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Study forecasts sales growth for wine to be tempered in '08

NORTH COAST, May 6, 2008 -- The outlook for the wine business for the next 12 months is generally positive except for a warning about an erosion of profit growth for high-end wine in fine restaurants experiencing a slowdown, according to a survey of 500 West Coast wineries released today.

In its annual survey of winery operations, Silicon Valley Bank predicts the fine-wine sales growth rate for this year will be in the low teens, compared to the 2007 peak of 22.3 percent the bank found for sales from a sample group of wineries from California, Oregon and Washington.

At the same time, most of the wineries surveyed indicated they would hold to current retail prices in the next 12 months or increase them just to keep pace with inflation. Meanwhile, with two average harvests since 2005 and only 2.8 percent of North Coast vineyard acreage planted with the choicest winegrapes remaining to reach maturity, it will be difficult to achieve sales growth through volume, noted Rob McMillan, author of the 22-page study.

"The fine wine industry will need to deal with a recession concurrent with a cost squeeze, as increased prices for raw materials will not be passed onto consumers at most price points easily," he concluded, noting exceptions for wines mostly sold on allocation or directly to consumers.

Some survey respondents said they are balancing their inventory against expected recessionary pressures by selling part of their 2007 vintage wine in bulk.

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