Wine prices in 2013

Apparently, we have to listen to this one more time.

They’re not going anywhere, no matter what you may read elsewhere. Some higher-end wines, like Napa reds, red and white Burgundy, and classified Bordeaux, may be able to take increases. Though, interestingly, Champagne is in a quandary over cutting prices.

But the cost of the wine that most of us drink will stay more or less the same.

Details are after the jump:

The pricing scare started last year, when the second of two “short” vintages in California led to over-the-top predictions about increases and the infamous Time magazine headline: "Panic! Wine Prices Due to Rise."

Those increases, save for some special cases, never happened.The two “short” vintages – wine industry-ese for a smaller grape crop – were still huge, the third and fourth biggest ever. In addition, as wine economist Mike Veseth noted (and he was one of the few who did), the wine business is now global. Higher prices for California grapes don’t necessarily mean higher wine prices; the biggest producers, who make most of the wine, can buy cheaper grapes elsewhere – and did.

That pattern, said the people in the retail, distribution and production sides of the wine business that I talked to, will continue this year. The 2012 harvest in California could the biggest ever, alleviating any shortage concerns in this country. And while bad weather decimated production in France, Italy and Spain, anyone who has bothered to look at U.S. wine consumption would see that Europe accounts for only 20 percent or so of the U.S. market.

Or that the euro crisis decreased demand in Europe, weakening the impact of the shortages there and making European wine less expensive in dollar terms. Or that the Europeans have been over-producing for years. Or that there are still plenty of grapes available in New Zealand, South Africa and Australia.

The other factor, which is just beginning to be understood, is that consumers are drinking more wine that is cheaper to make and can be sourced from anywhere in the world. Sweet red, for instance, can be made with almost any grape (even white ones) and doesn’t need an appellation like Napa Valley or Bordeaux.

Finally, and no one seems to have grasped this yet -- save for Veseth, who recently wrote a telling post about Big Wine and low price production. Big wine companies now dominate production in a way they never have, accounting for as much as 80 percent of the wine sold in the U.S. This means they can control prices in a way that we haven’t seen before. If they want to absorb higher prices to keep market share, they can afford to do it.

That’s why Beringer white zinfandel (made by multi-national Treasury Estates) was on sale at a Dallas Kroger for $5 over the holidays. Or that E&J Gallo’s Apothic was selling for $8, almost half off its suggested retail price, And, I was told, both retailer and producer made money on those deals.

Comments

[Blake Gray]

Who exactly is "us" in the sentence "the wines most of us drink?"

Do YOU drink Beringer White Zinfandel and Apothic Red? Do you expect that your blog readers drink them?

I'm aware of their sales numbers. But I don't think people who drink these wines, particularly the White Zin, are readers of articles about wine.

These products are to wine what Cheez Wiz is to cheese. They may sell a lot, and they are commodities worth covering, but when people talk about the category in anything other than a pure sales-volume sense, that's not what they're talking about.

[SVBWine]

W/C -
The article above from Time last year was overhyped in the title. A read of the article doesnt support that title, but it got people to read it.

The 2012 State of the Wine Industry Report we wrote last year and cited in the article characterized the forecast price increases as "modest" and overall fine wine sales growth of 7%-11% which appears to have been an accurate call as of middle November.

Where will prices go this year? (....here comes the not so obvious plug ....)

The 2013 SVB State of the Wine Industry Report will be released 1/15 and this year the lead segment of the report deals specifically with that question.

The report pairs with a first time ever live HD video feed direct from studio to desktops this year .... all gratis of course. Register for the Jan 15th report and video: http://www.svb.com/wine-report/.

Hope you tune in W/C. We might have a debate on our hands .... or .... we might agree. (News at 11:00)

[Jeff Siegel]

Rob, you can plug anything you want on my blog.

And Blake, no, I don't drink Apothic or the Beringer (though I have tasted them recently in the line of duty). My point is that the pricing process is much different than it used to be, and when Big Wine can cut prices on their products, where does that leave someone who makes a quality $10 wine?

Not in a position to raise prices. The Segura Viudas cava is a good example. How do they compete with Barefoot and YellowTail sparkling, which are $8, if they go to $12 or $15? And this doesn't take into account the slump in Spanish wine sales because of the Euro crisis, and all the wine they aren't selling in Spain.

[John Dorminey]

WC,
One pressure on rising prices for imported wine from Europe and Argentina, especially on value wines, is inflation. The dollar may buy more Euros, but the Euro-cost of everything has gone up within those countries--from grapes to boxes to labels to getting the wine to port. According to this week's Economist, Argentina's inflation was 26% last year!

[Terry]

"Cupcake" Pinot Grigio just went up 4.00 a bottle in the last week, at 3 stores I've been to. Now this may not be a worthy wine for this, just curious and yes I'm a 10.00 a bottle drinker.