20090103

Is NY's wine industry in trouble?

The recession that has forced several New York-only wine stores to close, put a crimp in expansion plans by some wineries because of the lack of investment capital, and Gov. David Patterson's threatened cutbacks on state assistance have combined to put the nation's third-largest wine industry in jeopardy.

New York trails only California and Oregon in total wine production. However, many of the several hundred wineries are small operations and need assistance in getting to market and getting the word out to consumers.

Patterson's proposed 2009-2010 state austerity budget calls for the elimination of funding for the New York Wine and Grape Foundation, the statewide trade association headquartered in Canandaigua. Its current budget is $3.8 million, but only $1 million of that comes from industry sources. The rest comes from the state.

NYSW&GF President Jim Trezise. above, ("NY's Trezise a man of integrity"), an indefatigable spokesman and activist on behlf of the state's wine industry, says, “If the governor’s proposal is adopted, the foundation’s programs and operations will cease in March, if not before.”

That would be a phenomenal blow to the industry. The NYSW&GF lobbies on behalf of the industry in Albany and Washington, DC, runs the prestigious annual New York Wine & Food Classic competition for wines produced in the state, provides advice and counseling for all areas of the industry, and prosyletizes for state wine producers worldwide.

[Go here for New York Times wine writer Howard G. Goldberg's summary of the situation.

[And, go here for the Seneca Lake Winery Association president's take on it.]


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16 comments:

Lenn Thompson | LENNDEVOURS.com said...

Bill, I'm surprised that you'd publish a post with this as the title/headline.

This is a unnecessarily pessimistic view and I'll be publishing a post about Howard's column early next week.

The downfall of the NYWGF may be upon us, but that does NOT mean that the NY wine industry is in trouble. Not by a long stretch.

The closing of both Vintage NY shops is of course sad, but that doesn't not mean the NY wine industry is in trouble.

Ask winery owners themselves, they aren't any where near as down on the industry. And they are the ones actually selling wines.

William M. Dowd said...

Lenn:

Thanks for the viewpoint.

I do speak with winery owners frequently, from all regions of the state. To a significant degree, they are concerned over any number of things:

• A freefall in restaurant patronage, which negatively affects wine sales.

• A potential increase in the state excise tax on wine sales, which would put the state's often-high wine prices at a distinct disadvantage compared to non-NY wines.

• A dropoff in visitor traffic to many wineries and resultant loss of sales ... .

The list can go on. And the looming loss of the New York Wine & Grape Foundation can't be underestimated.

As I recall, your blog has sometimes been at odds with the industry trade group (forgive me if my memory is faulty on that one), but it is a very necessary part of the industry. Individual wineries seldom do much to market themselves outside their own backyards, a task the Foundation has handled for years.

Kevin Burns said...

Lenn and Bill,

Greetings. Hope your holidays were great. I was planning on touching base with both of you soon but this article has provided a good opportunity.

This is an interesting debate on the NY wine industry. Pardon my ignorance if this is a dumb point as I am the beer geek, but wouldn’t Patterson’s proposed change of allowing wine sales in grocery stores help the wineries?

Granted it would hurt quite a few local liqour and wine stores, but wouldn’t the added revenue more then make up for it? Let me know what you guys think.

William M. Dowd said...

Kevin:

On the face of it, an increase in the number of places selling wine would appear to be helpful.

However, there is a school of thought that says wine-and-spirits shops might respond to supermarkets selling wine by simply dropping many of the New York labels that tend to be pricier and stock up on cheaper non-NY wines to make up for any potential sales dropoff.

Lenn Thompson said...

The “at odds” is a little overblown. I think that the NYW&GF is valuable, but I don’t think that the NY wine industry is going to fade away without it. Yes, it’s the primary trade org for NY, but there are others that don’t rely entirely on state funding (which is a good thing anyway).

The excise tax increase, according to a couple of the winery owners I’ve spoken to here on Long Island, really has the biggest impact on the larger producers.

What evidence is there of this drop off in visitor traffic across NY? Long Island wineries aren’t seeing any such drop off. And they certainly don’t tie the NYWGF to their foot traffic — at all.

How successful do you think that the NYWGF has been in marketing NY wines outside of NY? I think the results have been mixed, especially when it comes to Hudson Valley, Escarpment and Long Island wines.

I don’t want the NYWGF to go away, but I think this is a good opportunity (potentially) for it to reinvent itself as a more agile, effective promotional organization that uses new marketing techniques instead of relying on the same old, same old.

The NYWGF needs to find a way to be more self-funding as well. It shouldn’t have been so reliant on state funding for so long.

Regardless, my issue is how both you and Mr. Goldberg have written your pieces with such broad generalizations and I fear that your opinions might be influenced by a vocal, negative-thinking, minority rather than the much-more-confident majority. This kind of negativity doesn’t really help anyone (except maybe those trying to save their jobs).

Charles Massoud said...

Mr. Dowd,

I sent a letter to the NY Times in response to Howard Goldberg’s article. If the Times does not publish it next week I will forward it to you.

In a nutshell the pessimism he writes about is misplaced. If Gov. Paterson’s cuts are confirmed, I view it as an opportunity for our industry to reform its public and community relations efforts.

Our industry today is more mature than 25 years ago around the time the NYW&GF was founded. I suspect the funding will be restored if the tripling of the excise tax, an outrageous increase, is enacted.

We should take this opportunity to reform and sharpen our efforts. Declaring defeat because the state is having financial difficulties is nonsense.

Charles Massoud
Paumanok Vineyards

William M. Dowd said...

Charles:

Thanks for the point of view.

Lenn:

If the term “at odds” was in question before, your latest comments certainly make it accurate. But, as always, thanks for sharing your point of view.

Lenn Thompson said...

Bill, it is really disappointing that many in the New York wine industry equate constructive criticism with being “at odds.”

And that friendships sometimes get in the way of sound, logical thought.

William M. Dowd said...

To All:

Afte re-reading my original posting, and comments from several readers, I’ve come to the conclusion my headline was bit too rigid.

Thus, the addition of an interrogative (”Is”) at the start of it and a question mark at the end of it raises more of a question that it does offer a conclusion.

Keep the comments coming, however, It’s certainly a worthwhile debate in this erratic economy.

Joe Sweeney said...

I’d like to comment on the supermarket angle.

I agree with the view that many independent wine shops would drop any marginal NY products from their shelves the minute they went into supermarkets. And, I wonder whether the Wegmans and Price Choppers of the world will be keen on stocking wines from anything but the largest wineries due to production constraints.

Aren’t they going to want that riesling on the shelf 12 months of the year? How sympathetic will they be when a short/frozen crop takes a winery out of the market for half a year? And will they even talk to a winery that can’t provide the sku’s in marketable quantities to a full chain of stores?

I’m not a grocery guy, so I don’t know the answer, but I’ve always been curious about it and never heard anyone address that issue.

Lenn Thompson said...

Joe:

I think you’re onto something here.

If you look around the country at states where wine IS sold in grocery stores, you see pretty boring selections with mostly widely-distributed wines. There is even a phrase amongst wine geeks -- “supermarket wines” -- that refers to these types of wines.

What I mean is that I doubt you’re going to see a ton of quality local wines in these stores. Sure, maybe you’ll see a few things from the larger, volume producers (or maybe some of the better distributed like Dr. Frank's), but you’re just not going to see small, boutique wineries well represented in grocery stores.

My question is, if grocery stores (which can already sell beer) can sell wine will wine shops be able to sell beer?

Charles Massoud, Paumanok Vineyards said...

Here are a few questions/comments regarding selling wine in grocery stores:

• What is the giveback to the wine and liquor stores? Many may not survive especially those that are colocated in shopping centers with supermarkets.

• This is not designed to help NY state wines but to help the state raise more taxes.

• As pointed out elsewhere, the grocery stores may find it more profitable to stock up on “brand names,” as they are called. That is likely to be more California and Australia for most grocery stores. There are, of course, possible exceptions where some upscale supermarkets will go up market and stock high quality NY wines, but that will be a relatively small drop.

• Will overall demand increase if the number of outlets is increased? It is possible, but I think the demand is finite and market share will be taken away from wine/liquor stores. If so, the state will have put some of them out of business for no real difference in revenue.

• What will happen to availability of high quality wines if the stores that are struggling today are further weakened?

The retail wine trade is going to fight this and they should not be counted out.

Larry Chandler said...

A look at states around the country that allow wine to be sold in supermarkets shows that fine wine shops still exist, and that the marketplace for wine simply expands.

Yes, most supermarkets sell mostly the less expensive and "critter" wines, but not all. And this just means that the wine shops will have a bigger selection of better wines.

Look at New Jersey, where some supermarkets sell wine. In Short Hills, the Kings Supermarket has a fine wine store, and it's only blocks away from the Wine Library.

In Houston, Central Market and Whole Foods sells good wine, yet there are many fine wine stores around. And in California, where everybody and his mother sells wine, there are countless fine wine stores (K&L, the Wine Club, Beltramo's, the Wine House, 20-20, etc.).

Wine Stores in NY may have to change, but the good ones will survive. The bad ones don't benefit the wine industry anyway.

Mike Dunne, Sacramento CA said...

I've mixed feelings about potential elimination of public funding for the New York Wine & Grape Foundation.

Philosphically, New York's grape and wine trade should be able to stand on its own merits in a highly competitive industry. But realistically, no wine region raises its profile on merit alone.
Earnest, honest, persistent marketing is part of the scenario.

By my experience as a longtime wine writer, the New York Wine & Grape Foundation has done that for years with equal measures of integrity and personality. Its loss would be a major setback not only for the New York farmers who have provided its foundation but for the entire American wine industry.

In short, as a fiscal conservative I'd like to see continued public assistance of the New York Wine & Grape Foundation coupled with a long-range plan for the organization to be solely funded by its members.

No one in California these days should be urging anyone clear across the country about how they might better govern themselves, but that's my two-cents' worth.

Charles Massoud said...

Dear Mr. Dowd:

About a week ago I wrote to let you know of a letter to the editor of The New York Times' Long Island section, in reply to an article by Howard Goldberg that you had linked to under your article.

The NYT has published an edited version of my letter in tomorrow’s edition, which subscribers got today. Below you will find my letter in its entirety.

Since then there have been more articles and letters written and I am impressed by the effectiveness of this campaign. All I can say is if the NYW&GF can also be as effective at promoting our wines, as it is at promoting itself, it would have me as its strongest supporter.

Here is the letter:

Dear Howard,

At breakfast this morning I read your article in tomorrow’s NYT, with some surprise.

While you support the central point with some views, it does not seem to match what we have been experiencing “on the ground,” as they say.

According to Steve Bates, executive director of the Long Island Wine Council, the local wine industry is having a surprisingly strong sales results. Since Labor Day, when the financial markets have tanked, sales at the wineries have been in record territory. This is certainly verified at our winery. The prospects for 2009 are uncertain but there is room to be optimistic.
Here are some arguments for that view:

• In a year where Long Islanders, and others from the tri-state region, may want to stay at home to cut back on expensive vacations, a visit to the East End is fun, and affordable. So on a nice day people who have cabin fever seem to take a drive and come and visit us. They enjoy themselves and they buy our wines.

• In spite of the stale argument that Long Island wines are overpriced, consumers seem to think otherwise. And when they still want to drink good wines at a lower price, they are finding values in our wines.

• The reputation of Long Island wines has risen over the last few years and their distribution is much broader and getting deeper. This is in part because overall quality has risen. Publications such as the NYT, The Wine Advocate, The World of Fine wines, Food & Wine and the like have written very positively about the quality and value of Long Island wines.

• Wines like ours are being re-discovered as more and more people are pulling away from the high-alcohol, over-extracted and over-concentrated wines. Ours are seen as more balanced and food friendly.

• The East End continues to be a desirable destination.

• In NYC those wineries that have dedicated themselves to do the necessary sales and marketing work are meeting some remarkable success and many of the top restaurants are pouring Long Island wines. My expectation is that it will increase as more wineries learn how to sell and market more effectively.

• NYC is not going to stop drinking wine and LI wines are “local” products. This is a new opportunity to position our wines in another attractive way. As to the negatives, such as the closing of Vintage NY and the risk of losing state funding, as they say we will see. Susan Wines and Robert Ransom’s closing of their attractive NY stores is a disappointment and we certainly share their pain in the termination of this venture. They did help in increasing the visibility of NY wines in NYC. It is up to the industry to rise to the occasion and not loose the momentum they helped create.

As to the loss of funding that may shutter the NYW&GF, that is of course a loss. I had convinced Jim Trezise to create a class for wineries to teach winery staff basic selling and basic marketing. That would be sorely missed if the loss is confirmed. Also programs such as the "NY Wine and Dine" will be missed.

However here again there is an opportunity to replace the NYW&GF with something much more focused and tailored to the needs of the high quality wines of NY.

Currently the NYW&GF has a multitude of missions and lacks the focus to make it as effective as similar efforts by the wine organizations of other states or other countries. Should the NYW&GF be defunded the industry has an opportunity to refine and redefine what it wants from such an organization and fund it itself.

In the absence of such funding I suspect you will see collaborative initiatives between like-minded wineries, expand from the small joint work that they do on occasions. I have a feeling that Gov. Paterson will perhaps restore the funding if the industry will cooperate in helping him enact the much more important tripling of the excise tax.

Nevertheless, the question on the table will be:

Are the NYW&GF and the LIWC fulfilling a strategic need or are they simply nice to have. I personally think it is the latter and I view the current challenge as an opportunity for reform and for re grouping so that we can sharpen our act.

Either way I am optimistic about our industry’s future. And as the examples I pointed to show, it is not just because of my optimistic nature.

Charles Massoud
President
Paumanok Vineyards Ltd.
P.O.Box 741 Aquebogue, NY 11901

William M. Dowd said...

Here's the beginning of an editorial in the Elmira, NY, Star-Gazette:

Gov. David Paterson's attempts to cut $9 billion in spending as part of his 2009-10 budget has targeted a growing New York wine and grape industry that feeds rather than sucks the life out of the economy.

This is especially true in upstate New York and the Finger Lakes region where wine making and grape production form a key sector of agribusiness and a vital link to tourism. In both cases, agriculture and tourism, money flows into New York, supports jobs, provides sales tax revenue and, most of all, offers one of the few bright spots in upstate's struggling economy.

So why would Paterson want to cut the state's current $2.8 million subsidy for the New York Wine & Grape Foundation? It makes no sense ... .

Go here for the rest of the commentary.