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Global wine shortage? World’s grape supply points to higher prices

By Dave Buchanan

Wine consumers could be paying higher prices as the world-wide glut of wine and wine grapes shows signs of ending.

Reports from several major wine-trade websites are saying a series of low harvests worldwide along with a global rise in wine consumption point toward the possibility of a wine shortage, something unthinkable a few years ago when the world seemed awash in wine.

Shanken News Daily reported California has suffered two consecutive small harvests, which means wine makers are competing for less fruit, which in turn drives up grape prices and bulk wine prices. “If you’re buying wine on the bulk market, or you’re a négociant, your costs are going to go up,” said Adam Lee of Siduri and Novy Family wines, in an interview from the Shanken report. A similar report was by Andrew Adams for Wines and Vines.com.

Similar shortages are reported elsewhere, according to TheDrinksBusiness.com. France’s Languedoc saw grape prices rise to a 10-year high and Spain’s Rioja saw its 2011 yields drop more than 20 percent, resulting in “a serious depletion of stocks matched by price rises.”

The DrinksBusiness site recently said the California wine industry “is entering an extended period of structural supply shortage.” In that same story, Matt Turrentine, of Turrentine Wine Brokerage in Novato, Cal., said California vineyard plantings have not been keeping pace with growing demand, resulting in a doubling of bulk prices in the past 12 months.

All of this is compounded by the global recession, during which wine producers sold off existing inventories rather than invest in new plantings or increased production.

A similar move happened in Colorado after freezes in December, 2010, and spring 2011, wiped out the grape crop and forced winemakers to use existing inventory to keep their shelves full. Many winemakers saw their grape supplies curtailed or shut off as there simply weren’t enough Colorado grapes to go around, forcing some producers to go elsewhere for grapes.

Colorado hasn’t the luxury of new areas to plant, so winemakers depending on home-grown grapes must wait for vineyards to recover before production can rise to meet demand.

Nationally, it took wine prices a couple of vintages to catch up with the recession, as wine drinkers moved away from wines costing $20 and up and turned to less-expensive brands. Restaurants and stores were unable to move premium-priced wines, and winemakers, their cellars filling up with the unsold higher-priced wines, turned instead to marketing less-expensive bottlings built around the more-affordable bulk wines.

There was plenty to choose from since the ocean of wine included some very good juice, not just from California, but from around the world. And consumers soon got accustomed to driving the prices down and being able to find much better wines in the $10-$15 range.

But according to Shanken Daily News, with the recession softening, Americans are starting to reach for more expensive wines, which catches wineries unable to meet demands. And the small harvests means there aren’t enough grapes to allow production to ramp up enough to satisfy that demand, says the Shanken report.

Worldwide, wine demand is seen as a bull market. According to VinExpo, the international wine marketing group, the Asian wine market is expected to grow by 5 percent in the next four years, compared to a 1 percent global average. China, with its rapidly growing economy, is expected to see a 54 percent increase (to just more than 1 billion bottles annually) in wine consumption in that time.

All this means wine producers will have to face the challenges of having consumers with money to spend but without the product to spend it on.

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