Wednesday, November 8, 2023

The Worldwide Wine Glut of 2023

Vintners are dumping wines because prices are too low!

I wrote before about an inexpensive Cava from Spain, sold at Walmart as "Winemakers Select" for $4.78 a bottle or so.  Today, it is down to $3.79 a bottle - along with other varieties in the same series.  What is going on?

A wine glut.  We should be so lucky!

I noted before that we are in a worldwide wine golden age, as cheap wines from America, Australia, Argentina, New Zealand, and even France, are flooding the market.  The head of Bronco Wineries (the largest winery in the world you never heard of) Mr. Franzia (you've heard that name!) one opined, over a decade ago, that no bottle of table wine should cost over $11.

Well, since then, inflation has taken its toll, but the price of wine has dropped, to under $11 a bottle, and in fact, under $5 a bottle for very serviceable table wines.

Table wine, or vin de table as the French call it, is every day wine you have with lunch or dinner or even breakfast, I suppose.  This is not wine you "lay down" in a cellar or make a big deal about opening the bottle with a Sommelier or something.  It is akin to the light beer of wines - nothing fancy, but nothing unpalatable, either.

The wine business really took off in the 1990s or so and everyone got in on the act.  In Virginia, farmers were encouraged to grow grapes - instead of tobacco.  In New York, everyone on the Finger Lakes "Wine Trail" opened up a winery - to make a few bucks or get a tax deduction.  Some are quite good, too.  But the major growth was in South America and in Australia and New Zealand, where low production costs and favorable exchange rates meant that we were awash in a sea of cheap and really good wines.

But all that has changed.  In part because the younger generation seems to prefer cocktails and flavored liquors and flavored seltzers over beer and wine. In part, too, because too many people got into the business and flooded the market with product.  It has reached the point where - like farmers right before the 1929 crash - are being paid less for their product that the cost of making it.  As a result, some countries, such as France are dumping wine to prop up wine prices.  We saw this back before the great depression, where farmers dumped crops to prop up crop prices - and afterwords and even today, farmers paid not to produce in order to prop up prices.  Crazy - no?

Most of what is being dumped is table wine, which it not usually aged much.  These surplus wines can't be put in a cellar somewhere and saved for future consumption, when demand goes up and supply goes down.  These are not wines designed to be laid down for years like fine wines - getting only better with age.  Table wine rarely stays on the shelves for more than a few years, it is not aged or cellared very often.

Of course, you may not notice this, much as consumers failed to note it prior to the Great Depression.  But farm failures seem to predict such recessions and depressions.  Most mid-priced wines seem to be holding their own, in terms of pricing.  But at the lower end of the spectrum, well, prices seem to be in free-fall.  $3.79 for a bottle of Cava!  It is like Nirvana!  But how long will it last?

The thing also is that when prices fall in one segment of the market, they drag down other segments and markets as well.  Wine, like crude oil, is a worldwide market.  So a surplus in one country drives down prices in another country - and so on down the line.  Not only that, when a $5 bottle of wine sells for $3.79, that puts price pressure on the $10 bottle of vino as well.  When consumers see a real bargain, they may be enticed to switch.

And switch we did.  With inflation increasing the price of everything else and eating into our retirement savings, we have to look for discounts and cheaper alternatives wherever we can.  We used to stock our refrigerator with a case of Jaume Serra Cristalino Cava (and I still have a bottle of it in there today).  It was quite the bargain at $6.99 back in the day, sometimes on sale for as little as $5.99.  But like others before it (I'm looking at you, Frixnet!) the price crept up to $7.99 and then $8.99 and sometimes even $11.99.  Pretty soon, an inexpensive Cava is as costly or nearly as costly as some French sparkling wines or even Champagne.

So we switched.  And that means a few cases of Juame Serra at $8.99 will remain unsold at the local liquor store, which may, in turn, mark them down to move them out (at which point I may snap them up).  Free market economy at work!

Since we are moving downmarket from the $11-a-bottle range, the consumer may be inclined to look at bargains we are passing up - decreasing demand in the $15 to $20 range, and so on and so forth, up and down the pricing scale.  It is only at the very upper end of markets that prices might not be affected.  During the recession of 2008, yacht sales took a nosedive - but only for smaller yachts and boats that middle- and upper-middle-class people could afford.  The multi-million-dollar yacht market was largely unaffected.  Those people have real money.

I digress, but I heard a comment once about the difference between a yacht and a boat.  A yacht doesn't move when you step aboard.  And that is a pretty good definition.  A 30 to 50 foot boat may rock and roll when you jump aboard.  A 100-foot yacht doesn't move an inch when you walk up the gangplank.  Two different worlds, entirely - just as the world of table wine and fine wines are two different worlds.  People like you and me have no business paying hundreds of dollars for one bottle of wine, much less thousands.  Even $50 a bottle, unless at a restaurant, is kind of pricey for middle-class Americans.

Sadly, I think "wine snobbery" is one reason the next generation shies away from wines and seems enamored of flavored vodkas.  The beer thing, particularly IPAs, seems so boomer-esque to them.  And as I heard one 20-something explain, wine seems so confusing as there are so many brands and varieties, so they have no idea what to order - and don't want to appear to be unsophisticated or be mocked by ordering the wrong kind.

But it really isn't all that hard, really.  Your budget will indicate how much you can afford to spend, which filters out 90% of the wines on the shelf or on a wine list at a restaurant.  Why restaurants put these mega-expensive wines that no one orders on the wine list is beyond me.  I mean, really, why does Chuck's Weenie Shack have Veuve Clicquot on the wine list is beyond me.  Why would they even have a wine list - beyond "red or white?"  But I digress.

You either like sweet wines (usually younger people do) or drier wines (as you get older).  You find a type of wine you like and tend to gravitate toward that.  When you find a particular brand or vintner you like, well, that helps you focus even more.  Discovering is half the fun.

But again, I digress.

Getting back to the wine glut, it is an interesting development, particularly in an era where a bag of potato chips is selling for six bucks or more - because people keep paying it.  I saw a posting online from Australia where a bloke complained of paying sixteen Australian buck-a-roos for a bag of crisps.  The problem he failed to realize is that by paying that price, he validated it was a price he was willing to pay.  If he walked away or bought an alternative product for less, well, maybe consumption would decrease, retailers would have a surplus on their hands, and prices would be marked-down to move inventory.

You know, it just might work - it has worked for wine, anyway.

Maybe our Aussie friend should try a liquid lunch - a lot of fine, inexpensive wines down under.  And it would be probably as healthy as a bag of chips and a helluva lot more fun!

Oh, brave new world, to have such wines in it!