Monday, June 28, 2010

More layoffs for Sonoma County winery powerhouse?

There are several rumors circulating (with some very well informed parties providing me with confirming info just last evening) that there are more layoffs in the works for at least one major Sonoma County winery....
Ready to guess which?
  • one which has already had a few large rounds of layoffs in the past 18 months...
  • and has scaled back (mothballed & consolidated) a few of its properties recently....
  • and has management which currently seems to know no other answer to flagging sales than to cut its workforce...
  • management which also saw fit to raise the price of their main bread and butter product at the beginning of the recession...despite knowing the recession was on the way, and would negatively impact the next few quarters as their sales dropped due to the higher prices and the fact that distributors packed their warehouses at the lower prices, and then didn't deplete their stock like they had in the past.
Time's up! 
Put your pencils down, but don't worry, if you didn't guess you'll find out when it hits the paper...

*****
The continued trend of consumers not to "trade back up" from the lower priced tiers they have gone to in the past 18 months is contributing to many changes in our industry - especially regarding wineries which used to seem beyond the grasp of such trivial things as market fluctuations....
Many people have suggested that this is mainly just a matter of time, and that given enough time the industry giants will rebound to the same stratospheric heights they used to occupy. Though many readers of this blog in the past will know that I don't give the Titans the same respect they do, and for good reason.

I was lucky to have realized long ago how much of the current fluff regarding the hierarchy of wines & wineries is just that...."fluff". People (consumers), have "traded down" for financial reasons, but quite a few have found enjoyment at the lower tiers (~$15/btl) which they used to think only existed at the $30/btl range.
I really don't think they are ready to go back yet, and the wineries which aren't looking to price their wines at a price to move right now are missing the boat. Any talk of "not losing price point" (read that as "prestige" & "ego") is not really realistic. To be sure, many will weather the storm even with that attitude, but the healthier ones will be - in my opinion - the ones which make it through the storm without having to sacrifice facilities and product lines to get there. Witness the recent changes with Beaulieu and Sterling being sold/leased by Diageo....these are some of the previously "untouchable" storied wineries now leased-back to provide "nimble" and "entrepreneurial" business opportunities for the Diageo group.

The bad news for the producers whom are filling the market needs now will be expected by consumers to continue providing these $15 wines which drink like $30 wines for the foreseeable future.

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5 Comments:

Anonymous Anonymous said...

KJ?

June 29, 2010 4:58 PM  
Anonymous Anonymous said...

KJ

June 30, 2010 11:05 AM  
Anonymous Anonymous said...

My guess also. This is the last day of their fiscal year. Would make sense. . . .

June 30, 2010 1:51 PM  
Anonymous sondra said...

My first reaction was also KJ

July 01, 2010 8:09 AM  
Anonymous Anonymous said...

Does this mean another horse is being purchased?

July 09, 2010 11:06 PM  

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