Grape Prices Are Not Too High, (Yet)
Are grape prices too high? I have heard many producers claiming that they are. Vineyard guys tend to think they aren't. In the end, the answer is, of course, "depends." Depends on where you are and what you're growing. But we can take a broad-market look at this issue, too, and that is something I do every year or two.
The chart below shows some relevant stats. First, take a look at Grape Cost as a % of Retail Price. This is only an estimate, using USDA and Wine Institute figures. As you can see, that ratio is currently below average. (We'll talk about trends later.) Part of the reason for this are the recent drops in prices for San Joaquin Valley fruit. For coastal regions, I would guess that we are around historical averages.
Average price per ton is above average, but not when adjusted for inflation. After adjusting for inflation, we see roughly the same dynamic as with the previous metric.
The chart below shows long-term trends. It uses the same stats as above, but normalized. Though there is a long-term upward trend in grape prices, the inflation-adjusted trend is actually downward. Grape cost as a percent of retail price looks to have been beaten down, presumably by down-the-supply-chain forces, in a rather permanent manner.
Now, we all have our biases. I worry over vineyard financials more than, say, Silicon Valley Bank's analysts, who worry more over wine financials. But it looks to me like our bottle programs can accommodate current prices. Of course, many segments of the market will see prices continue to rise until the bubble pops. Right now, however, I think we're pretty balanced and may even have room to raise grape prices and still achieve a very hypothetical equilibrium.
If you're wondering when prices for your grapes are going to fall off of a cliff, pick up the phone and give me a call. I bet I can help you figure that out.
Listened to While Writing This:
Yppah, Tiny Pause (album)