Popping Wine’s Price-Hike Myth | Wine-Searcher News & Features Leave a comment

Santa is here, and I’ve got good news! My local TV news has been running stories about wine stocks being low and alcohol prices going higher. I am here to debunk this.

First, on price inflation. It’s easy to cherry-pick one brand of Champagne and point out the anecdotal price increase; I have read that story in newspapers. (We’re going to get to Champagne, which is a big outlier.)

But overall, wine prices have barely risen in 2021. US wine prices are up just 0.37 percent, according to Consumer Price Index information from the US Bureau of Economic Analysis. This is based on the price people pay for the same items from one year to the next.

Whiskey is a different story. Spirits prices have gone up 3.5 percent in 2021 – the biggest single-year jump in 20 years. The second-biggest jump, 3.04 percent, came in 2020. So whiskey prices may be going up, but let’s not throw wine into that basket.

I called industry analyst Jon Moramarco, managing partner of bw166, to discuss the price situation.

In 2020, the Consumer Price Index showed wine prices jumping 2.58 percent, the largest increase since 2008. But in six of the previous 11 years wine prices had actually gone down. Combine the past 13 years of the CPI and you discover that prices paid for wines in 2021 are just 1.8 percent higher than prices paid for the same wines in 2008.

Moramarco said the reason prices jumped even that much in 2020 had to do with the fact that retailers and producers haven’t offered the same discounts during the pandemic as they did before. The list prices haven’t gone up, but the prices paid by consumers have, albeit slightly.

“Because there has been higher demand, and not as much product available, you haven’t seen as much price discounting,” Moramarco said.

And even in 2008, when wine prices jumped 3.78 percent – the largest jump in 30 years – Moramarco said that was because of a rise in the excise tax.

“Wine is much more fragmented than spirits. Retailers have many more choices with wine,” Moramarco said. “Part of the CPI is not just the price increase, but the volume sold at that price. [Wine] producers are going to be looking at price increases next year. It will be interesting to see if retailers accept it.”

Price rises are coming

Danny Brager of Azur Associates sent me a Wine and Spirits Wholesalers Association (WSWA) survey of wine distributors that showed that 43 percent say they will definitely raise prices next year and 36 percent probably will. But that doesn’t mean consumers will end up spending more; they might just drink something different.

Moramarco said that large chain retailers have several ways to subtly reject a price increase. They can feature other similar products, for example.

“One large retailer has discontinued products when the price increases,” Moramarco said. “The front line price will go up, but your volume might go down.” The CPI includes the volume of sales in its calculations, Moramarco said.

As for whiskey, Moramarco said brand loyalty is the reason prices go up even though they don’t for wine. People who like Jim Beam will keep buying Jim Beam, whereas if you like Pinot Noir, and Oregon goes past your budget, there’s always New Zealand and Chile.

Now, about that alcohol shortage.

I’m sure many of you feel a chill hearing that stockists are running low on products. IRI, a Chicago-based market research firm, published a study showing that in-store, in-stock percentage of beverage alcohol is at 88 percent this week. It was 89 percent at the end of November; TV stations across the country picked up on this to say alcohol supplies are down 11 percent, and you better stock up.

Here’s a little perspective on that stat. IRI runs the same stat for 10 different categories. NONE of the 10, including beverage alcohol, is at 100 percent in-stock. (Tobacco is the lowest, at 80 percent). Now, this could indicate shortages of goods like we read about in the UK – but it could also indicate that retailers are just carrying fewer goods. IRI did not respond to several requests for an interview; it did send me an email with a link that doesn’t work and a phone number that has been disconnected, so if you want TV stations nationally to quote your statistic without giving any context or explanation, that’s how.

I asked around to some wine retailers. None mentioned difficulty in getting any type of wine or spirits but Champagne. The Champagne shortage is real.

“Champagne is a challenge both short-term and longterm, given the very short crop they had this year,” Moramarco said.

One producer’s challenge is another’s opportunity.

“It’s really just all the Diageo stuff like [Veuve]) Clicquot, Moët [& Chandon], Dom [Pérignon], Ruinart and Krug – although I bought every last case they had in the warehouse back in October,” said Frank Pagliaro, owner of Franks Wine in Wilmington, Delaware. “We still have lots of Schramsberg vintage bubbly which I’d much rather have any day at 30 percent less than those just mentioned.”

So the upshot is, you might want to secure your New Year’s Eve bubbly a little early. But there’s no need to load up your wine cellar for price increases to come; you’re better off devoting that space and money to items that have historically risen at least at the rate of inflation. Happy holidays!