“It’s grim out there”

 
Mr Lawrence Wine Bar, Crofton Park

Image by RobWinton via Flickr

Whilst entirely subscribing to the idea that recessions and “bubbles” (and now “crunches”) are to a great extent about a state of mind and driven by an irresponsible media (including blogs!), and therefore not wishing to add to the misery, I think it is important that bloggers are seen to recognise the real difficulties being faced by businesses in our various spheres of interest.

Even if our own jobs may not be directly involved, if we write about wine (or beer, or whetever) then we rely on producers, shippers, importers, distributors, retailers, restaurants, bars, pubs and a whole host of other suppliers. I get to speak to a lot of business people in my job, and there is a general mantra out there which goes something like this:

My business is theoretically fine, I’m doing the best I can, but I can’t be sure that other businesses I rely on will not suddenly fail, nor that some unforseen event will have a catastrophic effect on me. My customers are also not in trouble, but they are being very cautious and spending less, particularly after all the recent bad news. I’m holding on, but this needs to pass quickly!

Each reticent customer has a knock on effect on others up and down the chain; raising costs, slowing payments, spreading nervousness, eventually driving people out of business.

We are regularly reminded that the “engine” of the economy for the last decade or so, particularly in Europe and the US, has been consumer spending, financed by cheap credit and rising house prices. Oops!

So, as this is not (for good reason) an economics blog, does this have to do with wine culture and the wine conversation?

The long period of growth has encouraged the belief that things would always be good (anyone else remember the “end of history” comments after the fall of the Berlin Wall?), so the idea was to capitalise on this and “move upmarket”. “Premium products”, “Trading up”, “Luxury brands”, “Icon wines”, are all familiar terms, and it spread to all sectors. The UK, starting in London and the South East, turned its pubs into “Gastro Pubs”, more and more “Style Bars” opened up, and lots of “Clubs” emerged too. Unfortunately, everyone around the world has heard of British Pubs, but I doubt anyone really talks about British Bars.

Wine consumption in the UK is tied to this drive up market. Wine has been seen as a luxury product that those with the time, money and interest could get to enjoy, and therefore, as more of us felt we did have that time and money, we began to drink more and more wine. This was also good for business, because being a luxury product, these outlets could charge more for wine, including a healthier profit margin. In turn, everyday products, like beer, began to compete on price to drive volume, and the margins were lowered. It made more sense for pub owners to create spaces where rich, relaxed and unworried customers would want to gather to buy more luxury products. Spending on these “evening leisure activities” grew massively.

The result is that the local “community pub” fell out of favour to such an extent that they closed, were converted to upmarket outlets, or were sold off to developers to create more trendy living spaces.

Then, the new “Age of Austerity” dawned. It happened 3 months ago. With the credit crunch, possible recession and all its implications, those “rich, relaxed and unworried” customers have evaporated. One friend who runs a great local bar told that around 12 weeks ago the numbers of customers coming to the bars dropped like a stone. So how will they all survive? They won’t.

How do you convince a worried customer to go out and spend money that they are afraid of losing in your restaurant or bar? Well, you have to be part of the community, the place these individuals go to talk to friends about their shared predicaments. Unfortunately, many of these places are no longer community pubs where one meets friends, only ‘leisure providers’, and therefore something to be avoided.

There is no easy prescription. Bars and restaurants will struggle to attract a reasonable volume of customers willing to by the range of premium wines, spirits and foods in stock, so they are probably going to change their ranges. I’m afraid to say that the Wine Conversation will struggle. However, not all is lost.

A possible glimmer of hope, and it is faint, is that the drive to reduce costs and prices will be accompanied with a desire for value for money – after all why waste your money at all if it isn’t good value? It might encourage more places to price their better wines more keenly to at least differentiate their offering from others, and the search for these places will encourage more people to talk about “that place with the great value wines” that they found. Wine does not need to be a luxury product (as Tesco’s healthy wine volumes shows), but we do need pricing to reflect that it is now a firm part of the mix available in the on trade.

But, this is also a plea. Not for wine, but for local businesses. Times may be tight for you, but they are equally so for your local suppliers – restaurants, pubs, bars and shops. If you want them to survive, you HAVE to continue shopping with them, maybe diverting your money away from cheaper, but more anonymous, offerings from bigger brands. Support your local businesses as much as you can, and in turn you will see benefits, and hopefully we can come out the other side reasonably intact.

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