Saturday, 17 January 2009

A wine merchant's view of the recession and the future of wine prices

So….. is the recession deepening or are the “green shoots” about to emerge? Well don’t ask me – I’m just a wine merchant, whose knowledge of the financial world would fit nicely (with room to spare) on the back of a fag packet! But what I do know is that the price of wine (or, at least, good quality wine) is only going one way, which is up. The poor exchange rate between Sterling and many foreign currencies (especially the Euro), along with increasing production, bottling and transport costs means relentlessly increasing costs, for merchants and customers alike. The Government also seems determined to keep hammering wine drinkers for more and more tax, with further increases in excise duty – each one of which seems to be increasingly over and above even the most conservative (real) rate of inflation – seemingly inevitable.

But people who enjoy drinking quality wine will continue to do so, just as long as they see that their chosen wine merchant(s) keep price increases to a fair and sensible level - which is precisely what we at Leon Stolarski Fine Wines intend to do. In the 6 weeks or so leading up to Christmas, we took delivery of new wines from a good many growers. Our pricing calculations were originally based on an exchange rate of 1.20 Euros to the Pound….. until the rate dropped to 1.15. So we quickly re-calculated to 1.15, in order to keep pace. But in the time between taking delivery of those wines and now (mid-January) the rate dropped alarmingly to the point where Sterling and the Euro were almost at parity. Thankfully, it has rallied somewhat in the last week or so – something to do with the Euro-Zone’s own problems, I believe (and perhaps even the “Obama Effect”).

But growers have to be paid on time, so when each invoice becomes due (be it 30 days or 60 days) we are subject to the widely fluctuating exchange rates. The result is that some shipments have cost us considerably more than we accounted for. But there is a limit to how much of this extra cost can legitimately be passed-on to the end customer. So we have made the decision that our prices will remain static on all wines currently listed, for a good while yet. I simply hope that my customers will appreciate what I am trying to do and continue to support us and other independent wine merchants through the recession and (hopefully) out through the other side. I at least have the benefit(?) of a day job - after all, whilst building a fledgling wine business, bills still have to be paid - but other merchants aren't so fortunate. Many willnot survive the latest financial crisis, and the longer it continues, the more damage it will do. Let's hope it won't be too long..........