Wine Glasses May Be Half Empty

 

Since late last year importers and exporters in the wine industry have been warning of a significant increases in European wine prices. As most wine lovers know a hike in price is a natural phenomenon, especially with the growing number of winemakers from to choose and the development of viniculture.

However, the recent inflation has less to do with demand and more to do with the state of our economy. The surging oil prices and the floundering value of the U.S. dollar were foreseen by those in the industry to put a 20% – 30% increase on European wine four months ago. In the past two weeks Burgundy wines have raised their prices between 10% – 20%, as reported by Reuters News last Thursday.

In a press conference, Pierre-Henri Gagey, President of the Burgundy Wine Association said, “We have been absorbing the dollar decline for the past few years. The producers have given up their margin, the trade has sacrificed its margin and the importers have slashed their margins… we have now arrived at a situation where we cannot take it any longer and from now on we will feel the full brunt of any further dollar weakness.”

The U.S. is the most valuable Burgundy export market producing $284 million a year.

Restaurants have already begun to correct their wine lists for the increase. Some restaurants had prepared for the increase by purchasing larger orders several months ago. But these precautions won’t benefit for long. Wines from Italy, France, Spain and Portugal are expected to see the biggest increase.

“It’s like a huge bubble that’s about to burst,” said Joshua Wesson, a founder of the retail chain Best Cellars, to the New York Times in December. Well, it seems that the European bubble has been distended to capacity.

So what can be anticipated for the American market? The cost of crops and oil has already put an effect on food stuffs. Is it only a matter of time before domestic wine producers find it necessary to raise their own prices?