Tuesday, March 17, 2009

Merlot - It's about time to return!

Wine & Spirits Daily

March 16, 2009

Recession Gives Merlot a Chance to Shine

Dear Client:

Several years ago the "Sideways effect" on Merlot sales was one of the major issues in the wine business, but an article in WSJ contends the varietal is making a "Rocky"-like comeback. Could the recession prompt a comeback for the wine industry's prodigal son?

"Americans fell in love with Merlot, after all, because it was a meatloaf kind of wine, easy and unfussy, round and fairly soft, and we all need that kind of comfort these days. Not only that, but everyone is looking for value and so many Merlots are inexpensive. And Americans are clearly in a buy-American mood..." wrote wine critics Dorothy Gaiter and John Brecher.

In addition to the "Sideways" curse, many producers were making "really bad" merlot "for a really long time" after it became popular in the 1990s (which is something we see happening to Pinot Noir right now). As a result, the Merlot crush in 2008 was down -25% for the year "at its lowest level in more than eight years," said wine and grape brokerage firm Ciatti Co. after studying the 2008 California grape crush report.

WSJ hopes this means that "less Merlot will mean better Merlot" and that produces will focus on what is inside the bottle rather than producing "cute labels." After tasting more than 50 Merlots, Dorothy and John said the varietal "is struggling out of the hole that greedy winemakers dug for it. The wines were not uniformly good, but they were uniformly better than they have been in years." They admit that Merlot still has a long way to go before it becomes "a consistent treat," but there is hope.

In the four weeks to February 22, IRI reports that dollar sales of Merlot grew 3.2%, while red wines altogether grew 7.1%. In terms of volume, Merlot grew 5% and red wines grew 6.2%. Merlot lost -0.4 market share points in dollar sales but gained 0.1 share points in volume. So while it's not growing near as fast as other varietals, Merlot is showing some promise for the future.

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