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Wine: 'Cheap is chic,' at least for now


Americans are drinking as much wine as ever despite the massive economic turmoil. But now they stoop down in the grocery aisle to buy a cheap bottle, rather than reaching for the top-shelf luxury wine that characterized the industry only a few years ago.

"Cheap is chic," said Tony Correia, a veteran vineyard appraiser who spoke at a two-day wine conference in Napa that concluded Tuesday.

Chatter at the 19th Annual Wine Industry Financial Symposium frequently revolved around when, if ever, wine drinkers would return in large numbers to the high-end wines produced on the North Coast.

"I think the next 12 months will be very hard for the $25 and up price points," said Ray Chadwick, executive vice president at Young's Market Company, a wine distributor. "The lower price points will continue to do exceptionally well."

Retail sales are closely tracked within the industry because consumer prices trickle down and impact every part of the business – from grape prices to land valuations.

Facing financial pressures, many North Coast wineries have discounted their retail prices since 2008. The practice has generated necessary cash, but often has resulted in prices that don't cover the higher costs of producing wine in Sonoma and Napa counties.

"It is going to be challenging for the luxury market to get sustainable prices for some time," said Steve Fredricks, president of Turrentine Wine Brokerage, who spoke at the conference Tuesday.

Many speakers offered predictions for when the North Coast wine industry would hit bottom, or when wine drinkers would return to the high-end market.

"I think it's pretty close to the bottom," said Joe Ciatti, a winery broker and partner at Zepponi & Company. "But we're not going back to a time when $200 bottles are flying off the shelf."

An industry survey showed that nearly 100 percent of respondents feel wine drinkers are now more focused on value. Only 75 percent felt similarly last year, according to the annual survey conducted by Robert Smiley, director of wine studies at University of California-Davis.

Respondents, which included a mix of winery and vineyard owners from across the state and other industry professionals, expressed varying opinions about how quickly luxury prices will rebound.

"I think over $50 will take approximately 10 years to come back," said one anonymous respondent in the survey. "We have had a fundamental shift, and I had originally thought it was a 10-year shift, and now I am wondering if it might be a 30-year shift."

The majority of winery respondents said it would take three to five years for the industry to get "back to normal."

The survey also revealed that California grape growers expected to be in worse shape this year than last, while winery owners were more optimistic.

About 18 percent of vineyard managers said they expected to lose money this year, up from 12 percent last year.

Conversely, winery owners moved in the opposite direction. About 85 percent said they would be profitable in 2010, compared with about 73 percent last year.

Mort than two-thirds of respondents said they had cut costs, including more than half who said they laid off staff.

Overall though, the survey showed a growing optimism. Nearly 60 percent of people surveyed said the industry "will improve." Only about 30 percent felt that way last year.

"There are probably some people who won't be around next year," Correia said. "But I think this winter will represent the bottom of the barrel."