Inflation Looms for CA Wine

In last month’s column, I covered the rise in California’s grape prices in the wake of disastrous fires and two light vintages, but that was only half of the story. Now it’s time to examine inflation’s effects on the American wine industry.

Somewhat strangely, while most Americans see clear evidence of inflationary effects everywhere in daily life, the one place that prices haven’t (yet) gone up is the local wine store. 

‘Wine prices have not moved anywhere near the percentage of change of other food products’, says Jon Moramarco, a partner at Gomberg, Fredrikson & Associates and the editor of that firm’s monthly and annual reports on the California wine industry. 

The US Bureau of Economic Analysis publishes an annual Consumer Price Index report, which breaks down trends in pricing across many different categories of consumer goods. While prices for products such as milk and bread rose an average of 6.1% in 2021, wine prices actually dropped by 1.1%. In comparison, prices for beer rose by 2.1% and spirits by 3.1%. 

‘This is primarily driven by a highly fragmented, highly competitive marketplace, where it has been, and still is, difficult to raise prices’, says Moramarco. ‘If you go back and look at wine since the Great Recession, retailers have been very reluctant to accept price increases [from producers].’ In fact, wine prices have remained immune from inflation for several decades.

Why is this? Moramarco estimates that at any given time there are more than 300,000 individual wines available for sale in the US. With that level of choice, he says, it’s a simple matter for a retailer to choose an alternate wine, rather than lose margin on a wine or pass along a price increase to a customer.

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