American wines prices are expected to rise in 2012, primarily because of a grape shortage. On hearing this news, many are asking how one of the most fertile grape growing regions in the world managed to come up short of grapes?
According to Bob On Sonoma, one of the causes for the grape shortage is that grape planting decisions and schedules are not centrally managed. As a result, planting and growing has gone through cycles of over or under planting. The last three planting booms in the wine growing centers of Northern California occurred in the 1970s, 1990s and early 2000s. Since then, the recession and tight credit prevented growers from starting another planting boom.
There is also only so much land available for grape growing expansion. The state is not happy that vineyards are now encroaching into forested lands, which involves forest clear cutting. Growing on hillsides is being frowned upon, and water supply for new vineyards is an issue. Land is more expensive and so are the other costs of expanding into new territory.
The nurseries that supply the plantings had cut back when demand slowed down. Now the nurseries are struggling to make up for the shortage.
Another issue will contribute to rising wine prices in the U.S. as the wineries try to lock the growers into longer contracts. The longer contracts will give the wineries enough grapes to get through the shortage, but are going to come at a higher cost.
The price increases are expected to hit the cheaper bulk wines and premium wines from the coastal vineyards. Next will be the highly sought after wine varieties. Bob On Sonoma predicts that Pinot Gris and Moscato might be the first to go up in price, while Pinot Noir will continue to rise in price as it did even during the recession.
According to Wines & Vines. Imports will be a problem as a combination of the grape shortage, a strong dollar and a weakened Euro leads to imported wines. Imported wines, mostly from European Union members, are expected to move in during the shortage and grab some of the market share, leaving the U.S. market vulnerable. Since U.S. sellers will have less excess bulk wines to release to the markets, they will not have a reason to keep prices down. The bulk wines end up on the grocery store shelves where customers from “Generation X” are the big buyers.
This news is based on the latest annual state of the wine industry report by Silicon Valley Bank Wine Division. The latest report is based on in house research and surveys about 500 wineries and was released on April 17. The bank warns that “Most of California’s premium grape regions have posted low net inventory levels, and even with the rash of fevered planting forecast for coming years the market is not expected to return to balance for five to eight years.”
This indicates that the grape shortage will not be an immediate crisis, but is the beginning of a longer term trend in rising prices.
Wines & Vines sees Cabernet Sauvignon and Zinfandel, along with the cheaper bulk wines as the varieties that will be most affected by the shortage.
One bit of good news is that 2012 will be a bumper year and possibly a record year for U.S. grape yields.
Does this mean that wine consumers should rush to the markets to stock up on their favorite wines? Probably not this year, but this is a trend that will extend over time. Serious consumers will want to keep up with their favorite wine buying guides and decide when and if they need to stock up on their favorites.