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Consumption grew through the recession to an all-time high EDIT OR' S LET TER re you better off than you were four years ago? That is a popular question in Mitt Romney's campaign as the former Massachusetts governor attempts to unseat President Barack Obama in the Nov. 6 election. The Romney team apparently trusts that many people will say they are worse off than four years ago, based on the slowly growing economy and high unemployment rates. Different segments of the population, however, are answering that question differently. Are you, as winemakers, winery owners, vineyard managers and vineyard owners, better off today than during the bank crisis of September 2008 and the election in No- vember 2008? A In this space in the October 2008 issue I wrote, "It seems ironic that the wine industry has been humming along nicely during these otherwise troubled economic times." Hurt at the high end Three months later, however, tem- porary pain did come to the wine industry—especially the high end. Consumers of fine wine slashed their spending. Restaurants and retailers responded by slowing or even stop- ping their wine purchases as a quick way to save cash. Luxury wines in particular piled up in wineries' case goods storage. You all know the struggle to sell upscale wines that followed, with wine flash sites emerging, prices in- evitably falling and finally a string of distress sales among brands them- selves. But that turmoil didn't slow the wine market's growth in general. The economic crisis of late 2008 occurred during the mid-point of the wine industry's traditional eight-years-or-so cycle of oversup- ply to shortage. Now, four years later, this cycle has gone all the way to shortage. Demand for wine steadily increased (for all but the Numbers in gallons Are You Better Off Than in 2008? Certainly wineries will feel continued pressure to deliver consis- tently good quality wines at low prices. Inevitably Australia, Chile and other wine-exporting countries will come back as competi- tors. But U.S. wineries are better prepared to compete than before, as they have learned from the crisis, adjusted prices to realistic levels and in many cases right-sized their businesses to more sus- tainable levels. Consumption went up A very positive trend developed, almost under the radar, during the recession and slow recovery. Americans responded to the hard times in part by drinking more wine. Instead of dining out and ordering $50 bottles off wine lists, however, they dined in and drank their own $10 and $20 bottles. Per Capita Consumption by Presidential Terms Beginning of Term Clinton 1992-2000 1.87 Bush 2000-08 Obama 2008-11 2.01 2.48 End of Term 2.01 2.48 2.64 One way to gauge if the wine in- dustry is better off today than it was four years ago is to look at per-capi- ta consumption. I know it's a simple measure and doesn't indicate winery or vineyard profitability. Still, it's a nice hard data set to consider. The growth in per capita consump- tion during the first three years of Obama's presidency was .16 gallons per person, according to Wine In- stitute and Gomberg, Fredrikson & Associates. That's more than it grew during the entire eight years of Bill Clinton's administration and basi- cally the same rate per year as dur- ing George W. Bush's tenure. It's been steady growth for 12 years. Consumption at the end of 2011 (the most recent figure available) reached 2.64 gallons per person, the highest rate ever recorded in Amer- ica. This growth on an individual level came at basically the same time that domestic wines gained market share back from imports and the U.S. became the biggest overall wine market in the world. most expensive wines) while few growers planted new acreage and major import countries like Australia experienced short- ages of their own. Early this year bulk wine brokers declared that the surplus that formed because of the huge 2005 California harvest was now de- pleted, and that grape prices were rising. It brings up the question of what will happen in the next presi- dential term—whomever serves it. Now that consumers are ac- customed to the discounted prices of the past four years, will they be willing to pay more as wineries try to pass higher grape prices on to them? 8 WINES & VINES OCTOBER 2012 This is great news to be celebrated. What U.S. winemakers have dreamed about has happened: More Americans than ever before now incorporate wine into their lives—not just on holidays and special occasions, but weekly and even daily. It's difficult to say if Obama gets credit for that evolution, but it's clear that his policies didn't stop wine's growth. And now the U.S. wine industry as a whole has bounced back strongly from the economic crisis.