Wine Price Inflation Round 2
By: George Balling
We wrote frequently during 2022 about the surging inflation in the wine industry. For much of the year the price increases were relentless and pretty much across the board for wines from every appellation New World and Old World alike. Through the first half of 2023 things seemed to stabilize. There were still some price increases but they were more moderate in nature and not every bottle that came through the door went up. Even more refreshingly we saw some wine come in down a “tick or two” at the wholesale level. We were relieved, and I’m sure most wine consumers were as well.
Our relief though was short lived. In just the last several weeks we have seen the steady march to higher prices resume. Some of those price hikes can only be described as eye-popping. Ironically, or perhaps not so much so, we have seen many of the trucking related supply chain challenges reemerge as well. No doubt the transportation costs are part of what is driving these prices higher, however all of the raw material cost increases are forcing the issue as well. Add in some ill-conceived regulatory initiatives and tax increases and you end up with the perfect storm to drive some all-ready high prices higher. Here are some of the not so good trends we are seeing.
The Washington wine industry is one of the appellations feeling the worst impact. The state for many years has simply been producing too much wine. We hear frequently of wineries starting distribution only brands to try and off load some of their excess juice, other wineries are reducing the number of offerings they produce to help manage inventory, and there are a handful that are getting very creative in their marketing to try and move product. At the same time the cost of producing wine in Washington is increasing at what can only be described as an unsustainable rate. The recent passing of “cap and trade” regulations on everything from fuel to heating and cooling and mis-guided extreme hikes in the minimum wage have forced wineries across the board to increase prices drastically. In many cases Washington wines are just not competitive with wines from California, Europe and other regions, creating a double whammy of too much inventory priced too high that will take a long time to work through.
There are also regions of Europe that are passing through some pretty extreme price hikes. In two examples both Sancerre, the primarily white wine producing region in the Loire Valley, and Champagne are both showing out sized price increases. I don’t have an explanation for Sancerre, but I can tell you the wines are becoming unaffordable for what they are.
For Champagne the region has had two back-to-back years of very rough spring weather that have drastically limited the size of the wine grape crop. In addition, during the covid pandemic the supply chains were more disrupted than other areas experienced. Many of the Champagne houses took to direct to consumer distribution as their traditional restaurant and retail markets experienced massive dysfunction. We are now only starting to see some of the most well-known brands become available, but with some hefty price hikes. In just one example we have seen Veuve Clicquot move up nearly 30% from pre-pandemic to post-pandemic pricing at the wholesale level. We are excited that we can again access some of these producers, however we are unsure they are worth the price.
In still other cases we are seeing individual brands going way up in price with little explanation. One of our best-selling value priced red wines from Europe came in with an over 27% price increase in just one move. The hard part for us and all of you as wine consumers is when we all are used to paying “X” for a lovely Spanish red, and we are now paying “X” + 27% it is kind of a shock to the system.
Recent news on inflation has been better, especially at the producer/wholesale level. We are hoping that as raw materials prices for all that goes into wine start to moderate, we will see price increases slow or even start to go back the other direction. The wild cards remain a severe lack of truck drivers and expensive fuel, especially in Washington, that will continue to drive transportation costs higher. We will forever need to get wine from wineries not located here, or from ports of entry located on the coasts to our local market making transportation a vital link in the pricing equation.
We will continue to keep you updated on all of the price increases we see and hopefully decreases as well.