Why Wine Prices Will Keep Going Up

Silicon Valley Bank does an extensive survey and analysis of the wine industry, publishing a yearly report. One part of this year's report looks at what will be affecting costs in the coming year and longer term. Everyone wants to blame inflation, but there's more to it.

Fire damage on Spring Mountain, Napa, Oct 2020
image from pressdemocrat.com

Demand

Demand for wine, premium wine especially, is up. Yes, even with the Pandemic or maybe because of the Pandemic. Of wineries surveyed for the Silicon Valley Bank report, 31% said 2021 was their best year ever and 22% said it was one of their better years.

Supply

The West Coast accounts for 92% of American wine. These states (CA, OR, WA) had a below normal harvest size in 2021. Much of the 2020 premium grape harvest was decimated by wildfires. This was centered in Northern California, but there were issues in the central part of the state, and also in Oregon and Washington State. When supply goes down while demand is up, well, you know where prices go. There are also shortages for some wine making supplies.

Prices

Of the wineries responding to the SVB survey, 42% said they expect to raise prices this year, and the survey was done before the Ukraine war broke out. The largest increases are expected to be in Napa and Oregon's Willamette Valley.

Climate

Wildfires have destroyed a few California wineries over the past five years. Smoke damage to vineyards has hurt a lot more wineries. In the survey, 70% of the wineries said their insurance is going up this year. Eight percent said they can't get insurance.

The drought in the West continues. Serious water shortages are a threat for 43% of those surveyed. Water shortages can lead to smaller crop sizes or at least higher water prices.