Wine, the 'petty luxury,' sparkles in a sour economy

As a financial adviser to retired people, Robert LaBree grapples with the effects of the grim economy almost every day. Some of his newer clients have seen their stock portfolios plunge 40 percent or more over the past year.

But amid the economic turmoil, LaBree hasn't pared back his spending on one food category: wine. "There's a psychological lift to having a petty luxury like wine," LaBree, 59, said, while buying four bottles of wine at Surdyk's in Minneapolis. "After all, you can pinch on some things, but if you pinch on everything, then it leads to depression and a real gloomy outlook."

Indeed, the miserable economy may literally be driving people to the bottle. As people cut back on costlier luxuries, from snowmobiles and jewelry to eating out, they are staying at home more and rewarding themselves with an end-of-the-workday glass of wine, experts say.

Nationally, unit sales of wine in grocery, drug and discount stores rose a robust 7.9 percent in the 12 months ended Sept. 30. That's more than any other product category -- from fresh produce to flour to meat, according to Nielsen Co., a market research firm in New York.

Even Scott Loveless, a partner at Deloitte & Touche, used to show appreciation to his team of 25 accountants with a $100 steak and seafood meal at a downtown restaurant. But this year, with his corporate clients cutting back, Loveless is entertaining his accountants at his Lakeville home, hosting a wine tasting last Wednesday.

"You get a bigger bang for your buck than going to some fancy restaurant," he said.

Buying, but pinching pennies

But consumers aren't exactly splurging. They are buying more wine on sale and sticking to less expensive varieties, including cheaper imports from South America, Australia or South Africa. Sales of wine priced at more than $20 a bottle rose a mere 0.1 percent in the year ended Oct. 20, while wine priced at $3 to $5.99 increased 6.5 percent, according to Nielsen. One of the hottest-selling categories is Argentine Malbec, a dry red wine that sells for as little as $7 a bottle.

Increasingly, wine has become a substitute for more expensive liquors. At Morelli's Discount Liquors in St. Paul, owner Jim Morelli has cleared away entire shelves of hard liquor -- from Seagram's 7 whiskey to Fleischmann's flavored schnapps -- to make more room for wines. The store's wine department has grown 15 percent over the past year, Morelli said.

"Wine has pretty much taken over for spirits when it comes to home entertainment," said Morelli. "It's seen as more socially acceptable to have wine than a cocktail."

Recent growth doesn't surprise historians of wine consumption. Historically, when the economy gets tough, people reach for the bottle. In the darkest years of the Great Depression, between 1934 and 1941, annual wine consumption nearly tripled to 0.76 gallons per capita from 0.26 gallons. Wine sales actually declined through most of the go-go 1980s before picking up again after the 1990-91 recession, according to the Wine Institute in San Francisco. Today, Americans consume an average of 2.5 gallons per capita.

In grim economic times, wine delivers a psychological boost that beer and liquor don't, say experts. "If you can put a bottle of wine on the table, there is a sense in which all is not lost and you're not scraping the bottom just yet," said Rod Phillips, a history professor at Carleton University in Ottawa, Ontario. "Besides, wine looks the same in a glass whether you paid $8 or $20" a bottle.

At Lakeville Municipal Liquor in Lakeville, membership in the store's wine club increased 15 percent last year, to about 3,400 members. It was the biggest one-year percentage gain since the store created the wine club in 1985. The club meets once every three months.

"Younger people, in particular, have learned how to pair food with wine better," said Brenda Visnovec, the store's director. "It's a big change from when I was a kid, when it was pretty much beer and hard liquor all the time."

Wine up, restaurants down

It's no coincidence, say retail experts, that wine sales are robust while restaurants are struggling. According to retail experts, many people have substituted a bottle of wine for a night out at a restaurant. In November, wine accounted for 0.9 percent of all restaurant orders, down from 3 percent a year earlier, according to NPD Group, a market research firm in Port Washington, N.Y.

Heidi Marquart, 29, a manager at a local graphics design firm, cut back on everything from new clothes to vacations over the past year as she tries to save money for a wedding. But she's buying more wine than ever, in part because she and her friends are having more dinner parties, and that means usually bringing a bottle of wine for the host, she said. "It's fun to pick out interesting bottles," she said. "And if you wrap a bow around [the bottle], you can make it look festive."

However, because consumers are opting for less-expensive wines, the recent increase in sales volumes hasn't necessarily translated into higher revenues, merchants say.

Ted Farrell, general manager of Haskell's, which has 10 stores in the Twin Cities metro area, said revenues in 2008 were "pretty much flat" from the previous year, though store traffic was up significantly.

Store owners are doing what they can to increase revenue. Surdyk's, for instance, used to have four major sales a year. Now, the store has about one a month.

"It's clearly going to be an era of sales and promotions and heavy discounts," said Jon Fredrickson, a wine industry analyst for San Francisco-based consulting firm Gomberg, Fredrickson & Associates. "That means the consumer dollar will go farther."

But over the long term, that may change. Many bargain-conscious consumers who can't imagine spending more than $10 or $15 for a bottle of wine may eventually move up to more expensive varieties when the economy improves, said Farrell of Haskell's. "The key is we're expanding our overall customer base," Farrell said. "When things get cheerier and a little more glowy, people will move more up the scale."

Chris Serres • 612-673-4308