The year 2009 has been a boon year for grape growers. The harvests have been huge. However, as with all boon cycles in productivity, there is a downside. Too many grapes on the market lead to lower prices for a bottle of wine.
Lower grape prices are being seen around the world, from Napa Valley to Australia, from Oregon to France. Growers who are unable to sell grapes at profitable prices are actually allowing grapes to rot on the vine.
As grapes are fetching growers lower prices, the price of wine, even very good wines, is falling this year. But sales are still on the rise. Surprisingly, as the cost of wine drops, the better quality wines, in the $15 to $20 price range are increasing, while lower cost wine sales are dropping.
According to MSNBC, "Pinot Noir grapes that once fetched $5,000 a ton now sell for $2,500." Of course, the end result is that a bottle of wine that used to cost $50 is now selling at a discount, often below $20 a bottle, as well.
Recently the National Association of Business Executives (NABE) concurred that the recession is over. Whatever the case regarding the recession, in good economic times or bad, people will continue to drink. Even during the depression of the 1930s, people kept drinking. In fact, those who were anti- prohibition advocated that a revitalized alcohol industry could benefit the economy.
There are a lot of contributing factors to the price of grapes falling, in addition to a great crop.
Credit availability for wine growers is down. Many wineries need this credit to pay their workers, to pay for fertilizer and grape packaging. The costs are significant, and wineries often operate on tight margins.
The recession is contributing to the lower prices for grapes because consumers can get good wines at lower prices, so the pricier grape growers are being forced to sell at lower prices to get their grapes sold at all.
Many wineries do not grow their own grapes. The glut is causing competition among growers to lower their prices.
The winners during this glut will be distributors and consumers. Distributors will buy only as much wine as consumers are buying, so they will always win. And of course, consumers will be cashing in on the low prices for what they would have bought anyway.
Is it time for you to start stocking your wine cellar this year?
Written by Shelby Bateson
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