Windsor Winery Woes: Harbinger of Hard Times?

This week’s layoff of 16 workers (9% of total) by Sonoma County vintner Windsor Vineyards highlights the dramatic downshift in consumer wine purchases that wineries and retailers have known for months. Consumer reluctance to buy high-end wines was cited as the reason for the layoff.

CONSUMER DOWNSHIFT INTENSIFYING

Analysis by Wine Industry Insight of data provided by Information Resources Inc. (IRI) indicates the down trend seems to be intensifying.

While data for the 52-week period ending Nov. 30, 2008, shows dollar sales up 4.8% on a volume increase of 1.4%, performance was weaker leading up to Thanksgiving. The four-week period ending November 30, showed dollar sales up 4.1% from the year before on a 1.2% volume increase.

JUGS AND BOXES DOMINATE

As the table, below, illustrates, box wines showed the largest dollar sales gains in the four-week period ending Nov. 30, 2008.

In addition, box wines and those selling for $3.00 to $4.99 were the only price categories whose average price for the beginning of the holidays showed a gain.

HIGH-END WINES BRING UP BOTTOM

Most relevant to Windsor and other makers of high-end wines, the data above, shows that wines selling for more than $20 were the only ones showing a drop in dollar sales and volume for the four-week period.

Because the holidays are times when consumers tend to buy more expensive wines for gifts, this drop will certainly be ominous if the December numbers follow suit. These numbers, of course, do not include sales made directly to consumers by small, artisan wineries whose prices tend to be higher than $20.

HIGH-END WINES SOLD BETTER EARLIER

Wines selling for more than $20 fare much better when the overall 52-week period are considered.

However, the four-week total offers a more recent snapshot of the time period leading up to the holidays when consumers tend to buy more expensive wines for gifts and celebrations.

If subsequent data are consistent, then the trend for high-end looks dim for the duration of the current economic downturn.