'Recession-proof' high-end labels, eateries feel squeeze as consumers cut costs
The wine industry likes to think of itself as recession-proof.
Wine, the story goes, is more than just a drink. It's a lifestyle, and not one that people are inclined to give up just because times are tight.
But that theory is being put to the test as waves of woe continue to wash over virtually every segment of the nation's economy.
Not only are the majority of economists convinced the nation is now in a recession, more and more seem to think it's going to be longer and deeper than previously predicted.
There are signs that California's $19 billion wine industry is already feeling the squeeze. Luxury wine sales appear particularly vulnerable as consumers facing soaring gas and food prices are eating out less and finding lower-priced wine options on supermarket shelves.
"A recession is upon us and sales growth rates will likely moderate," concludes a recent report on the industry by Silicon Valley Bank. "We believe the margin squeeze many wineries feel today may not be a short-term trend."
The report, based on a survey of more than 500 wineries, remains largely positive about the prospects for the industry's future. It predicts the wine industry as a whole will grow 4 percent to 6 percent annually.
But one worrying sign is that demand for higher-end wines -- long the fastest-growing segment of the industry -- has slowed sharply in recent months.
Sales of wines priced from $15 to $20 a bottle had been growing at about 15 percent a year, with wines above $20 growing at more than 20 percent, according to the study.
But those growth rates dropped last year to 6 percent and 12 percent respectively, the study found, citing data from Trade Pulse.
Nielsen, which tracks wine sales in supermarkets, found similar softness for high-end wines in the first quarter.
The growth rate of wines above $15 has been cut in half, according to Nielsen. On a volume basis, sales that had been growing at more than 14 percent slowed to just 7 percent for the first three months of 2008.
Slowing restaurant sales are a key reason high-end wine sales are slowing, said Jon
Fredrikson, a veteran wine industry analyst at Gomberg,
Fredrikson & Associates.
"The high rollers are not spending as much in restaurants, and certainly bankers are not out there celebrating these days," Fredrikson said.
Changing habits
The softness could be particularly painful for the North Coast wine industry, whose high-end wineries have long enjoyed prominent placement on the wine lists of the nation's best restaurants.
The National Restaurant Association has been warning for months that its members are very worried. The group's performance index dropped sharply in March, to its lowest level in five years.
"The soft economy continues to weigh on the minds of restaurant operators," said Hudson Riehle, senior vice president of research for the association.
At Syrah Bistro in Santa Rosa, chef Josh Silvers said beverage sales -- the majority of which are wine -- are down 4 percent so far this year.
Instead of dropping $30, $40, $50 or more on a bottle of wine for the table, more diners are ordering wines by the glass, which run from $7 to $15 a pour.
That's partly because of a shift in their dining habits.
Syrah, where a seven-course tasting menu with wine runs $128 a person for dinner, is finding more people coming for the less expensive lunch menu.
"People are spending a little bit less, but they still want to go out and treat themselves," Silvers said.
Wine sales at dinner are down about 6 percent, but lunch sales are up 14 percent over last year, he said.
For wineries like Sonoma's Hanzell Vineyards, which sells nearly half of its 5,000 cases to fine restaurants, the pullback is palpable.
Sticking to what's familiar
Restaurants across the country are buying about a third less wine than they have in the past, said Jean Arnold-Sessions, Hanzell's president.
That doesn't mean she's sitting on a bunch of wine she can't sell, it just means she has to work harder than ever to sell it. Arnold-Sessions must travel more to court new restaurants to make up for the drop in sales from her longtime accounts.
It's costly and tiring, but so far she's succeeding.
"The market is still there; the restaurants are still there. It's just harder work now," she said.
One force working in favor of established wineries is that many diners tend to stick with what they know when they aren't feeling flush, said John Hudson, brand director for Sonoma-Cutrer in Windsor.
With more than 80 percent of its nearly 300,000 cases sold in restaurants, the chardonnay specialist keeps a close eye on the "on-premise" market, as it is known in the industry.
"I think when times get tight, people go with what they know," Hudson said.
And even if they don't, deciding instead to try something cheaper, Hudson thinks Sonoma-Curter will win some of that business. As people slide down from the lofty heights of wines over $100 and look for value, he thinks they'll settle in comfortably to Sonoma-Cutrer's $40 to $50 restaurant range.
Retailers feel pinch
Exactly how far consumers will slide in search of less-expensive wines is a hot topic in Wine Country these days.
One of the core ideas supporting the argument of wine as recession-proof is the notion that once people get hooked on high-quality wines, they have a tough time swallowing lesser vintages.
But in today's fiercely competitive market, every winery has rivals nipping at its heels, arguing that their wines cost less but deliver just as much.
"You'll see people who on a regular basis have been drinking Kendall-Jackson at $13 and all of a sudden Blackstone is fine at $10," said Dale Stratton, vice president of strategic insights for Constellation Wines U.S., which owns Blackstone, the popular merlot brand. "Loyalty is very low in our category."
Retailers say they're seeing the trend of "trading down" very clearly.
"With the uncertainly of the economy and the future of our country, those I have talked to are watching their pennies and saving for a rainy day," said Renay Santero, wine buyer for Oliver's Markets, the chain of local groceries.
Oliver's wine sales are up overall, but growth has recently slowed and people are trading down, Santero said.
"The recent tone of the industry is that higher-end wines are sitting on our shelves a little longer than normal," she said.
Despite the pain that may cause some wineries, the wine industry is growing and will likely continue to do so, Fred-rikson said.
The weak dollar tends to make U.S. wines more affordable, in comparison to foreign wines, which bodes well for domestic wineries, he said.
In March, imports "walked off the cliff," plunging 19 percent over the same period in 2007. For the quarter, total imports were off 7 percent, he said.
And unlike the previous recession in 2001, there is currently not a glut of grapes on the market. In fact, several years of strong demand combined with limited planting of new vineyards means wine prices are far less likely to drop, Fredrikson said.
"Sales have softened a little, but it's not like we've fallen out of bed," Fredrikson said. "There is no major crisis here."
KEVIN MCCALLUM
Monday, May 19, 2008
Obituary: Robert Mondavi
In Napa Valley, where formality tends to be reserved for gala auctions and visiting dignitaries, Robert G Mondavi was and probably always will be referred to as 'Mister'.
'Call me Bob,' or 'Call me Robert,' he would say when introducing himself. Yet those employed by him over the years at Robert Mondavi Winery, others who worked with him to enhance the quality and reputation of California wines, and even some who didn't always see eye to eye with America's most important and charismatic wine figure, typically showed their respect by calling him 'Mr Mondavi.'
Mr Mondavi died on May 16, one month shy of his 95th birthday. The legendary vintner, who had been frail and in a wheelchair in recent years, died peacefully at his home near Yountville in Napa Valley, the family said.
Described as the father/grandfather/godfather/patriarch/ambassador of California wine, Mondavi, a skilled technician and ultimate marketing and public relations man, waged a half-century-long, four-pronged campaign: Rally California winemakers to produce better wines; show the world that California wine quality could rival that of France, Italy and Germany; encourage Americans, for whom little wine-drinking tradition existed, to include wine as a healthy, food-friendly part of their lives; and demonstrate that wine, food and the arts were equal components in enjoying 'the good life.'
'We lost one of the most important leaders in the world of wine, and for those of us in the Napa Valley, it's as if we've lost our second father or grandfather,' said Linda Reiff, executive director of the Napa Valley Vintners association. 'Robert Mondavi was the head of the Napa Valley wine community's extended family - this large, crazy yet tight-knit and dedicated group of people who would do anything to help each other. And that's one of the many important lessons Mr. Mondavi taught us: To always be there to help a neighbor, a friend, our community or beyond. He was one of the most kind and generous people we've ever known.'
In addition to founding the most famous winery in the US, Mondavi is credited with being one of the creators of the wildly successful Napa Valley Wine Auction, and for sharing viticultural and enological research and information with his competitors, believing, as Richard Arrowood said, 'that it would come back to him ten-fold.'
Decanter's consultant editor Steven Spurrier said, 'There will never be another Robert Mondavi. He was unique, and completely driven, completely consistent. His uniqueness lay in the fact that from the very beginning he wanted success for the whole Napa Valley – he was never just in it for his own operation.'
Mondavi inspired huge loyalty, and counted some of the most eminent wine professionals as personal friends.
'I was there at the opening of the winery in 1966,' Hugh Johnson said. 'He was always a great great friend. What was unique about him? He was an amazing, seamless talker – unstoppable. He was always asking questions, trying out new theories on people – and he always had a bottle of wonderful French wine on the table, Mouton or Latour. He wanted to show everyone the wine he was making was just as good.'
'He is singly responsible for putting respect for California wines on the map. Period. End of story,' said Arrowood, who received advice and inspiration from Mondavi in the early 1970s, when Arrowood was a lab technician at Rodney Strong Vineyards in Sonoma, contemplating becoming a winemaker. 'He brought all the wines from California to the attention of the world, not just Napa.'
Arrowood went on to great success as the winemaker at Chateau St Jean, then founded Arrowood Vineyards & Winery in Sonoma. In an interesting twist, he and his wife, Alys, sold their winery to Mondavi in 2000, with Arrowood staying on as winemaker. The sale of the Robert Mondavi Corp to Constellation Brands in 2004 ended the business relationship, yet Arrowood looks back fondly on the experience.
'The whole family was very kind to us, very sincere,' he said. 'The wine world has lost a champion of graciousness and the enjoyment of wine and food'.
Sarah Kemp, publishing director of Decanter (which honored Mondavi as its Man of the Year in 1989) said, 'Robert Mondavi holds a unique position in the history of wine. This extraordinary man, through his vision, relentless energy and gritty determination, changed the way consumers thought about wine. By putting California wine on the map, he ensured the world knew that some of the world's great wines could be made outside Europe, at the time a revolutionary concept. He was deservedly one of the wine legends of our time.'
One of Mondavi's proudest accomplishments was the 2001 opening of Copia: The American Center for Wine, Food and the Arts, in the city of Napa, to which he was a major contributor. Also in 2001, he and his second wife, Margrit Biever Mondavi, gave US$25 million to help establish the Robert Mondavi Institute for Wine and Food Science at UC Davis, which is scheduled to open in October, and US$10 million to launch the Robert and Margrit Mondavi Center for the Performing Arts in Davis, which opened in 2002.
After being forced out of his family's Charles Krug Winery in St. Helena in 1966, Mondavi founded Robert Mondavi Winery on the west side of Highway 29 in Oakville. In addition to the high-quality wines made there, the winery's iconic California mission architecture, educational opportunities, visitor amenities, concert series and Great Chefs program (participants included Julia Child, Alice Waters, Paul Bocuse and Joel Robuchon) underscored the credo Mondavi outlined in his 1998 book, 'Robert Mondavi: Harvests of Joy.'
'Wine to me is passion,' he wrote. 'It's family and friends. It's warmth of heart and generosity of spirit. Wine is art. It's culture. It's the essence of civilization and the Art of Living … When I pour a glass of truly fine wine, when I hold it up to the light and admire its color, when I raise it to my nose and savor its bouquet and essence, I know that wine is, above all else, a blessing, a gift of nature, a joy as pure and elemental as the soil and vines and sunshine from which it springs.'
Jay Indelicato, chairman of the California Wine Institute, said, 'Over the decades, he encouraged a spirit of cooperation for all wineries in California. He helped advance the whole industry, from technical issues all the way to marketing concepts and culture. He was out there doing it all himself, not just designing programs. What drove him? True passion.'
Mondavi was born in 1913 in Virginia, Minnesota, to parents who left the Marche region of Italy for America. The family moved to Lodi, California, during Prohibition and Robert attended school there.
A 1936 graduate of Stanford University with a degree in economics and business administration, he joined his father, Cesare, at Sunny St. Helena Winery, a bulk wine producer. He later convinced his father to purchase the nearby Charles Krug Winery, where Mondavi and his younger brother, Peter began to improve quality there.
During an argument with Peter in 1965 over Robert's purchase of a mink coat for his first wife, Marjorie, to wear to a White House dinner, Robert punched his younger brother, prompting his expulsion from Krug by his mother, Rosa.
So at age 53, Mondavi built Robert Mondavi Winery in 1966, with his older son, Michael. At a time when California wine was considered cheap plonk, the Mondavis made an immediate impact on quality by introducing the use of cold fermentation, stainless steel tanks and French oak barrels to their winemaking. By the l970s, Robert Mondavi wines were recognized for their superior quality and sold abroad.
Robert Mondavi had a great eye for talent, hiring several winemakers who went on to stardom elsewhere, including Warren Winiarski (Stag's Leap Wine Cellars, Zelma Long (Simi Winery and now her own Zelphi Wines), Mike Grgich (Grgich Hills) and Dan Goldfield (Dutton-Goldfield Winery).
Along the way, Mondavi met Baron Philippe de Rothschild at Chateau Mouton Rothschild in Bordeaux, and in 1979, the two launched Opus One Winery in Oakville, a specialist in Bordeaux-style red wines. That same year, Mondavi bought a winemaking cooperative near Lodi that he named Woodbridge, for the production of value-priced wines.
Mondavi further expanded his winemaking empire through partnerships with the Frescobaldi family in Italy, Eduardo Chadwick of Viña Errazuríz in Chile, and Rosemount in Australia.
Seeking more growth, the Robert Mondavi Corp. became a publicly traded company in 1993. Robert semi-retired, though his succession plans were upset when sons Michael and Timothy couldn't agree on how to run the company. Financial problems arose, stock prices fell, and the family was compelled to sell its shares in Robert Mondavi Corp. to Constellation Brands in 2004, a transaction that the family and many Napa Valley neighbors still have difficulty swallowing.
Richard Sands, chairman of Constellation, praised Mondavi's contributions.
'He had a vision about the potential for developing great California wines. Robert was a pioneer who acted on his vision and was both passionate and relentless in his pursuit of ever-better wines, especially from the Napa Valley. He championed the marriage of fine wine, excellent food, arts and culture, and relationships that enrich lives. He was an inspiration and he will be greatly missed.'
Mondavi was awarded France's Legion of Honor in 2005 and in 2006, was the first inductee into the Culinary Institute of America's Vintners Hall of Fame. In 2007, Gov. Arnold Schwarzenegger inducted Mondavi into the California Hall of Fame.
At the time of his death, Mondavi was chairman emeritus of the Robert Mondavi Corp. With his wife, Margrit, son Tim and daughter Marcia Mondavi Borger, he also owned the Napa Valley Cabernet Sauvignon-based brand Continuum; the first vintage, 2005, was recently released.
In addition to his wife, sons and daughter, Mondavi is survived by nine grandchildren and his brother, Peter. In lieu of flowers, the family suggests donations to Copia, UC Davis, The Oxbow School and Stanford University.
Robert Mondavi Winery spokesperson Mia Malm said services will be private. A remembrance book will be available at the Oakville winery and at the visitor center at Woodbridge winery in Lodi, California, for those wishing to share a message or condolence. The books will be given to the Mondavi family.
Linda Murphy
'Call me Bob,' or 'Call me Robert,' he would say when introducing himself. Yet those employed by him over the years at Robert Mondavi Winery, others who worked with him to enhance the quality and reputation of California wines, and even some who didn't always see eye to eye with America's most important and charismatic wine figure, typically showed their respect by calling him 'Mr Mondavi.'
Mr Mondavi died on May 16, one month shy of his 95th birthday. The legendary vintner, who had been frail and in a wheelchair in recent years, died peacefully at his home near Yountville in Napa Valley, the family said.
Described as the father/grandfather/godfather/patriarch/ambassador of California wine, Mondavi, a skilled technician and ultimate marketing and public relations man, waged a half-century-long, four-pronged campaign: Rally California winemakers to produce better wines; show the world that California wine quality could rival that of France, Italy and Germany; encourage Americans, for whom little wine-drinking tradition existed, to include wine as a healthy, food-friendly part of their lives; and demonstrate that wine, food and the arts were equal components in enjoying 'the good life.'
'We lost one of the most important leaders in the world of wine, and for those of us in the Napa Valley, it's as if we've lost our second father or grandfather,' said Linda Reiff, executive director of the Napa Valley Vintners association. 'Robert Mondavi was the head of the Napa Valley wine community's extended family - this large, crazy yet tight-knit and dedicated group of people who would do anything to help each other. And that's one of the many important lessons Mr. Mondavi taught us: To always be there to help a neighbor, a friend, our community or beyond. He was one of the most kind and generous people we've ever known.'
In addition to founding the most famous winery in the US, Mondavi is credited with being one of the creators of the wildly successful Napa Valley Wine Auction, and for sharing viticultural and enological research and information with his competitors, believing, as Richard Arrowood said, 'that it would come back to him ten-fold.'
Decanter's consultant editor Steven Spurrier said, 'There will never be another Robert Mondavi. He was unique, and completely driven, completely consistent. His uniqueness lay in the fact that from the very beginning he wanted success for the whole Napa Valley – he was never just in it for his own operation.'
Mondavi inspired huge loyalty, and counted some of the most eminent wine professionals as personal friends.
'I was there at the opening of the winery in 1966,' Hugh Johnson said. 'He was always a great great friend. What was unique about him? He was an amazing, seamless talker – unstoppable. He was always asking questions, trying out new theories on people – and he always had a bottle of wonderful French wine on the table, Mouton or Latour. He wanted to show everyone the wine he was making was just as good.'
'He is singly responsible for putting respect for California wines on the map. Period. End of story,' said Arrowood, who received advice and inspiration from Mondavi in the early 1970s, when Arrowood was a lab technician at Rodney Strong Vineyards in Sonoma, contemplating becoming a winemaker. 'He brought all the wines from California to the attention of the world, not just Napa.'
Arrowood went on to great success as the winemaker at Chateau St Jean, then founded Arrowood Vineyards & Winery in Sonoma. In an interesting twist, he and his wife, Alys, sold their winery to Mondavi in 2000, with Arrowood staying on as winemaker. The sale of the Robert Mondavi Corp to Constellation Brands in 2004 ended the business relationship, yet Arrowood looks back fondly on the experience.
'The whole family was very kind to us, very sincere,' he said. 'The wine world has lost a champion of graciousness and the enjoyment of wine and food'.
Sarah Kemp, publishing director of Decanter (which honored Mondavi as its Man of the Year in 1989) said, 'Robert Mondavi holds a unique position in the history of wine. This extraordinary man, through his vision, relentless energy and gritty determination, changed the way consumers thought about wine. By putting California wine on the map, he ensured the world knew that some of the world's great wines could be made outside Europe, at the time a revolutionary concept. He was deservedly one of the wine legends of our time.'
One of Mondavi's proudest accomplishments was the 2001 opening of Copia: The American Center for Wine, Food and the Arts, in the city of Napa, to which he was a major contributor. Also in 2001, he and his second wife, Margrit Biever Mondavi, gave US$25 million to help establish the Robert Mondavi Institute for Wine and Food Science at UC Davis, which is scheduled to open in October, and US$10 million to launch the Robert and Margrit Mondavi Center for the Performing Arts in Davis, which opened in 2002.
After being forced out of his family's Charles Krug Winery in St. Helena in 1966, Mondavi founded Robert Mondavi Winery on the west side of Highway 29 in Oakville. In addition to the high-quality wines made there, the winery's iconic California mission architecture, educational opportunities, visitor amenities, concert series and Great Chefs program (participants included Julia Child, Alice Waters, Paul Bocuse and Joel Robuchon) underscored the credo Mondavi outlined in his 1998 book, 'Robert Mondavi: Harvests of Joy.'
'Wine to me is passion,' he wrote. 'It's family and friends. It's warmth of heart and generosity of spirit. Wine is art. It's culture. It's the essence of civilization and the Art of Living … When I pour a glass of truly fine wine, when I hold it up to the light and admire its color, when I raise it to my nose and savor its bouquet and essence, I know that wine is, above all else, a blessing, a gift of nature, a joy as pure and elemental as the soil and vines and sunshine from which it springs.'
Jay Indelicato, chairman of the California Wine Institute, said, 'Over the decades, he encouraged a spirit of cooperation for all wineries in California. He helped advance the whole industry, from technical issues all the way to marketing concepts and culture. He was out there doing it all himself, not just designing programs. What drove him? True passion.'
Mondavi was born in 1913 in Virginia, Minnesota, to parents who left the Marche region of Italy for America. The family moved to Lodi, California, during Prohibition and Robert attended school there.
A 1936 graduate of Stanford University with a degree in economics and business administration, he joined his father, Cesare, at Sunny St. Helena Winery, a bulk wine producer. He later convinced his father to purchase the nearby Charles Krug Winery, where Mondavi and his younger brother, Peter began to improve quality there.
During an argument with Peter in 1965 over Robert's purchase of a mink coat for his first wife, Marjorie, to wear to a White House dinner, Robert punched his younger brother, prompting his expulsion from Krug by his mother, Rosa.
So at age 53, Mondavi built Robert Mondavi Winery in 1966, with his older son, Michael. At a time when California wine was considered cheap plonk, the Mondavis made an immediate impact on quality by introducing the use of cold fermentation, stainless steel tanks and French oak barrels to their winemaking. By the l970s, Robert Mondavi wines were recognized for their superior quality and sold abroad.
Robert Mondavi had a great eye for talent, hiring several winemakers who went on to stardom elsewhere, including Warren Winiarski (Stag's Leap Wine Cellars, Zelma Long (Simi Winery and now her own Zelphi Wines), Mike Grgich (Grgich Hills) and Dan Goldfield (Dutton-Goldfield Winery).
Along the way, Mondavi met Baron Philippe de Rothschild at Chateau Mouton Rothschild in Bordeaux, and in 1979, the two launched Opus One Winery in Oakville, a specialist in Bordeaux-style red wines. That same year, Mondavi bought a winemaking cooperative near Lodi that he named Woodbridge, for the production of value-priced wines.
Mondavi further expanded his winemaking empire through partnerships with the Frescobaldi family in Italy, Eduardo Chadwick of Viña Errazuríz in Chile, and Rosemount in Australia.
Seeking more growth, the Robert Mondavi Corp. became a publicly traded company in 1993. Robert semi-retired, though his succession plans were upset when sons Michael and Timothy couldn't agree on how to run the company. Financial problems arose, stock prices fell, and the family was compelled to sell its shares in Robert Mondavi Corp. to Constellation Brands in 2004, a transaction that the family and many Napa Valley neighbors still have difficulty swallowing.
Richard Sands, chairman of Constellation, praised Mondavi's contributions.
'He had a vision about the potential for developing great California wines. Robert was a pioneer who acted on his vision and was both passionate and relentless in his pursuit of ever-better wines, especially from the Napa Valley. He championed the marriage of fine wine, excellent food, arts and culture, and relationships that enrich lives. He was an inspiration and he will be greatly missed.'
Mondavi was awarded France's Legion of Honor in 2005 and in 2006, was the first inductee into the Culinary Institute of America's Vintners Hall of Fame. In 2007, Gov. Arnold Schwarzenegger inducted Mondavi into the California Hall of Fame.
At the time of his death, Mondavi was chairman emeritus of the Robert Mondavi Corp. With his wife, Margrit, son Tim and daughter Marcia Mondavi Borger, he also owned the Napa Valley Cabernet Sauvignon-based brand Continuum; the first vintage, 2005, was recently released.
In addition to his wife, sons and daughter, Mondavi is survived by nine grandchildren and his brother, Peter. In lieu of flowers, the family suggests donations to Copia, UC Davis, The Oxbow School and Stanford University.
Robert Mondavi Winery spokesperson Mia Malm said services will be private. A remembrance book will be available at the Oakville winery and at the visitor center at Woodbridge winery in Lodi, California, for those wishing to share a message or condolence. The books will be given to the Mondavi family.
Linda Murphy
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