Wine prices in 2012, one more time (but no more, I promise)

Will we need a bag of money to buy wine in 2012?

Who knew what fun we'd have after my trio of posts about the direction for wine prices in 2012? Since then, the cyber-ether -- as well as the traditional media -- has been hipping and hopping about what will happen to prices. Even Time magazine got into the act (for what that's worth), with a story that took price-mongering to new heights: "Panic! Wine Prices Due to Rise."

This story closely followed a report by Silicon Valley Bank detailing what their experts see as a possibly severe supply-driven shortage for California grapes. Or, to translate for the non-expert, there won't be enough grapes for all of California's wineries, so grape prices will go up, which will force wine prices up as well.

This report, given the bank's reputation in the wine business, was the source for any variety of blog posts and stories warning, like Time, that we would soon no longer be able to afford to buy wine. More, after the jump:

Yet there is an equally persuasive argument being made that just the opposite might be going on. Britain's the drinks business trade magazine quoted quite a few experts who said reports of a supply shortage were overstated, and that what was going on in California was nothing more than the ebb and flow of grape growing.

There's also the perspective offered by economist Mike Veseth, who wrote that the wine business has changed so much in the last decade that the rules that applied during the last shortage 10 years ago won't necessarily apply this time around. In particular, he wrote, consumer behavior has changed, and that will exert pressure on prices in a way they didn't influence prices before. 

Finally, no one knows how the on-going European economic crisis will affect U.S. wine prices. Wine sales in Spain and Italy are seriously off, according to winery types I've spoken to in each country. If they (along with France, which is near recession) start dumping wine on the U.S. market to make up for their domestic slump, we'll be flooded with cheap European imports. Wenseth touches on this briefly, and even the Silicon Valley Bank report noted that consumers would be able to buy less expensive European wine if they didn't want to pay the new, higher California prices.

My guess is that California wineries will try to take price increases this year, and that consumers will buy something else when they do. In addition, there is some question whether retailers will pass on any price increases, given the increasingly cut-throat competition on the retail side, where Costco and Walmart set pricing patterns that smaller retailers often match.

What happens after that will bring us to 2013, and then it will be time for more price-related blog posts.

Artwork courtesy Johnny Automatic at OpenClipArt.org, using a Creative Commons license

Comments

[Mike Veseth]

Just correcting a typo: my name is Veseth not Wenseth.
Thanks,
Mike

[Jeff Siegel]

Sorry about that, Mike. A cranky ex-newspaperman should know better than that. I corrected it.

[Dave]

Sorry to throw cold water on all the "experts" but what is causing the wine grape shortage in California is a virus killing vineyards at about 12 to 20 years of age. Eutypa is wqreaking havoc after two wet years, as the vector is rain. The tonnage is permanently down on these damaged vineyards as they die a slow death. I wish somebody would cover this slow moving disaster.

[Bobby Cox]

Let's talk numbers, at Texas prices the bottle would only go down by $1.70 if we GAVE the wineries our fruit! Prices are not the fault of the growers.