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Expect higher prices as ocean of wine shrinks

By Dave Buchanan

Don't be surprised to see wine prices increase this year, says the always entertaining and informative writer W. Blake Gray on his blog, The Gray Market Report.

Gray lists smaller vintages in California, Italy and Spain as warning signs that the world's ocean of wine has shrunk considerably over the past few years, forcing prices up as demand, particularly in the U.S., continues to grow.

Forget arguing over to what degree quality affects wine prices, he says.

"Pricing is all about supply and demand,'" Gray writes in his latest blog entry.

His argument makes sense: As stocks of bulk wines shrink, distributors will be harder pressed to satisfy the demand from consumers accustomed to finding California Cabs for $20.

Bulk wines include not only the lesser-quality juice commonly used for blending but also situations where top wineries have produced more wine than they can sell and market that surplus to small-company labels or to mass-market distributors (think Bronco Wine Company's popular "Two-Buck Chuck") for private label bottling.

Bulk-wine volumes in California (those being sold by vintners to other vinteners) reached 15 million to 20 million gallons since 2000, according to a report in the Jan. 19 issue of North Bay Business Journal out of Sacramento, Cal.

The story, citing Brian Clements and Marc Cuneo of Novato (Cal.)-based Turrentine Brokerage at the 21st annual Sonoma County Winegrape Commission Dollars & Sense seminar, said aggressive marketing efforts by wineries to reduce that inventory, along with the three successive smaller harvests, "have siphoned the bulk-wine inventory down to 4 million gallons now."

The varietal most affected, the grape brokers said, has been cabernet sauvignon.

“This is the first time I’ve been involved in a market flip that was not about sales,” Mr. Clements said. “This flip has been about inventory.”

“If wine sales continue as they have, we can look for a very deep shortage of cab in the North Coast,” he said.

Clements also warned of a potential shortage of chardonnay, which continues to be the favorite white wine of American consumers and, according to Reuters, the No. 1 white wine in the world..



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