The L.A. earthquake and its effect - Los Angeles, California; Northridge, California, earthquake, 1994; effect on wine industry

The dust has settled from the January 17, 1994 earthquake, and business is back to normal for the leading Southern California wine retailers interviewed for this article. Few businesses are more fragile than one whose primary product line is packaged in glass, yet the resilience of these businesses and the people who operate them is reassuring.

Another positive revelation from the earthquake was the good-natured support of customers for their favorite stores. Daniel Palmer, manager of The Wine House reported that customers were receptive to buying bottles with damaged labels, and enthusiastically purchased "survivors," bottles that got through the earthquake, as souvenirs for full price. Gary Fishman at Wally's said that many of the store's best customers called in or faxed offers to buy whatever the store needed to sell to clean up its inventory. Wally's had a sidewalk sale that was scheduled before the earthquake and offered some stained labels for sale. Oddly enough, they had to hold some back to support the advertisement made in the March newsletter offering distressed products at special prices. They did not want to run out of stained labels before the advertisement broke!

A customer in New York called Paul Smith, owner of Northridge Hills Liquor, and ordered ten cases of wine. The only stipulation was that Smith choose the wines and select only those with stained labels. The customer subsequently ordered more of some of the selections and passed it off not as an exceptional act of generosity, but merely as the result of being cooped up due to the extreme weather afflicting the East Coast.

There was also high praise from these merchants for vendors who generously participated in the clean-up effort. In Northridge, even customers appeared, shovels in hand, to work through the knee-deep mounds of shattered glass. Everything that was done was deeply appreciated by the merchants we interviewed.

The damage

At the Wine House in West Los Angeles a posterboard covered with photographs of the store before cleanup informs shoppers of the magnitude of the mess left by the earthquake. The temblor devastated nearly all sections of the store, and not until the Friday afternoon following the Monday morning quake could the store be opened for business. The shattered glass was only part of the mayhem. The cascade of wine reduced cartons to pulp and stained hundreds of labels. A similar photographic display is in place at Wally's on Westwood Boulevard, a few blocks from the Wine House.

At Wally's the earthquake damage was compounded by the buckling of a parquet floor from the spilled wine. The wood buckled three feet or more, creating a surreal sand-dune effect that toppled more displays than the earthquake itself. Wally's was closed for 12 days, and cleanup work continued for just over a week beyond that. A positive irony salvaged from the earthquake was that plans were already in place to remove the parquet and install a slate floor. Prior to the earthquake they had planned to stay open during the remodel. It was actually easier to make the change while closed. The structural damage other than that caused by the floor was not extensive.

At the Duke of Bourbon in Canoga Park damage was spread more or less throughout the store, but there was no significant harm done to the building itself.

Northridge Hills Liquor was damaged the worst of these four stores. So much wine ran free that the neighboring dry cleaner had two inches of wine standing on the floor in some places. The wine store's ceiling caved in. Cooling units broke most of their restraints and dangled precariously at eye-level from their mounts on the 18-foot-high ceiling.

Dollar Losses

Palmer estimated outright damage to merchandise at The Wine House at approximately $200,000, which represents about 20% of the total store inventory as measured in retail prices. He adds to this an estimated $30,000 worth of product with stained labels which he says has sold without being re-priced as distressed merchandise. The Wine House declared itself on a c.o.d.basis with suppliers and applied for a FEMA loan to cover the cost of lost inventory.

Gary Fishman at Wally's estimates merchandise losses in the range from $150,000 to $200,000. Northridge Hills lost approximately $200,000 in inventory from a total inventory of $700,000.

Wally's, owned by Steve Wallace, is like the other merchants interviewed in that they had no insurance to cover product loss from earthquakes. According to Fishman, "We were fortunate in coming off the greatest Christmas and year in the history of the store, and we had a good deal of capital on reserve. Being in business twenty-five years, Steve is very adept financially. This was certainly the largest emergency he has ever suffered." He continued, "We knew that once we bounced back things would be better than ever, because things were going our way before the earthquake."

These retailers wrestled with the difficulty of assigning retail value to older wines with shelf prices many times higher than their original list price. Tallying dollar figures regarding losses varies according to the accounting method used. Another difficulty in establishing exact figures rests on the impossibility of counting bottles amid the rabble of glass fragments. Only by conducting a thorough inventory before and after the event can a solid accounting be established. In the tumult of recovering from an earthquake, this sort of reconciliation effort is especially difficult. For these reasons hard numbers regarding losses are elusive. There is little incentive to attempt to inflate these numbers since the losses are uninsured and the tax implications are limited to the reduction in profits due to damaged goods.

Vulnerable storage methods

The worst damage at The Wine House occurred to floor stacks with open cases on top. The lurching motion of the earthquake seemed to launch the bottles into the air. Another weak section was the large bottle display where bottles stood on shelves with no restraint system. Palmer estimates the store lost 80% of its bottles that were three liters and larger due to the openness of flat shelves and counter tops. The 1.5 liter magnums were in racks and fared well. The least vulnerable storage was the wood bins, which The Wine House fabricates from recycled wine cases.

The Wine House has now installed additional industrial-style modular metal racks with crossbars along the front to restrain bottles. Wally's has put a wood border around the shelves for the same purpose but has no plans for major changes in the shelving and displays. At Northridge Hills the worst damage was on shelves facing north or south. East and west-facing shelves had the least damage. By a fluke, a stack of burgundy was the least damaged section of inventory. The merchants interviewed for this article did not plan any major changes in the way they display wine. All felt that life must go on and hope that they will not suffer another earthquake like this one.

Current business levels

Business has increased at The Wine House and at Wally's since the earthquake. This increase is in spite of the closure of a near-by section of the Santa Monica freeway. Wally's continues to emphasize delivery service and has increased the delivery fleet and number of drivers to accommodate the increase. The Duke of Bourbon quickly bounced back to customary levels of business according to David Breitstein. Paul Smith is optimistic about recouping his losses at Northridge Hills Liquor, but he admits that doing so will take a considerable amount of time.

Post office figures show that one family in eight has registered a change of address in the zipcode the store occupies, but ironically the construction crews that have come into the neighborhood provide a much-needed boost to sales.

The personal element

Paul Smith summarized his reaction to the earthquake this way: "It was like a wild animal! I had more fear of this thing than of being shot at in Vietnam. Can you imagine a rhinoceros rampaging through your house?"

Several employees among the companies we interviewed lost their homes to the quake. Another, a transplant from the East, decided that the shaky ways of Southern California were not for him. He did not return to work for the cleanup and instead plans to move home in search of other ways to earn a living. With that lone exception, however, everyone reported a high level of commitment to working through problems at their store even while dealing with domestic disasters of their own. At the Duke of Bourbon, two employees, including David Breitstein's son Ron, lost their homes. The Wine House receptionist found his apartment condemned and was forced to move as a result.

Northridge Hills Liquor required 500 hours of labor shoveling and hauling to clear the store. Much of this labor was provided by friends. Necessity forced the store to be partially open for business to the extent of selling water to neighbors who, like the store, had none available from the tap. Smith purchased 300 cases of bottled water and sold it for $1 per case over his cost to grateful neighbors.

The unlikely

Somehow in the chaos and destruction at The Wine House, a nine liter bottle of Schramsburg fell off a high shelf onto the concrete floor and survived. Palmer calls it the miracle bottle. In every situation destiny retains its right to make distinctions. It was not time for that bottle to break! Northridge Hills Liquor did not lose the glass in any of the store's 23 cold box doors nor in the windows of the building. And, of course, the stores shared in everyone's good fortune that the event occurred when the stores were empty of people.

The earthquake, with all its devastation, also revealed much that is positive about human nature. The retailers that have survived the last decade of marketing challenges are not about to turn and run from a bit of shaking, and their customers are clearly appreciative and supportive of that commitment.

COPYRIGHT 1994 Hiaring Company
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