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Affordable wine bottles take over the counters at Galleria Liquers, a wine and spirits shop on Chicago's Southport Corridor.

Cheap wines drink up in recession

by Traci McMillan
July 15, 2010

America has become a cheap date. Just ask Rob O’Leary, a Chicago wine drinker who says he’s no longer afraid to bring a cheap bottle of wine to a party as long as it’s tasty.

“There are a lot of good quality wines for $5,” O’Leary said, who last year bought three boxes of wine priced at $6 a bottle, marked down from $12.

Don Sritong, owner of Just Grapes in Chicago’s West Loop, agreed the wine-buying climate has changed since the recession hit, with consumers more confident in buying cheaper wines.

“You can find some fantastic wines between $15 and $20,” Sritong said.  And these wines are “more acceptable in social gatherings” now, he added.

Just Grapes has seen average transactions drop to $57 per customer in 2009 from $60 per customer in 2008, and $78 in 2007.  Nevertheless, sales are up and the store has seen a 20 percent jump in transactions through its cash register year-to-date.

According to the Gomberg Fredrikson report, the $10.2 billion wine industry saw U.S. sales increase nearly 2 percent in 2009, with the most growth in bottles priced at $10 or less.   

The Nielson Company reported that the average price of a bottle of wine is $6.18.  The most popular category is $7 and under, which accounts for 72 percent of in-store volume.

Binny’s Beverage Depot, a large liquor and spirits retailer owned by Gold Standard Enterprises Inc., has not seen a decline in wine sales but has also observed the trend towards more “value-oriented” wine, according to Binny’s wine and special events manager Bill Newton.   

Newton said there continues to be a handful of consumers who are interested in “cult” wines -- the bottles that wine enthusiasts will dish out a wad of cash just to sample.  The real group that’s suffered, he said, are bottles priced between $30 and $100 that fall between the two extremes.

Newton said the wineries with “a track record for quality” should survive and make it back.  “People have not deserted these brands.”

One of these trusted brands, Kendall Jackson, has seen a decline in sales but has no plans to discount the namesake brand.  In an email, Chuck Shea, Kendall Jackson’s vice president of production, said if the brand were to “follow the consumers down in price point” Kendall Jackson would have a difficult time ever increasing the price in the future.

Instead, according to Shea, the wine company has created brand extensions to appeal to the lower-price-range consumer.  Kendall Jackson brand Murphy-Goode “added a California tier of wines at a lower price to their Sonoma wines and have seen sales double,” Shea said.

Mike Caldwell, head of the wine department for online wine retailer Uncork-it Chicago, said the majority of customers are buying wines under $30.  However, there is still a customer base for specialty wines.  Bottles priced over $500 will sell out in a day, according to Caldwell.  Uncork-it is continuing to carry all price ranges of wines, but like other retailers they’ve seen a shift to a slightly lower price point, he said.

Stan Post, the liquor manager and wine buyer for Sunset Foods in Highland Park, said Sunset wine sales are “stronger than ever.”  The bottles with highest sales at the specialty grocery store are priced between $10 and $11.   

Similarly, Just Grapes has seen the average amount of money spent per bottle decline 23 percent to $20 per bottle in 2009 from $26 in 2007.   

Even customers who were not affected by the recession went through a “guilt stage,” according to Sritong.  “Even if they could afford it, they didn’t feel right spending.”

Since the onset of recession, in-store sales have picked up with an increase in in-home entertaining, Sritong said.

So when the economy picks up speed, will sales of high-priced wines do likewise?

Post said the economy does not need to fully recover for higher-priced wines to return. “It just has to be more stable,” he said.

There are a number of “great wines that you can only drink if you can afford them… if you are that lucky,” Post added. 

Newton, too, believes expensive wine will have its comeback.  “Americans have discovered wine and there is no going back,” he said.