There is a titter of joy running through the California wine business as the 2011 harvest ends, and it's not because the quality of the harvest is particularly good. It's because, for the first time in several years, California growers are picking fewer grapes — by some estimates, as much as 10 percent less than last year.
This means that grape prices are expected to go up, which means that wine prices are expected to go up. Which means, after several years of flat and even decreasing wine prices, growers and producers see dollar signs on the horizon.
They're so happy, in fact, that there is even a drinking game celebrating the harvest. More, after the jump:
California grape prices matter because six out of 10 bottles of wine wine sold in the U.S. come from California and almost 90 percent of the wine made in the U.S. comes from the state. And, in fact, the wineries that I have talked to in the past couple of months say spot prices for California grapes and juice have increased this year. Growers, confident that the 2011 harvest would be smaller, are being more aggressive about pricing than in the past couple of years.
So will all of this actually mean higher wine prices in 2012 and 2013, when the 2011 harvest shows up as wine on store shelves? Probably, but probably not as much as California hopes, and with two big caveats that could change pricing significantly.
First, there is still a lot of wine from past vintages in the supply chain that hasn't been sold. Retailers need to move that wine before they can sell the new, more costly vintages. If they can't, they won't buy as much of the new vintages, and the wineries will be back where they started with unsold wine sitting in warehouses and great bargains for consumers.
Second, though this year's harvest was smaller than last year's, it wasn't particularly small. The estimate of 3.3 million tons is the fifth most on record, and more than in 2006, 2007, and 2008. So it's not like there won't be a lot of grapes to make wine with. My best guess? Wine prices will be more or less stable. Instead, many of the cheap wine brands that showed up in the past couple of years, courtesy of cheap grape prices, will vanish since there won't be enough cheap grapes to make them. There will just be fewer $8 and $10 grocery store wine.
The photo is from guidoux of Brazil, via stock.xchng, using a Creative Commons license