One of the best things about new media is that it doesn't require a lot of bureauacracy or capital investment to do a story. In other words, when I need to write about something, I don't have to clear it with a boss or wait days or weeks or even months for it to wend its way through a printing plant and delivery truck.
I mention this because, since I first wrote about wine price trends for 2012 in January, a bunch of things have happened to make that post seem outdated. But if I was still writing for a newspaper, I wouldn't be able to ready update the post, and readers would be left thinking that wine prices in 2012 will go up.
Fortunately, since I'm not tied down to a traditional media publishing platform, I can correct that impression whenever it needs to be corrected. I've updated it once, and it looks like it needs to be updated again. More, after the jump:
The first part of that hasn't changed. California grapes are still in short supply, and grape prices are higher than they have been in several years. But that doesn't necessarily mean wine prices will increase. As one expert told an industry conference last month: "The higher costs of grapes will ultimately be passed through to the consumer, but retailers will be resistant, particularly in their disbelief that the industry could have gone from a long position to a short position in a matter of 18 months."
But ultimately doesn't mean any time soon, because retailer price resistance is more important than ever before. Wine retailing is no longer the province of independent liquor stores or fine wine shops, which need higher margins to be profitable. One estimate from the Food Marketing Institute says wine accounts for as little as 10 percent of the sales at those kinds of stores. Instead, regional liquor chains, grocers, and super stores are emerging as the leading retailers, and Costco is the biggest wine retailer in the country. They operate on smaller margins, and don't need to raise prices to be successful. Lower prices are their reason for being.
And that is only one part of the resistance toward higher prices. There is still a lot of wine from previous vintages on store shelves, which is holding down current vintage prices. A friend of mine, who regularly visits California wine country, reports that it's common to see wineries offering a case of wine for $100, which is as much as one-half off the retail price. And CellarTracker user Boom Baby! wrote that he bought a case of previous vintage Chalk Hill sauvignon blanc for $3.89 a bottle -- one-fifth of the retail price.
Finally, consumers are still reluctant to spend more on wine. The NPD Group, as part of a study about restaurant trends, found that even wealthy consumers are identifying themselves as "financially strained." Said the report: "30 percent of people who consider themselves financially strained have incomes of more than $150,000 per year. Only 19 percent of people earning that much per year call themselves financially comfortable." That income level, by the way, takes into account, more or less, the top five percent of U.S. households.
So expect wine prices to hold stable for at least the rest of the year, and possibly longer.