A column that appears in the October 2010 edition of Meininger's Wine Business International
A lot can happen in two years, and much can change beyond most of our imaginations. 24 months ago, we were all told that politics and the way we spend money had changed for good. A black man had been elected to the Presidency and ushered in a time of hope. Faced with the threat of imminent collapse in the banking, motor and other industries, all the talk was of a permanent end to partisanship and a move towards collective efforts to get America back on track.
On other pages in those same newspapers columnists picked over the bones of one of the most obvious and predictable victims of the recession. Conspicuous consumption, they declared, was dead. At a time when countless people were wondering whether they would still have a job or a house, it was no longer appropriate to be dazzling your entourage with a $10,000 handbag, or a $1,000 bottle of wine. But even when good times returned, we would handle our disposable income differently. Paradigms, we were told, had shifted. We were moving into a period of more considered consumption and of sustainability.
Fast forward to the eve of 2011. Millions of voters seem, for reasons that remain opaque to many beyond their shores, actually to hate their president and see an appeal in some of the undeniably eccentric candidates of the Tea Party.
A similar revival has been seen in the realm of conspicuous spending. Two years ago, many in the publishing world openly wondered how long the Financial Times could continue to publish its glossy international ‘How to Spend It’ supplement. Where would the advertisers come from? Who would want to read about hedonistic ways to spend thousands of dollars?
Today, the magazine is packed with advertising for watches, art, cars and clothes and a digital version was launched this year with the help of a £2m ($2.9m) advertising campaign. The presence of all that advertising is explained by the remarkable recovery in the sales of luxury goods.
A study by US analysts Bain & Co on behalf of Fondazione Altagamma, the Italian association of luxury producers has revealed an extraordinary recovery between 2009 and 2010. Sales of watches, jewelry, leather goods and designer clothes dropped by 8% in 2009 - less than one might have expected - but last year they have surged back by an estimated 10%.
Bain’s figures are supported by the results declared by luxury brand owners such as LVMH and Richemont, owner of brands such as Cartier, Dunhill and Mont Blanc. Sales for the five months until August 31 2010 by the latter company rose by 37 percent. Obviously China accounts for much of this growth, but not as much as you might suppose. Richemont’s sales rose by a dazzling 51% in Asia Pacific - but an even more impressive 52% in the Americas.
Many - probably most - members of the wine world viscerally dislike the notion of a bottle of wine as a luxury item. For them, it is an agricultural artifact - a piece of terroir - or a food or an artwork. Or a combination of these. What it should not be is something people buy in order to show off their wealth. To read the comments by some European wine critics, the very idea of the $1,000 bottle is absurd, if not actually obscene. Chateau Lafite gained little applause from these writers for cannily exploiting its Chinese success by adding a gold figure ‘8’ to the label of its 2008 wine.
Looked at rationally, however, the $1,000 bottle is no more crazy than the $10,000 handbag, the $100,000 watch or the $250,000 car. The only difference is that the makers of humbler cars, watches and bags seem to be rather more comfortable with the situation than their counterparts in the vineyards and cellars. It’s time for the wine industry to wake up to reality. Many of us might balk at paying mad prices for fermented grape juice, just as many of us might shake our heads in disbelief at the readiness of US voters to support political candidates from another planet. But my guess is in some form or other both are here to stay. Some of the wine professionals who learn to give luxury buyers what they want may actually fare better than those who are currently struggling to offer value for money.