Tequila Rack Blog

In the December 17, 2009 issue of Drinks International online magazine, the headline reads:

WHO plans global duty free liquor ban

The story goes on to say…

“The World Health Organization (WHO) has shocked the duty-free industry by proposing a global ban on duty-free liquor sales, a business which was worth $6.3bn last year.”

The proposal to slow down alcohol consumption was actually published in December of last year, but will finally get onto the WHO’s Executive Board agenda between January 18-23, 2010. The Board is made up of health ministers from 34 leading countries, and if it approves the proposal, it will be presented to the WHO’s full annual General Assembly in May 2010.

Keith Spinks, secretary general of the European Travel Retail Council (ETRC) believes that the proposal will pass the Executive Board and into the General Assembly that is made up of 193 governments, and warns, “If this goes though, it will be a disaster for the industry.”

Should the World Health Organization ratify this proposal, there is an upside.  According to Spinks, this proposal on liquor would not be “binding.”

“It is going to be up to each member country to decide whether to implement the proposal or not.” But, he adds, “My fear is that some countries will and some won’t, leaving us in a big mess.”

In 2005, the WHO tried to ban duty-free tobacco sales through its Framework Convention on Tobacco Control (FCTC). The FCTC was ratified by 165 countries worldwide, but has yet to be implemented by any country.

A quick review of the members of the World Health Organization may give a clue as to why.

Alcohol, Tobacco, and Tourism

All countries which are Members of the United Nations may become members of World Health Organization by accepting its Constitution.  So, which countries are members?

Australia, the Bahamas, Costa Rica, Dominican Republic, Egypt, Finland, Germany, Hungary, Italy, Mexico, Switzerland, UK, and the USA, to name just a few.  Most all of these countries have one or more international airports with duty free stores selling among other things, spirits, cigars, and cigarettes.

Not only do most of these member countries tout tourism as a major industry, but many also have their signature spirits (and cigars, in some cases) that define them.  Examples are rum from Barbados, limoncello from Italy, and of course, tequila from Mexico.

Where duty free merchants pay inventory/business or other taxes, customers usually pay none.  For these countries, tourism, and the profit made at duty free shops from alcohol and tobacco sales, is directly related to each other.

How much damage could the enforcement of this proposal do?

WHO vs. Patrón

As stated above, duty-free liquor sales from last year amounted to $6.3 billion in 2008.  That accounted for 17.2% of the total global liquor business according to the Drinks International article.

In the April 2008 issue of Impact Magazine, it states that Patrón tequila was also penetrating the travel retail sector overseas, long a key channel for high-end spirits but one in which tequila was underappreciated.  Patrón was aggressively growing its brand by sampling at very visible public relations events in key cities such as London, Athens, Hong Kong, Singapore and Sydney, all whose countries are members of the World Health Organization.

The Patrón Spirits Company, producers of Patrón tequila, claim on their website to be in over 100 countries and islands worldwide.  Given that there are only 193 members of the WHO, the chances are good that Patrón is available in the duty free stores of most of these member countries.

Assuming that the same 163 countries that ratified the duty free tobacco ban in 2005 also decided to ratify—and enforce–the duty free alcohol ban, the results could be devastating not just for Patrón, but also for Sauza, Brown-Forman (El Jimador brand), and Jose Cuervo, as well as all spirits suppliers, duty free retailers, and airports.

While it seems likely that the World Health Organization’s Executive Board will ratify the alcohol ban proposal, it seems unlikely that any countries will actually enforce it.

From: Hotel F&B Marketing: Sprucing Up F&B Sales

Hotels find effectively merchandising food and spirits and getting staff involved in the story behind the product directly affects the bottom line.

By Mary Boltz Chapman, Contributing Editor — Hotels, 6/30/2009 11:00:00 PM

When The Peninsula Chicago began offering single-malt scotch flights, its public relations staff spread the word through local newspapers and magazines. Its finding, however, was that the best marketing is the buzz that spreads through the bar when someone orders it: Three 1-ounce pours in etched glasses are stacked on a handcrafted wooden ladder.

“We knew it would take off,” says Director of Food & Beverage Pradeep Raman. “We started getting regular guests ordering it, which attracts onlookers.”

The Peninsula created the flights and added them in October to try something unique for its guests, whom Raman describes as “urban yuppies. A mixture of affluent younger generation who come in with friends and businessmen entertaining clients.” Nine flights, ranging from US$25 to US$95, were assembled to take customers “on a journey.” Each flight holds three scotches ranging in complexity. They are grouped by region, body or tasting notes.

Raman says the flights are selling well, at a pace of about five to 10 on weekdays and 20 or more on weekend days. He credits in part the merchandising that happens when a guest sees someone else drinking it. The server or bar manager will walk customers through the experience, discussing each single malt and its characteristics. Guests also receive a card listing details on each scotch.

The handcrafted, etched glassware bearing the hotel’s name is prominently on display behind the bar, and bartenders are happy to tell inquiring guests about the flights.

Home-Grown Merchandising

At Doubletree Hotel Chicago Magnificent Mile, bar staff also serve as marketers, telling the story of the infused vodka flights featuring flavors grown on site.

Executive Chef Scott Walton grows vegetables and herbs in a deck garden for the hotel’s Markethouse restaurant. Taking a cue from the restaurant’s seasonal slant, Walton began infusing vodkas with fruits from local purveyors for the hotel bar, which was completed in December. A recent US$15 flight included raspberry, vanilla and pomegranate.

This summer, Walton will include infusions from the fruits of his own labor, such as lemon balm, chocolate mint and tomatoes. He also is planning a bacon-infused vodka with pork from a local farmer. Flights combine flavors from savory to sweet.

Walton says depending on flavor, the bar goes through a decanter of infused vodka every seven days. As at The Peninsula, glassware set out on the bar and customer buzz act as merchandising.

Full story here: http://tinyurl.com/ylacv34

In reading the article below today, I find myself curious know, and understand, the key differences and distinctions between this new “Luxury” Tequila brand and all the many others that have traveled this road before it.  Perhaps you can distill it out of the below article or their website.

Please (really) post your comments back at the appropriate section below. I really want to know what I’m missing here.

I’m not trying to be a PaQui buzz kill, but much like life, unless a brand is born from “Luxury Linage”, it is a long, hard, “New Money” road to Luxury status.  So, you’re either born with it or you have to buy into it. And, for the many owners of Tequila Brands out there, they just don’t have the resources, or the patience, to make their way into Luxury Brand status.

Therefore, the bigger question here, “What does it really take to make a Luxury Tequila brand?” is at the core of what many in the biz fail to grasp completely.  They believe that if people like it and they price it the same as Patron, it somehow magically becomes so.  It is by far a more complex sum of factors that eventually, equates to a luxury brand, …or not.  It’s a dynamic process where the building of a luxury brand takes a lot of money, money, money, marketing, and time. Did I mention money?

So, just how does one go about building Luxury brand status for ones muy fabuloso Tequila?

Well, for those out there that care to know, here is the not so secret recipe to establishing a Luxury Tequila Brand:

Ingredients:

• 1 Good quality Tequila recipe

• 1 Good quality & consistent set of ingredients

• 1 Good quality distillery

• 1 Set of replicable processes that will produce a consistent, quality product

• 1 industrial produced bottle, trademarked

• 1 Consistent Message

• Great Global Distribution system

• Money ($10-20M/Yr.)

• Time (10-20 years)

   

  Directions

1. Preheat distillery, add quality ingredients, apply good Tequila recipe. Stir

2. Using replicable processes, make Tequila, set some aside in barrels to age

3. While waiting for Tequila, produce distinctive trademarked industrial bottles and closures

4. Use some of the money to buy into a great global distribution system

5. Fill Tequila bottles and ship to Great Global Distribution system

6. Sprinkle Consistent Message liberally with money, add Time

7. Wait (about 10-20 years)

As always, your thoughts and comments are most welcome.  Now for the article:

Making People Happy Through Tequila? ‘PaQui’ Says ‘Si’

Dec. 10, 2009, Jeremy Nisen–HispanicBusiness.com

Dr. Javier Martinez was born in Mexico, but has lived in England. His journeys have taken him from the business sector into the study of politics, in which he earned his doctorate. But Dr. Martinez’s path has led him back home, at least in a career sense. While he currently lives in Los Angeles with his wife and children, he’s heard and answered the call of his family business. Dr. Martinez is the President and CEO of Tequila Holdings, Inc., the company behind the new luxury brand known as PaQui.

PaQui, which is an Aztec word for “to be happy,” is Dr. Martinez’s answer to the opportunity he sees in the American alcohol market. It’s been on the market for only five months, but its creation was a long time coming.

Starting in 1997, from his position as an importer and distributor of bulk tequila brands, Dr. Martinez saw the shift in the premium tequila landscape, wherein brands like Patron began to take off.

“We, in Mexico, were not realizing how exciting the word ‘tequila’ is to the American consumer,” said Dr. Martinez. “I sensed potential was huge in the U.S.” At about 6 percent of the market, luxury tequila is the fastest-growing category, says Dr. Martinez, “but the base is small.” His segment of the market, he believes, could be 10 percent in the next 10-15 years.

Patron, says Dr. Martinez, got the packaging right. With PaQui, he sees an opportunity to make a similarly beautiful bottle, but pair it with a tequila that he feels “represents the best of the industry.”

“I thought, ‘Let’s bring tequila back to tequila,’” Dr. Martinez explained to HispanicBusiness.com, noting that his priority is to highlight the agave,

“Vodka is neutral, for example,” he said, “but tequila — particularly white tequila — is very rich in flavor and aroma compounds.”

PaQui is made with a process he calls “selective distillation,” a method that his company spent two years developing. The result, said Dr. Martinez, is “very drinkable, clean, smooth, and finishes with ‘I need some more!”

It’s a far cry from the tequila many people aged 35 or older may have experienced. The perception imparted in the 1980s and 1990s by lower market brands, notorious for causing headaches, is what PaQui — and indeed the Mexico-based tequila industry in general — is attempting to overcome.

“The consumer trading up,” said Dr. Martinez, “for less quantity, more quality.” Those making high-end, premium tequila are attempting to answer that call.

For the neophyte premium tequila drinker, Dr. Martinez says “the ’silvera’ first.” That will give the best idea of what the agave plant tastes like. From there, consumers can figure out how they prefer drinking it — trying it neat or with ice or in a margarita.

“One of the advantages of good tequila is that it’s very mixable,” Dr. Martinez advised. “You can mix it with almost anything and retain the characteristic of the tequila. Even in a margarita, you can tell what brand is being used. It’s an amazing spirit, unlike any other.”

After trying the silvera, Dr. Martinez said should a consumer want to experience “more exotic flavors,” try the “reposado,” which is slightly aged and retains some flavors imparted by the wood barrels used in the aging process. After that, one should try the “anejo,” which has been aged even more.

Source: HispanicBusiness.com (c) 2009. All rights reserved.

Read the rest here:

http://www.hispanicbusiness.com/news/2009/12/10/making_people_happy_through_tequila_paqui.htm#

According to figures released by Herradura, the number of cases of tequila exported annually are…

1. US 11.5 million

2. México 7.5 million

3. Germany 450,000 

4. Russia 300,000

5. Canada 250,000

6. France 200,000

7. Greece 190,000

8. Japan 150,000.   

Of worldwide tequila production, Mexico bottles 33% while the United States bottles 51% as bulk mixto. 

However, figures released by the CRT (Consejo Regulador del Tequila) state that from January to October of 2009, there was a 19% drop in tequila production from 2008.  

A reporter for Excelsior Online recently commented in his column that despite Mexico’s economic drop of 7% during the recession, as of October 2009, sales of tequila have increased 10% over last year. While this columnist attributes the rise in tequila consumption to consumers trying to make the recession more bearable, others in the tequila industry are more optimistic about the future.

Juan Beckmann Vidal, president of Casa Cuervo, sees enormous worldwide potential in the exportation of the Spirit of Mexico, particularly into Asia.  He foresees the annual sales of 137 million liters of tequila to double in the next five years.

With the current instability of each country’s economy, it will be interesting to see what the final production figures are at the end of 2009.

Will KIRKLAND prove to be the category killer for high-end Extra Anjeo like it has for ultra-premium Vodka? As you can see from the below insert from December’s Costco Connection magazine, Kirkland 3 year Anjeo hits the shelves in select US markets. In CA it is currently selling for $23.99 per bottle.

I’m sure to buy one to put on my ever expanding Tequila shelf, most likely next to “Black Death Tequila” and others of similar ilk. I’m also sure to do a proper tasting and write down my thoughts to share with you as a future commentary to this article.

But the thought I have for you to ponder today is simply this: Why didn’t Costco start with Blanco? Blanco is the largest volume category style of 100% Agave Tequila by far. It is also much less expensive to produce, and much easier to maintain product consistency and taste profile (due to the differences in barrel wood, especially amplified over three years).

My best guess is that Costco wants to accomplish two things: apply pricing pressure to the high end that will ultimately drive down all other Tequila pricing, and… Costco does not want to mess around with the volume and profit surrounding the massive amounts of 1.75L Patron Blanco that it sells through its stores.

Your thoughts?

UPDATE:

So, as an update to our most recent topic above, “How low can the price of Tequila go?” now that the new Costco 3yr Anjeo is out in stores @ a very low $23.99/L. Simple Economics say that this pricing pressure at the high-end will no doubt exert pricing pressures throughout the tequila markets where Costco sell Liquor.

Well, I believe the next shoe, Premium Mixto Pricing, has just dropped.

In the mail today, courtesy of this week’s Ralph’s grocery flyer, Sauza Gold Premium Mixto is featured for a mere $6.39 a bottle with a -$3.00 instant redeemable coupon (that arrived in the same flyer bundle), for a net price to consumer of only $3.39 / 750ml.  Stater Brothers Holiday Ad features Sauza for only $2.99 net after both a Southern Wine & Spirits -$3.00 in ad coupon plus the manufacturers -$3.00 instant redeemable coupon.  At these prices, which are very near the cost of production after taxes, bottle cost, shipping, its really time to stock up on every segment now through Q1 of 2010.

Perhaps this is the answer, at least the near term, regarding the low end of Premium Mixto Tequila pricing.

If it gets any cheaper, we may all find ourselves giving a whole new meaning to “Two Buck Chuck”(up?) Tequila. – Z

A picture of the article can be found here: http://tinyurl.com/y9ngesy

Link to the Costco Connection article can be found here: http://tinyurl.com/yzyrrc6

The Distillery site is here: http://www.fabricadetequilasfinos.com.mx/

By Andrew Cleary

Nov. 26 (Bloomberg) – Patron Spirits International, which outspent all other U.S. liquor brands on marketing last year, plans to grab more “blockbuster” billboards, ousting auto, phone and beer ads to catch up with tequila rival Jose Cuervo.

Patron, controlled by shampoo billionaireJohn Paul Dejoria, this year gained control of a 225-foot-tall billboard, New York’s largest, near Penn Station. Formerly held by AT&T Inc., the billboard says shoppers can “eliminate regifting” by buying Patron for their loved ones this weekend, the busiest of the U.S. Christmas shopping season. Clear Channel Outdoor Holdings Inc. says such a billboard can cost $1 million a year.

Chief Operating Officer John McDonnell said the third- biggest U.S. tequila maker is raising its marketing budget by 10 percent to secure similar billboards in the 10 biggest U.S. spirits markets. Sales of Patron, which costs between $40 and $500 a bottle, rose 10.6 percent in the year to Sept. 6, Chicago-based researcher Information Resources Inc. says.

Patron is “taking advantage of opportunities that haven’t been available in the past, like choice outdoor locations,” McDonnell said yesterday. “Increased awareness and exposure is very much attributable to our advertising.” Las Vegas-based Patron may pick up sites being vacated by automakers, he said.

A Patron ad replaced Heineken NV on a billboard above the I-93 expressway in McDonnell’s home town of Boston last year.

Heineken, which is cutting costs like advertising to stay profitable, saw U.S. sales of its Dutch beer plunge 12 percent by volume in the first half. Diageo Plc, the largest liquor maker and Cuervo’s U.S. distributor, cut its marketing spending by 9 percent in the year ended June 30.

Seagram Veteran

For Patron, “it is particularly smart to increase that spend,” said Tom Sebok, chief executive officer of advertising firm Young & Rubicam North America. “Those who are aggressive will get long-term dividends. Those who aren’t will have a much harder time clawing back in better times.”

Patron, which also owns Ultimat vodka, may buy more brands, McDonnell said. The veteran of Seagram Co. said the company has no debt, and declined to provide sales or profit figures.

Larger tequila rivals Casa Cuervo SA de CV and Fortune Brands Inc.’s Sauza, which both sell for less than Patron, saw their revenue decline 2.4 percent and 8.9 percent, respectively, while total U.S. liquor sales rose 1.6 percent over the same period, according to Information Resources.

Patron is also spending more to secure inside covers and pull-outs in magazines including GQ, Sports Illustrated, and Forbes, McDonnell said in an earlier interview in London. “You have to have these blockbuster positions,” he said.

The company generates 90 percent of its revenue in the U.S. and spent $50.9 million on advertising its tequila in 2008, more than any other liquor brand, Taylor Nelson Sofres Plc says.

READ MORE HERE: http://tinyurl.com/ydg8elj

– Restaurants and Institutions, 11/1/2009

Unless they’re ordering the driest of martinis, drinkers don’t often choose gin as a straight-up sip, making the gin flights on offer atNew Heights in Washington, D.C., all the more intriguing.

“Gin has such complexities of flavors,” says Umbi Singh, owner of the contemporary-American restaurant, where an emphasis on the spirit has propelled gin-based drinks to nearly 60% of liquor sales. “Each gin brewmaster brings his own profile. So many different herbs and flavors can be introduced.”

Each month, Singh presents a new $15 trio of chilled gins; the pours are usually garnished with lime. One recent lineup explored three different styles: London Dry, New World and old Dutch (also known as Genever). Selections are chosen from the restaurant’s evolving list, which currently features 32 varieties from around the world.

Although gin tends to fly under the radar in comparison with populist-favorite vodka or always-classic whiskey, Singh sees more customers these days sharing his passion for the botanically driven spirit. “I think people are beginning to get into it,” he says.

Full article here: http://tinyurl.com/yj9r7dx

Posted date: 11/23/2009

By MICHAEL VOLPE Orange County Business Journal Staff

Two former executives of Aliso Viejo-based Nolet Spirits USA Inc., importer of Ketel One vodka, have traded martinis for margaritas.Kirk Gaither, former vice president of sales for Ketel One, and Jim Riley, former vice president of public relations and events for Ketel One, have started Newport Beach-based Intersect Beverage LLC, an importer of Azuñia Tequila from Mexico.The two started the business after being laid off.The pair left Nolet Spirits USA after the company’s Dutch vodka maker parent sold a 50% stake in 2008 to Britain’s Diageo PLC, which has taken over a lot of the vodka maker’s U.S. distribution and marketing work.Gaither and Riley secured a deal with Sergio Partida Zuniga and Liliana Partida, two members of a tequila making family in the Mexican state of Jalisco. They had approached Riley weeks prior to the Diageo deal about doing business.“It was kind of like fate since Kirk and I had always talked about doing a side project together,” said Riley, chief executive at Intersect.The tequila importer brought on Newport Beach-based Blue C Advertising to handle advertising, including social media campaigns and store displays.“They hired us to do their ongoing integration into social media and retail marketing in bars and out of them,” said Eric Morley, principal at Blue C.Intersect is leaning on social media campaigns. The company has various campaigns including “Follow Jim Wednesdays,” where Riley offers to buy margaritas for anyone following him on Twitter, and “Margarita Mondays,” where the company posts a margarita recipe.“Regular advertising doesn’t work for the spirits business when you’re trying to break into it,” Blue C’s Morley said. “You have to do something different.”The ad shop is sending tequila to bloggers to taste and write about.“The main objective is to get restaurants, night clubs and bars excited about carrying the brand,” Morley said.Riley plans to race an Azuñia Tequila truck in this year’s Baja 1000 off-road race.  More on the story can be found here:

http://tinyurl.com/yz7pxts

For some reason this article Tequila Timeline: From Agave to the Worm was reposted in Fast Company Magazine on Friday, November 20, 2009 from an earlier post on October 15, 2009.  (Maybe it was because the editors forgot to add the cute tequila graphics the first time?)

Anyway, most of the timeline is historically accurate, except for this factoid:

“1873:  Don Cenobio Sauza exports three barrels to El Paso, Texas, the first tequila in the United States.  Today, the U.S. is the No. 1 market for tequila.  Mexico is second.  Third?  Greece.”

The reference to Sauza exporting mezcal wine into El Paso in 1873 is incorrect.  I’ll explain why momentarily, but first…

Texas’ long history of laying claim to being the home of tequila in the United States can be credited to W. Park Kerr of the El Paso Chile Company fame.  Not for anything that he may have said, but for what he did.

Kerr was the first Texas entrepreneur to distill a private label tequila (Tequila Naciónal) in Mexico to his specifications, thus opening the floodgates of recent tequila brands based in Texas such as RiAzúl in Houston, El Grado in Corpus Christi, Republic Tequila in Austin, Buscadores in San Antonio, and Dos Lunas in El Paso, among others.

Sorry to break this to tejanos, but Texas was not the final destination of that first delivery. 

In his book La historia del tequila, de sus regiones y sus hombres, author Rogelio Luna Zamora recounts:

“‘…con destino a Nuevo Mexico sale una partida de 3 barriles y 6 botijas….’  El punto fronterizo por donde salió fue el Paso del Norte (hoy Ciudad Juárez) en aquel entonces, paso obligado a las mercaderías exportadas por tierra al mercado estadunidense.”

["'...with a destination of New Mexico there is a lot of 3 barrels and 6 jugs....'  The border town point of entry was el Paso del Norte (present day Juárez) that in those days was the required land passage for commodities exported into the American marketplace."]

  In 1873, New Mexico was a territory of the United States, but still considered part of Mexico.  The final destination of Sauza’s shipment is believed to have been to the oldest capital city, Santa Fe.  Being also the terminus of the legendary Santa Fe Trail, the route that opened the Southwest to trading with the Eastern United States, this conclusion only makes sense.

Thirty-nine years later, New Mexico joined the Union.  Flash forward to today, and there is only one New Mexican owned brand of tequila (Silvercoin). 

Perhaps now is the time for more New Mexico entrepreneurs to step up with tequila labels of their own?

By Jillian Jones

FOR THE STAR

Friday, November 20, 2009

An old wine industry adage says that during good times, people drink. During bad times, they drink more.Whoever came up with this saying didn’t come from Napa Valley.With the economy on the skids, local vintners have suffered through wrenching changes in business even though — or especially because — the valley is one of the premium winemaking regions in the world.The cheap wine is selling. But $50 Napa Valley cabernets aren’t making the cut.

“People drink more wine, but they only drink cheaper wine,” winemaker Mike Grgich said.Grgich, the founder of Grgich Hills Estate, whose wines go for anywhere between $20 for his most inexpensive sauvignon blanc to $135 for his cabernet sauvignon, said his sales have plummeted 30 percent this year in California. Out-of-state sales have dropped by 50 percent.Grgich has spent 50 years in Napa Valley, and he said he’s not seen conditions this difficult. “People in this recession don’t buy the wines that they used to, and the Napa Valley wines don’t sell,” Grgich said.Drop-off in 2008Wine sales in Napa County dropped suddenly during spring 2008 after several years of steady growth, according to sales tax figures from the county. Napa Valley saw record sales in 2007 and the beginning of 2008, but by the second quarter of 2008 — months before the collapse of Lehman Bros. and billion-dollar losses in the financial markets — Napa Valley wine sales headed south and dipped to 2006 levels.Industry insiders cite several related factors. Consolidation among distributors has made it more difficult for small producers, which includes many wineries in Napa County, to get onto restaurant lists and market shelves. Increased competition from Australia, New Zealand, Argentina and Chile is giving the wine buyer new options.But the pain in Napa County — even in the face of increased wine consumption in the United States — appears to stem primarily from the fact that people aren’t buying expensive wine as they once did. High-end restaurants, many of which distinguish themselves with impressive wine lists carrying bottles from the most reputable regions, are seeing a significant reduction in wine sales.Consumers are turning to cheaper alternatives, which feeds into the strengths of New World importers and large domestic wineries that bottle inexpensive brands from less prestigious regions.A recent study by the Napa Valley-based industry research firm Wine Opinions indicated more than half of the wine drinkers in the United States are in a worse financial situation than they were a year ago. As a result, most are trading down to cheaper wines.One-third of the people surveyed are buying more wines between $6 to $15 than they did a year ago, and 40 percent say they have cut back on wines more than $30 and are no longer buying anything above $50.“The change in the last year has not been in the amount of wine but rather in the type of wine and where it is consumed,” said Ed Matovcik, an executive with Foster’s Wine Estates, which owns four Napa Valley wineries, including wine giant Beringer, and two in Sonoma County.“Consumers are trading down in price, purchasing more from grocery stores and less at restaurants. Both factors have negatively impacted many Napa Valley wines that are sold at higher price points and primarily in restaurants,” he said.‘Dangerous place’Counter to the trend, ultra-premium cult wines are going strong, selling just a touch slower than usual.Bill Harlan of Harlan Estates, whose top cabernet is available only to club members and is listed for as much as $500 a bottle by online wine retailers, said the major impact has been that the waiting list has winnowed.“The waiting period isn’t as long as it used to be, but the wines are selling out,” said Harlan.Still, many local producers have a lot of extra wine on their hands.That may mean fantastic deals for consumers as wineries slash prices to get their product moving.But people in the industry worry that that discounting prices could tarnish the Napa Valley’s prestigious image and hurt prices in the long run.“It’s a dangerous place to go,” said Deborah Steinthal, founder of Napa-based wine consultancy Scion Advisors. “I know quite a few brands are feeling the pressure, but they also know the long-term impact of discounting your product is huge, because it’s very difficult to climb back out of that hole.”Gary Fisch, founder of Gary’s Wine and Marketplace in New Jersey, agrees that deep discounts could undermine Napa Valley wine values over the long haul, but he argues that it is imperative Napa maintain its share in the increasingly competitive global wine market, especially when other wine regions are offering huge discounts.“My first choice is a Napa Valley cabernet, and I want (Napa wines) to succeed,” Fisch said. “But I have to be realistic. If I get a deal on a Burgundy that normally was $100 that now is $40, that’s where my cash is going.”Terry Hall, communications director for the Napa Valley Vintners, an association of some 370 Napa Valley wineries, acknowledges the dangers of discounts, but adds that the industry has never faced an economic climate like this.“In a typical day we would say when you discount your brand, it’s hard to get that dollar back,” Hall said. “However, in this economy, this is the Great Recession … I think we’re all discounting because we’re in the same boat.”

Read the full article here:  http://tinyurl.com/y8vmhch