Cheap wine and the weak U.S. dollar

$1 Ask foreign winemakers what their biggest problem is, and the answer is almost always the same: the historically weak U.S. dollar. ?We ?re getting absolutely slagged, ? says Hugh Hamilton, an Australian whose brands include Hugh Hamilton and Jim Jim.

How bad is it? The Australian dollar was worth more than 90 cents U.S. in November, its highest level since 1984. The euro, which French, Spanish, and Italian winemakers use, is at a record high of almost $1.50. It was worth $1.17 at the beginning of 2006. Even the Chilean wine industry is noticing the difference, as the peso continues to appreciate against the dollar. It is at levels it hasn ?t seen since 1999.

Why does this matter to wine drinkers? Because a weak U.S. dollar means more expensive foreign wine, as producers raise prices to make up the difference. Hamilton ?s Jim Jim shiraz, which was $10 last year, is $13 this year. Veramonte, the Chilean sauvignon blanc, has traditionally been a value at $8. But it ?s $11 for the current vintage, which takes away a lot of its appeal. And when France ?s Beaujolais nouveau arrived this week, prices approached $15, instead of the traditional $8-$10. This defeats the purpose of nouveau, which is supposed to be inexpensive, easy-drinking wine. But what ?s the point of buying it when it costs as much as a better-made New Zealand pinot noir?

The weak dollar isn ?t hurting prices for more expensive wine quite as much, say several foreign winemakers. They have more room to play with, so you won ?t see those sort of 20 and 30 percent increases. But if the dollar continues to slide ? and no one has any idea what will happen ? it ?s possible that those prices could rise significantly as well.

Are domestic wines an alternative? Not so much on the less expensive end, where wine from the southern hemisphere and southern Europe dominates the $10 category in quantity and quality. California, for whatever reason, has really fallen off in that area. The situation is a little better in the $12-$15 and $18-20 ranges, where the quality is more than comparable. But that ?s not much consolation for someone who wants to drink Spanish wine instead of California wine.

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