Beware rising wine prices
I can't imagine anyone still buying super unleaded these days, much less imagine someone buying 38 gallons of it at the same time.......but here it is: the $159 purchase!
Maybe some kid in his new 4x4 thought he'd get a better burn with that higher octane stuff...
Sure as hell wasn't me, as the only things I've ever driven with a 40 gal tank are tractors and vineyard trucks. But that leads me into the next topic: what's gonna happen when diesel hits $4.20 per gallon?
Be ready for increases in the prices of all goods, but I think you'll see that the vast majority of wineries will hold their prices steady for the short term, as most are already structured with their prices well above their cost of goods. That's not to say they don't feel this impact - they do - but they should be able to hold steady for the short term, barring any higher records for a barrel of crude oil. The exceptions to this will probably be for the truly small Mom & Pop wineries which really just scrape by anyways, and the public traded wine companies which have hungry shareholders wanting to hold onto their dividends if not increase them.
Of course, I've gone on record before as stating that wines don't cost nearly as much to make as wineries want you to believe (see this link about Coffaro winery) and how that plays into the image they then market to consumers, even so, there are many wineries which keep their prices down who will not have that extra padding to absorb the fluctuations in the fuel prices...
The problems for the smaller family wineries is one of "where do we get the money for the fuel increases", and it's likely they'd need to raise prices or sell out (not likely that fuel prices will retreat far enough to get them back out of the red), but they may do OK if they have a higher-end flagship or specialty blend they can market for extra bucks. The problem then becomes one of how much of that specialty blend they can possibly produce, and what the market saturation point is.
On the other hand, most of the really large wine companies are already structured to a position where they can more easily move revenues around to keep up with fuel prices, but will see a higher demand from their investors who want to make up for failing portfolios from other market segments which currently are tanking. Couple that with the continued talk of recession (gasp!) - even by the head of the Federal Reserve, and our gutless President Bu$h who strangely DIDN'T see this as a potential problem only a month ago - and you'll see investors start to harp on their "safe" stocks in large wine companies to get them more scratch.
There will still be people who drink outrageously priced wines, and I hereby donate my allotment of Kristal to the likes of the debutantes whom do so (Britney & Paris, do you hear me?)....
But I think it unlikely that those segments of our industry will see growth in the near future...I think the mid range part of the market will make gains as people who otherwise might take vacations don't, and hedge that the economy is likely to drop further before it gets any better.
Maybe some kid in his new 4x4 thought he'd get a better burn with that higher octane stuff...Sure as hell wasn't me, as the only things I've ever driven with a 40 gal tank are tractors and vineyard trucks. But that leads me into the next topic: what's gonna happen when diesel hits $4.20 per gallon?
Be ready for increases in the prices of all goods, but I think you'll see that the vast majority of wineries will hold their prices steady for the short term, as most are already structured with their prices well above their cost of goods. That's not to say they don't feel this impact - they do - but they should be able to hold steady for the short term, barring any higher records for a barrel of crude oil. The exceptions to this will probably be for the truly small Mom & Pop wineries which really just scrape by anyways, and the public traded wine companies which have hungry shareholders wanting to hold onto their dividends if not increase them.
Of course, I've gone on record before as stating that wines don't cost nearly as much to make as wineries want you to believe (see this link about Coffaro winery) and how that plays into the image they then market to consumers, even so, there are many wineries which keep their prices down who will not have that extra padding to absorb the fluctuations in the fuel prices...
The problems for the smaller family wineries is one of "where do we get the money for the fuel increases", and it's likely they'd need to raise prices or sell out (not likely that fuel prices will retreat far enough to get them back out of the red), but they may do OK if they have a higher-end flagship or specialty blend they can market for extra bucks. The problem then becomes one of how much of that specialty blend they can possibly produce, and what the market saturation point is.
On the other hand, most of the really large wine companies are already structured to a position where they can more easily move revenues around to keep up with fuel prices, but will see a higher demand from their investors who want to make up for failing portfolios from other market segments which currently are tanking. Couple that with the continued talk of recession (gasp!) - even by the head of the Federal Reserve, and our gutless President Bu$h who strangely DIDN'T see this as a potential problem only a month ago - and you'll see investors start to harp on their "safe" stocks in large wine companies to get them more scratch.
There will still be people who drink outrageously priced wines, and I hereby donate my allotment of Kristal to the likes of the debutantes whom do so (Britney & Paris, do you hear me?)....
But I think it unlikely that those segments of our industry will see growth in the near future...I think the mid range part of the market will make gains as people who otherwise might take vacations don't, and hedge that the economy is likely to drop further before it gets any better.
Labels: energy, farming, marketing, shipping, sustainable
posted by St. Vini at 5:27 AM
5 Comments:
I don't think that you'll see anyone going belly up from the wine industry who isn't already over-extended going into this recession.
RE price, most people who buy at the uppermost tiers are insulated from fuel price flux. You might even see those sales increase as people try to dress up their everyday lives since they may not be going on big vacations anytime soon. Wouldn't be surprised if the entire wine category, especially the small mom + pop wineries continue to make money as people drown their sorrows of a poor economy.
Republicans' mishandling of the economy might actually be good for the wine business!
Fuel prices and trasport are only a part of the problem. As the dollar weakens against the Euro cork and barrel prices are climbing.
"Belly-up" isn't very common in this industry but I do fore see an increase in corporate acquistions of privately owned wineries. Corporate consolidation is the only way to offset increases in operating costs such as these.
I am sure Trader Joe and Charles Shaw will reap the benefits of this economic downturn.
It's funny reading these comments from one year ago. I've seen plenty of brands go belly-up since then. I have also seen our wine sales increase.
Anon,
Yeah, though not for the original reason I postulated. The stress is more pervasive and generalized than I had predicted. Fuels prices fell on the whole, and the burdened financial/credit/real estate market is doing the trick...
Sad but true...
/Vini
Hi there-
I read the amusing Coffaro post regarding the cost of making wine, which I might point out is a bit dated now...But I had to chuckle, because his quoted "obscene" prices, are substantially lower than what it costs me to make fine Russian River Pinot Noir.. Barrels, $1200-$1500 a piece, (I wish we could use American Oak), and $5000 is the going rate per tone for to quality local Pinot Noir. Great Blog BTW..Thanks!
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