lulu, hillsider companion

lulu, hillsider companion

Wednesday, November 12, 2014

are wine pipelines backing up?

something has caught my eye, and it's causing me to wonder...are wine supply pipelines beginning to back up?

it seems to me that suddenly, or at least recently, I've begun to see wine retailers throwing significant discounts against the wall to see what might stick. and when I say "retailers" I refer to them as a breed, meaning specialist shops, liquor stores, grocers, and even on-premise outlets such as restaurants and wine bars: everyone. is this just coincidence, or does it mean something? beats me...

usually, and I know this from 40 years in the food and beverage industry, when someone begins to discount, especially when he or she discounts sharply, it means that they have a more or less urgent need to move inventory in order to free up cash. that could be for any number of reasons when one or two scattered individual outlets are concerned: maybe he/she is short of cash and needs to pay a tax liability, or make a mortgage payment, settle a divorce, pay a child's tuition, or just buy a new car. on the other hand, when it manifests itself over a broad spectrum of outlets, and fairly suddenly, it frequently signifies a general softening of the market; people have a lot of product that nobody seems willing to buy.

what to do? discount, and try to do it before anyone else notices the phenomenon and undercuts you.

so, if all of a sudden I'm seeing not just one or two folks in my little end of the valley cutting prices, but a bunch of them, and at all levels of the chain, what am I to assume? right. they can't sell wine at standard markup, so they're hitting the panic button.

why is that? not why are they panicking...that's just human nature, self preservation if you will. but why are they being put into a position that requires their panic? the first answer that comes to mind is: market saturation. but why is that? I don't recall seeing any calls to panic during the past several years in the trade publications that I read on a regular basis, no writing that harvests were so over-abundant that the wineries were over-producing to a degree that was far beyond the capacity of the consumer to consume. so that's probably not the problem. so what is it? pricing? well, prices are high, no question of that; however, that in itself argues that the market isn't saturated with overproduction. unless, of course, the market was once again suckered into believing that the bubble would expand forever regardless of any negative market pressures. things like happened just a few years ago like...oh, never mind. you remember, I'm sure. I certainly do; my 401k never completely recovered (thanks, citi), and I am pretty sure that most of you have similar memories.

so what's going on? although, to be completely honest, at this particular time I'm not too unhappy since I've made some exceptional buys over the past week or so, restocking the wine rack just outside my office at home at an average discount of close to 30% off retail. however, my interest is aroused, so i'll do some digging and get back to you in a day or so. what is the wine market up to, and why?

take care.


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