Can Trading Down lead to Trading Up?

 tradingup

A recent Gallup poll noted that the recession has not stopped consumers from drinking. Numbers are even from last year, with 64% of the population saying that they drink, the other 36% claiming abstinence. There were other stats listed of course, showing consumption differences between men and women, young and old. But one thing the poll admitted it could not adequately estimate was wine sales. Sales may be flat in numbers, but it cannot attest to volume vs. price point. As Gallup put it, “the recession may give people more reasons to drink, but less money to do it with”.

This is what we’ve noticed at Wine.com as well. During this recession, instead of seeing sales drop, we’ve seen people buy at a lower price point, but with a higher number of bottles per order – an increase in volume, a decrease in average bottle price. Why is this? The news continues to report that people are choosing to eat in more and out at restaurants less. Perhaps the rise in numbers of bottles per order reflects that choice. Or maybe people are in fact drinking more. Hard to say.

The interesting point to make here is that the trend of consumers trading down in wine has created  created an opportunity for these same consumers to trade up.

Here’s how that works: The recession has hit people’s wallets. Instead of eating out at restaurants, they are eating in. If they are eating out, chances are they order a less expensive wine than they did a year ago. Restaurants, in turn, are ordering less from distributors. Wine once allocated only to restaurants now sits in the distributors’ warehouse. Needing to move product, distributors offer the wine to retailers, often at a hefty discount. This discount is passed along to the consumer and there you have it – the opportunity to trade up has arrived.

So while you may have had to go from $15 to $10 on your everyday wine, you can now snag some $100 bottles for $40 and a few $40 bottles for $15. The savings are huge.

It’s a good time to be a wine consumer.