“Luxury Drought?” Who’ll Buy Expensive Wine?

cartierI love economic forecasters. They basically live in the Land of Make-Believe, where they use all kinds of sophisticated economic extrapolation techniques to make pronouncements like, “Producers of high-end wine face a “luxury drought” decade through 2020, in which attracting younger “affluent” consumers who actively acquire luxury goods will be increasingly challenging as the ranks of such buyers decline until the buying power of the Millennial increases as they age.”

Huh? I think I’ve translated this for us regular folks to mean, “You’re gonna have a hard time selling pricey wine for the next 10 years.”

This forecast was made at the 2011 Direct to Consumer Symposium in Santa Rosa, California by Pam Danziger, president of Unity Marketing. She was talking about wine buying trends, and she predicted a “luxury drought” through the year 2020. The reason, according to Ms. Danziger, is that high-end wine sales rely on people who are in the “window of affluence,” which is defined as being between 35 and 45 years old. She predicted that it will take 10 more years for the current Millennial Generation to muster enough buying power to start purchasing luxury goods, such as high-end wine.

This is taking me back a few years, when we talked about Yuppies, and Conspicuous Consumers. Those were people who couldn’t wait to flash their nouveau money around by buying toys like BMW’s and Silver Oak Napa Valley. The Yuppies are probably in their 50′s by now, and guess what? They’re still flashing their money around!

I disagree with Ms. Danziger on this point: high-end wine sales aren’t dependent on 35-year-olds. The guys who walk  into my shop looking for Silver Oak (at $100 a bottle) are closer to 50 than 35. And my children, who are the much-celebrated “Millennials” of her research, are a LONG way from buying wine that goes for more than about $8. They’re experimenting with wine, and willing to trade up, but they’re not even close to the “luxury” end of the wine spectrum.

To give Ms. Danziger her due, I think she’s absolutely correct in her estimation that it’ll take some time for high-end wine sales to recover. Many American wine drinkers were forced by economic necessity to “buy down,” to purchase $25 wine instead of $50, or $10 wine instead of $20. And what many discovered was — “I kinda like this cheaper stuff! Maybe I don’t need to spend as much as I used to on wine.”

That’s my theory about wine buying trends. I’m not an economist, and I don’t play one on TV, but if I were a betting woman, I’d buy stock in  wineries that produce great stuff for under $20. They’ll be riding the trends from now until 2020. Cheers!

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