How resilient are high-end wine sales?

NAPA — Wine industry executives seem to agree that wine drinkers have traded down to less expensive wines.

But whether they’ll trade back up again once the economy turns around is anyone’s guess.

Two key industry surveys released Tuesday at the influential Wine Industry Financial Symposium in Napa revealed the U.S. wine industry is deeply divided over its future.

“The industry is just absolutely split on this issue of what it’s going to look like a year from now, two years from now and three years from now,” said John Gillespie, founder of wine research firm Wine Opinions.

About 40 percent of the people in the wine industry are optimistic that once the economy recovers, the industry will quickly recover and return to the glory days when consumers had an unquenchable thirst for high-end wines, Gillespie said.

But just as many have come to believe a “sea change” has occurred in the industry, he said.

This group feels the recession has dramatically and fundamentally changed the way consumers think about how much they need to spend to get a good bottle of wine. They have traded down to lower-priced wines, are content with the values they’ve found there, and will be hard pressed to return to spending big bucks for the best wines.

“Half of the people are saying, ‘Oh, this is just a cycle,’ and half of the people are saying ‘No, the rules of the game have changed,’” Gillespie said.

The reason for the schism is that the industry has just been through the worst recession since 1982, and many executives have been thrown for a loop, said Robert Smiley, director of wine studies at the UC Davis graduate school of management.

The responses to Smiley’s annual survey of wine industry executives were pretty consistent when it came to the phenomenon of consumers trading down. The financial crisis, high gas prices and the collapse of the real estate market caused consumers to curtail spending. They stopped going out to eat at fine restaurants, ate at home more, and consequently bought more wine in supermarkets, often at lower prices.

Because of this, total U.S. wines sales are up slightly, but there’s been a dramatic downward shift in price, especially away from the highest-end luxury wines over $50, Smiley said.

The trend has generally benefitted wines under $20 and hurt those over it.

The big question: will consumers return to buying higher-end wines at their prior levels? Or, Smiley said, has the recession “seared into their minds the importance of saving and the importance of value” so deeply that they recoil from expensive wines for the foreseeable future?

No one is really sure.

Danny Brager, an alcohol analyst with The Nielsen Company, said there is some indication that wine drinkers seem pretty happy with the quality of wines under $20.

In a series of three surveys spaced six months apart, the number of consumers who responded that they were finding good wine at lower prices increased from 28 percent to 41 percent. It is a dramatic swing that is unlikely to reverse anytime soon, Brager said.

“Consumers are finding more good wine at lower prices and that may be hard to shake,” Brager said.

The obvious implication is that the highest-end wines, particularly ones that don’t have cult status and a rabid following, may be in for a shakeout, Smiley said.

“Another way to say it, less politely, is some brands are going to fail,” Smiley said. “People that are selling $150, $250 or $300 bottles but don’t have the Screaming Eagle cult status, they’re not going to be around in a few years.”

But that’s not necessarily so bad for the industry as a whole, Gillespie said.

When wine ceases being a status symbol and, like in Europe, just becomes an everyday, casual part of American culture, the industry will thrive.

“More wine becoming more important to more people and more people drinking more wine more often — and not chasing a $350 bottle of cabernet sauvignon just because only 85 cases were made — is a positive thing,” he said.