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What will 2010 be like for Italian wine in the US?
Like 2009. Only more so.
Everyone's been hoping for a big rebound in 2010, but early indications are that the market will not snap back to "normal." Retailers and restaurateurs in New York-New Jersey keep pushing for lower-cost wines; except for holiday gift shopping, the mantra will continue to be "under $20."
With the weaker dollar, this has important ramifications for producers, importers, customers.
Producers need to get serious about discounts. I'll go beyond that and recommend they lower their pricing domestically as well. Italian consumers are scraping by these days. Aspirational pricing is no longer feasible, and fashion should follow feasibility. In terms of international competitiveness, Italian producers must lower prices or continue to lose market share to the South Americans. (Talk about an ignominious fate.)
The Grim Discounter
I just got a price list from a Piedmontese producer who assured me that the 20% discount he offered was the best deal he'd offered any US importer. But 7 euros for a Nebbiolo d'Alba reduced to 5.60 -- it's not an attractive price. It would end up on local shelves for, what, $25? I wrote the poor guy back and suggested we start talking at a 30% discount.
Another Piedmontese producer understood right away, proposing something close to a 50% discount. He's sitting on a lot of wine. Forget dreams of getting rich. These days it's about enough cashflow to pay the bills.
As a consequence, importers have to get very picky.
How many times have I heard of such-and-such an importer who has an excellent book, but whose wines are too expensive for today's conditions? And how many times have I heard of the distributors who represent them slashing prices to an extent that undermines the entire market for, say, Brunello?
May I tell you that it didn't take a genius to see two years ago that the economy was overheated and was going to experience a hard landing? We saw it coming, and we're hardly Paul Krugman. Our mistake was to underestimate the depth of the depression or "Great Recession" -- which was what they called the Great Depression for its first couple of years. We thought $25 would be the cut-off, not $20 or even less, as it is now.
So we, too, have some very good wines that must be discounted for clearance. Whether we reorder from the producers in question is a matter of their realism on pricing. If they remain fixed on their 2007 prices, then ciao ciao, bambini.
Customers -- our customers, the retailers and restaurant guys -- are having their own brand of hard times. All you have to do in New York is look at the exalted restos that offer deeply discounted prix fixe menus, or those which have changed their name, menu and price points to cope with the new reality. One startling example is David Burke's new eatery on the Upper East Side, FishTail. It focuses on seafood and posts prices far less extravagant than its sister restaurant one block south, David Burke's Townhouse.
Plenty of these guys are just scraping by because their clientele no longer has the money or stomach for $100+ bottles at restaurant table or $40 ones at home. They want a nice bottle with dinner, but they're willing to trade down. And in many cases, no doubt, discovering that the bottle costing one-half what they used to pay is really about as good as the expensive one. The inevitable thought will occur: "Why should I go back to spending more than I need to?"
For those of us who haven't received any TARP money, this mentality is going to persist a long long while.
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