By Graham Holter
It’s not something that wine merchants tend to crow about, but their businesses prove remarkably resilient whenever the economy starts making clanking noises and emitting violent bursts of steam. Recessions don’t damage specialist wine shops in quite the same way as they do other trades.
The reasons for this are often quoted in wine trade lore. The glibbest, and the easiest to discount, is that when times are hard, people need to drown their sorrows. But there’s certainly truth in the claim that, if wine drinkers are facing a squeeze on their spending, they’ll probably give restaurants a miss and economise by buying bottles to enjoy with meals at home. It would be unfair to name them, but I have certainly spoken to a number of wine merchants over the years who will quietly admit that business often booms when recession is biting.
There is also a vague sense that economic downturns don’t really affect the kind of consumers who buy from specialist wine shops. The average bottle price in our sector, according to January’s Wine Merchant trade survey, is £15.10, compared to a market average of £6.35. Large swathes of the customer base always seem to have money to spend, whatever the economic weather.
The Bank of England has signalled that the UK will enter recession this autumn. Inflation will top 13% and remain at “very elevated levels” throughout 2023. Unemployment will increase for the next three years.
Reliable estimates say that two-thirds of households will face fuel poverty by 2023, with typical annual bills increasing from around £1,000 in early 2020 to perhaps £4,400 by the spring of next year. At the time of writing, the scale of the pain that people are about to feel is only just beginning to dawn. By mid-winter, few of us are likely to have any doubts about the human impact of the abstract numbers we keep hearing on news bulletins.
Spiralling energy bills will of course hit retailers directly, which is unwelcome news in itself, especially for those who have ridden out a quiet summer and are pinning hopes on a profitable Christmas run-in. And we probably shouldn’t assume that wealthier consumers will all be able to take soaring electricity and gas bills in their stride, either.
Economics expert Duncan Weldon wrote in August: “The median income for households in the top fifth of earners in Britain is around £63,000 after tax – affluent, but not rich enough to comfortably absorb a £2,500 rise in utility bills without cutting back elsewhere.”
We are about to find out how many people in this income bracket really regard wine as a necessity – or at least the sort of wine that specialists sell. The worry is that many will revert to what they can bundle in with their supermarket shop.
In July’s Wine Merchant, Stuart McCloskey of The Vinorium in Kent reported that his business’s average selling price per bottle has historically been £33, but the cost-of-living crisis has meant orders have “gone through the floor”. He said: “Customers who would buy from us weekly have just disappeared … it’s maybe the wider world looking at those super-premium wines and thinking: actually we can’t afford this. It’s a luxury too far.”
What can any small independent wine merchant do in such circumstances? Making sure the range includes some sub-£10 bargains could be part of the strategy, but not every business can make the sums add up by relying heavily on what most specialists would regard as entry-level fare.
We know that our trade is resourceful as well as resilient. And no recession is ever so deep that people stop buying and selling wine. But anyone who believes that the gathering storm is going to miss them altogether is likely to find their optimism is misplaced.