How’s your winery doing? Greeaaat!
Fine wine sales are expected to grow 7 to 11% in 2012. Baby boomers, who have an average net worth of approximately $130,000, are still the largest group of wine buyers. And 12.5% of wine sales are direct to consumer (a “fifth column” sales channel).
These are just a few of the findings in a (surprisingly entertaining) state of the wine industry report released today by the Silicon Valley Bank.
That growth stat is good news for many, and comes at a time when – as was pointed out in the attached presentation below – unemployment continues to rise, while consumer confidence continues to fall.
The 30-page report is based on “ongoing research and a survey of nearly 500 wineries.” Data points include everything from macroeconomic indicators such as unemployment, house prices, interest rates, and the popularity of Congress to the price of grapes, wine industry financial performance, varietal wine inventory, and wine consumption trends. A presentation was also held today featuring speakers Rob McMillan (SVB), Tony Correia (The Correia Company), and Paul Mabray (Vintank).
After dipping in the late 80’s, wine consumption continues to grow, with approximately 2.5 gallons of wine consumed per resident (as of 2010).
Regarding financials, I like this particular quote (and there are several good ones):
There is a neighborly tendency in the wine business. You want to know about a winemaking trick? No problem. A vineyard practice? Just have to ask. Just ask a neighbor how business is going. Answer: Greeaaat! Like the scene hyperlinked, things might seem fine but when you look under the hood, it might not be as it seems financially.
You can turn a profit if you’re a small winery, though it might not be as easy as the Wild West days we saw in the film Bottleshock. According to SVB, if you aren’t selling more than 25,000 cases success requires “budgeting, developing strategic insight, leveraging information gathering, sales strategies, cost accounting, grower relations and a litany of other skills.”
You’ve been slimed.
Regarding the all-important topic of millennials and the search for the next generation of buyers: “The reality is the consuming Millennial generation is not even close to the most important age demographic for the fine wine business today.” The report states that millennials simply can’t afford to buy luxury wine today.
