Wednesday, February 17, 2010

Supply or Demand?

Yesterday Robert M. Parker, Jr. made some posts on Twitter and one of them caught my eye. He said, "[the]biggest problem for consumers is the trade is not buying much, diminishing our choices."

It left me wondering if he hasn't got that a backward. It's been my personal experience in my own markets this past year that it is consumers who have tightened their belts, choosing less expensive wines and cutting back on spending in general. As consumers are sitting on their money, retailers, restaurants, importers and distributors are all sitting on inventory. I've talked to many trade partners who have seen an encouraging upswing in sales in January and February; but all are having to adjust their purchases to a stagnant marketplace, either by ordering less wine or by bringing in more wines that fit into the value category (what consumers are showing us they will buy) and cutting the ultra premium (what they are NOT buying.) I'm going to go ahead and say that I think it is the consumer who is not buying much, limiting the choices of the trade to provide them with options.

I'd LOVE to hear your opinions.

Wine Ophelia

7 comments:

  1. Interresting point and the basic principle of supply and demand. If there is lower demand, then the supply will go up. Parker would be referring to the opposite. The only way that would be true is if the supply did not exist, which would then actually drive up the demand and the prices.

    I think you've nailed it!

    Josh @nectarwine

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  2. I think it is not so simple as the traditional supply & demand discussion. Consumers have lost their explicit need to purchase wines across a wider spectrum. The value category provides decent well made wines. What it does not offer are wines that are unique, reflect the place of origin and the people who made the wine.

    Something needs to trigger that need with consumers to seek something different. At least from my vantage point. Then the selections on retail shelves etc will grow.

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  3. Thanks Josh and Ron for taking time to comment. I appreciate it. Ron I agree it isn't so simple, certainly not with all the moving parts in international wine trade.

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  4. Ron,
    I'm wonering if wine is ever truly considered a "need" in the mind of the consumer. Now, of course there are many jokes to be had there as many of us would certainly consider it a daily need! :o) But for most, perhaps it is something nice to have vs. need to have. It is my opinion that what "needs to trigger" is a turnaround in the overall economy. That is when I see consumers becoming adventurous. Right now they are seeking the comfort and "safety" of known brands and good values. I'm hopeful, however, that the glimpses we are seeing of increased sales indicates that people might be tiptoeing back to market and will begin demanding more interesting options again.

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  5. In my distributor and supplier experience, I have to agree with you Raelinn that Mr. Parker has it backwards. Most of the options that he would perceive as being cut are the most profitable items in a distributor's portfolio.

    I agree with you, consumers are trading down and/or seeking familiarity, and for the most part the trade has to react to it. Although there are those stores that like to use any excuse reduce their inventory and buying and are probably jumping ahead of their customers by doing so. But for the most part its driven by the consumers.

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  6. Matt,
    Thanks very much for taking time to comment.

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  7. Raelinn

    Yes, growth in the overall economy will put more dollars into circulation - the question then will be - what will consumers do with those dollars?

    I suspect there are two schools of hope - some will hope that the good old days will come come roaring back and all will be good.

    Others will be more cautious and understand how precious dollars really are. This group of sellers will do the extra work to give consumers a reason to trade their dollars for their wines.

    I suspect the Silicon Valley Bank 2010 wine report just might be on track with its comment suggesting consumers who return to the market for more expensive wines - will seek out some aspect of "real" - while this is a stretch word or concept - I believe it is something that could become a real buying criteria.

    We all know the joy of going to the farmers market and buying seasonal foods and also connecting with the people who grew them. Seems logical that seeking and discovering the same in wine is a good journey to be on.

    Also, creates an opportunity for someone like yourself to become the local source of information in your area on wines from around the world that delight.

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