong, I am not anti-trade or anti-competition, but lets not do this without any thought for small business while giving big business a wind-fall. And don't kid yourself about prices changing drastically - the New York Wine Retail industry competes now with California and their big Supermarket Chains due to internet wine sales.

Introduction

I have written about wine since 2004 in published magazines, remember those, publications that are printed on paper, then later posted to the internet. I have tried blogging in the past with very little success, but now I think I may have found a reason to post more frequently and perhaps get some readers interest now and again.

What I plant to write about is not wine, what wine I love or hate or some droll note on a wine, but I want to write notes here about the wine business and link to other sources with news that I feel should be read by those of us that care about the wine industry. Things in the wine industry have changed enormously with the change in shipping laws, the internet and now the weak economy. As a New Yorker a new important issue is being debated loudly right now concerning wine being sold in grocery stores. I know this seems ridiculous to those wine consumers in California, Washington State and Europe, but...