The price of wine has remained fairly stable during recent months and has not been impacted in the same way as the price of gas and food. However, this is soon about to change.
As you have seen at the gas pump, the Russian invasion of the Ukraine has caused a surge in gas and oil prices. These increases have impacted the cost of wine industry supplies. Increases of 20% to 45% have occurred on the cost of bottles and boxes over last year. The war has created a great deal of volatility and unpredictability to the glass bottle industry.
Oil prices have surged 70% in the past year and with transport costs rising, barrels, bottles, cases and wine labels are all more expensive. But so far the consumer has not felt the impact.
Very high Inflation is severely impacting the price of supplies such as glass, corks, labels and cardboard. Labour and energy costs have skyrocketed.
With grapes being harvested only once a year and wine reaching the market through a rather complex multi-faceted distribution network, price pressures have not yet reached store shelves. However, when they do, the effects of inflation, which is currently around 6%, supply chain issues (see Dry Times Ahead from January 22), a small 2021 global grape harvest and a surge in demand will mean consumers should prepare for a significant increase in wine prices.
Historically, wine isn’t as volatile as other consumer goods, so has been less subject to price fluctuations. From 2004 to 2021 inflation increased at a rate of 2.11%, while wine prices only rose by 0.73% during the same period.
Wine producers have been doing their best to deter price increases especially given the impacts from the COVID pandemic which they are now struggling to recover from. Unfortunately, costs are continuing to increase and many distributors have already absorbed the higher transportation costs. Operating expenses have reached the point where they can no longer be absorbed by producers.
The greatest impact will be seen on imported wines. The cost of shipping containers and freight has increased by more than 100%. Adding to the problem is the impact of the small harvests in France’s Burgundy, Loire and Provence wine regions. The only saving grace will be the competition within the wine industry which will keep the increases moderate.
The high consumer demand for wine is also having an impact on price. In particular, wines from Bordeaux, Burgundy, Tuscany, Rioja and Napa will be most affected. Wines from these regions may increase by 20% to 25% within a year.
Domestic wines will be impacted as well though probably not to the same extent as imported wines. It is expected that these wines will see a minimum of a 10% increase in price.
Will this inflation last? Some financial experts don’t think so while others are convinced it will. In either case the most optimistic timeline is that the current conditions will remain throughout 2022 and 2023.
In any event it is believed that competition will keep runaway pricing in check. Wine is different from most other consumer goods in that there are options available at every price point and there are a lot of wine choices available. This will help keep wine prices as low as possible.