Early signs of better fourth-quarter for wine; high end labels will continue to see pressure

SANTA ROSA -- Early indications of improved fourth-quarter sales of fine wine could partly offset significant declines in sales growth this year, and 2010 could bring some upswing for the segment as trade buyers place orders to maintain new, lower inventory levels, according to a report released today from Silicon Valley Bank's Wine Division.

However, the trend for a minority of fine wine vintners toward more "bargain transitions," or sales of distressed wineries, will continue next year "as the realization sets in with financially weaker wineries that a rapid and full recovery in high-priced wine sales is not in the cards at this time," wrote Rob McMillan, author of the report and founder of the bank's St. Helena-based wine division.

In a report early this year, Mr. McMillan noted that only the most established brands selling for $50 to $125 a bottle managed to stay outside of a "dead space" of limited sales and distribution activity.

Sales of fine wines, or those selling for more than $20 a bottle, in 2009 could dip 2 percent to 8 percent from the year before, following a dramatic slowdown in sales growth for the segment, according to the report. Overall, 2009 U.S. wine sales, propelled by sales of wines under $10 a bottle, are expected to have a few percentage points of positive growth.

Year-over-year sales growth slowed from 22.3 percent at the end of 2007 to 11.6 percent in the third quarter of 2008 just before the financial-market crash to 2 percent at the end of 2008. Fine-wine sales in the second quarter of this year were 11.2 percent below those of a year prior.

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