The Economics of Wine
Devon Reid, Contributor
Jamaica is no doubt now fully in the grips of the Global economic recession. With this organizations and individuals are peering on all areas of expenditure to cut costs.
But how has the economic recession affected our wine consumption?
Most people would answer this using three scenarios.
The first say that yes, customers will trade down as a cost cutting measure . Economics 101 which postulates that total expenditure falls with price when demand is inelastic as is usually the case in a recession seems to bear this out.
The second group believes that people drink more, not less, in bad times, so the overall wine market is recession proof. The third likes to think of wine as an investment and argues that with traditional financial investments doing so poorly, the affluent will switch over to fine wine and power a continuing boom in these “liquid assets.”
In the US demand for wine has risen slightly despite the recession, but consumers are trading down to less expensive bottles.
California represents the bulk of that nation's wine grape supply, producing more than 90 percent of domestic wine. But the same price pinch is being felt in other wine regions such as Oregon and Washington.
In Jamaica there is evidence that the economic crisis has affected the demand for wine. Restaurant sales have been hard hit and some retail store customers are trading down in the quest for good value.
According to Constellation Brand’s market survey, some wine buyers are influenced mainly by price, so that trading down to a less expensive product comes naturally to them.
There is evidence of this in our retail sales of brands such as Frontera at $600/bottle and Intis at $506/bottle which has seen a dramatic increase.
But in Jamaica we have also developed what is called lifestyle wine consumers. These are persons responsible for the significant growth in brands such as Yellow tail, Casillero Del Diablo, Woodbridge by Robert Mondavi andHobnob. Lifestyle wine consumers are unlikely to give up wine during a recession because it would mean more than changing their consumption patterns, but sacrificing an important element of their identity.
The se consumers try to maintain their lifestyle identity through the economic cycle to the extent that they can. In CPJ’s portfolio we have seen increase in sales of Yellow Tail, Woodbridge, Casillero del Diablo, Trio, and Hobnob which all fit in the premium retail wine category. This as the Lifestyle wine consumer continues to indulge in brands they have become accustomed to.
A spinoff of the economic downturn is that more People are entertaining at Home. You seem them in the liquor section of grocery stores peering at various wine bottles trying t0 make the right decision that fits their pocket book and taste.
Caribbean Producers has brands available such as Frontera, Vendange and Trapiche for those seeking easy drinking affordable wines. For the Lifestyle Wine Drinker there is Yellow Tail, Hobnob, Casillero del Diablo, and Fat Bastard among others.
Whichever category you fall in, remember that ‘good wines taste just as good in good times and bad’.
For More information Contact dreid@caribbeanproducers.com