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Ready for some bad news? It looks like wine will become more expensive in the foreseeable future. Why? There are a number of factors that will go into the increase in wine prices for 2018. Regardless of your own personal wine tastes, the news is widespread over the entire industry.
The Silicon Valley Bank Wine Division authored its annual report, called the State of the Wine Industry 2018, and it provides a basic rundown of the entire wine industry in the United States. The report is an overview of the wine industry within the States, and it concludes that the price of wine will go up over the course of the next decade.
It doesn’t seem to matter if you prefer red wine or white wine, the overall prices are going to increase during the year and that trend isn’t going to change in the next decade. In short, wine will become more expensive.
What if I drink cheap wine?
You might be thinking to yourself that an increase won’t affect you since you prefer cheap wine. Truth be told, it doesn’t really matter if you like cheap or quality wines, the price of a single bottle of wine is going to increase regardless.
The 2017 report was stopped because of the number of wildfires that happened in California during that year. The report stated that they had decided to suspend their report for 2017 because they were busy supporting the people in the wine industry who were suffering in some way from the fires. As a result, they expanded their research terms in 2018 to include other research data that they might not have included in the 2017 report.
On top of that report though, an online editorial posted by the Guardian reported that 2017 was the worst year for wine production in over 50 years. France, Spain, and Italy, the largest wine producers in the world, were hit with disastrous swings in climate over the course of the year. The effect of the unbearably hot summers and harsh winters are responsible for the more affordable bottles of wine typically available in marketplaces across Europe to see a drastic spike in price.
For a better gauge of just how badly the wine industry was affected by weather alone, The International Organisation of Vine and Wine estimated that 2.9 billion less bottles of wine were produced as a result of the severe European climate in that year. At this rate, wine country trips you need to add to your bucket list are only going to get fewer and further between.
Is it the grapes?
Wine consumption had been on a steady incline since the early 1990s. The amount of wine consumed almost doubled, from 370 million gallons to over 770 million gallons in the span of about 24 years. In that same time, wine production obviously increased, but that increase in production didn’t come without a cost.
The price tag of grapes is a contributing factor to why wine will become more expensive over the next decade. The cost of wine grapes has significantly increased over the past five years, and winery owners are finding that their customers aren’t too pleased with the increase in wine prices.
They still have their own businesses to run, which isn’t cheap, and they need to make up the extra money they are paying out in the cost of grapes. Added to that is the fact that younger generations aren’t as willing to pay higher costs for great wine. The younger generation doesn’t seem to have the same tastes for fine wine that previous generations did.
Who's to blame for this?
One of the biggest factors is the changing of the generations. The Baby Boomers are getting older and are starting to reach an age where they aren’t taking up as big of a share of the market as they did 10 or 20 years ago.
The industry was booming a decade ago. Even though the cost of wine was becoming more expensive, the Baby Boomers didn’t really notice the price increases. Plus, fine wines were seen as more of a status symbol, and those who truly enjoyed fine wine didn’t mind paying a little extra. (Not to mention, the cost of grapes wasn’t anywhere near what it is now, so the overall cost was a little more reasonable.)
The Gen X generation is now approaching wine intake that would warrant them to be the largest consumers of wine. Gen X is keeping the fine wine industry afloat lately. They have more discretionary income and seem more willing to spend their money on items like wine. They are not as concerned with the fact that wine will become more expensive, they are stable consumers.
The Millennial generation is really one of the reasons why wine will become more expensive over the next decade. Millennials and the generation after them are just a different type of consumer. They have less discretionary income to spend on items like wine. This is a generation that is coming out of college with about 300 percent more debt than their parents. They are also more likely to be living at home into their late 20s, and are about half as likely to be homeowners as compared to their parent’s generation.
Is there a silver lining?
The good news is that they are more discerning than the older generations were in their 20s and early 30s, but they are also looking for a better deal. They want to feel like they are getting a premium product for the best deal possible, which is what's causing the increase in popularity for the best wine yoga retreats. In essence, this should actually drive the cost of wine down, but that’s not in the cards solely based on materials and operating expenses.
With all the talk about the different generations, it should be noted that people ages 35-55 are the biggest consumers of wine. As the Millennials start to age into this bracket, their wine purchases will start to increase as well.
Millennials are also more likely to spend their money on craft beer and other liquor instead of wine. They don’t seem to care as much about where the wine is originated, but are looking more to the quality vs value ratio when they ultimately decide to make a purchase.
What's next for wine?
Wine is going to become more expensive over the next decade, and it’s up to the wine producers, making wine and working in a cellar for most of their lives for that one perfect combination, to figure out a way to adapt to these new consumers and ever-present climate issues.
Wildfires and warmer than average temperatures can negatively affect production. What happens is that, with a smaller yield of grapes, there is less finished product. This is simple supply and demand economics, which can cause the prices of wine to increase. This has a bit of a domino effect, as it can lead to other industries that use wine in the production of their goods, such as brandy and vinegar.
There are any number of factors that contribute to why wine will become more expensive over the next decade. However, the prices will continue to increase, and that’s just something that wine drinkers will have to come to terms with.