As holiday preparations commence, consumers are greeted with the unwelcome guest of soaring wine prices.
Live data from the Federal Reserve Economic Data (FRED) indicate a sharp climb in the cost of wine grapes, culminating in a peak that threatens to tip the scales of festive budgets.
Vineyards that grow those grapes are facing a dual challenge that's putting pressure on the industry and driving up prices. A report issued earlier this year by MDPI said that global demand for wine has been increasing for years, driven by rising incomes and a growing middle class in emerging markets, at a time when climate change is making it more difficult to grow wine grapes in some regions, due to factors including drought, heatwaves, and wildfires.
Stateside, that burgeoning demand coupled with vineyards producing fewer grapes due to climate change has fueled a boom in winery establishments, MDPI said, which is driving up the price of wine grapes due to the escalating productivity that is necessary to meet the growing thirst of the U.S.
Newsweek has reached out to the authors of the MDPI report via email for comment.
That scarcity of premium grapes is reflected in the uptick in wine prices consumers are now facing.
Reports from Climate Central highlight wine grapes as particularly vulnerable to temperature and precipitation changes. With average growing season temperatures in the U.S. climbing 2.0°F since 1970, and a steeper 2.9°F increase in California—the bastion of American wine production—the risk to premium grape varieties is stark.
The fickleness of the climate gives rise to erratic wine markets. Vineyard Magazine noted a dramatic surge in market grape prices in the U.K., with costs leaping from £2,000 ($2,158) per ton in 2018 to between £2,800 and £3,000 ($3,021 to $3,238) recently. Although the Vineyard Magazine report focuses on the U.K., the trend is reflected in the U.S. market as well.
Price inflation in both countries is a sustained ascent, with demand outpacing the vine-strewn supply in the U.K., according to the report.
Beyond the inflationary economies, supply chain woes from the pandemic linger, with the cost of European glass—vital for bottling—ballooning post the energy crisis induced by Russia's invasion of Ukraine. From glass to cork, every element of packaging has seen cost increments, according to a November report issued by the BBC, inevitably cascading down to the consumer.
The wine industry, bound by unique pricing psychology, hesitates to reduce prices even as demand dips due to the perceived notion that a cheaper bottle of wine equals cheaper quality, according to the BBC report. The complex "three-tier" distribution system in the U.S. further complicates the landscape, with wholesalers exerting influence over prices, encouraging a pivot towards mid- and high-end wines.
Still, the U.S. wine market projects growth, with revenues expected to climb annually by 4.33 percent over the next five years, according to Statista. With the Wine Market Council's study indicating a trend towards lower price points, vineyards may need to increase grape production to satisfy the volume of wine Americans demand.
As trends converge, the holiday cheer may be somewhat dampened by the higher price tags on American wine aisles.
Uncommon Knowledge
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About the writer
Aj Fabino is a Newsweek reporter based in Chicago. His focus is reporting on Economy & Finance. Aj joined Newsweek ... Read more
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