Why wine price is dropping so fast in the US?

Why wine price is dropping so fast in the US
Over production of grapes is the main reason behind the price drop. Source: Getty Images
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Daily US Times, California: The wine price is expected to drop to its lowest levels in five years, thanks to the oversupply of California grapes. Experts predict US wine consumers will enjoy the “best wine retail values in 20 years.”

The decreased demand for wine contributed to wine price drop as well and the cheaper price may last up to three years.

Too many grapes

California grapes have the main impact on the US wine industry. In 2016, vineyards in Northern California began planting thousands of acres of new vines with more efficient harvesting method. This results in more bountiful harvests of grapes.

Having more grapes to make wine sounds good, but if there is not enough demand for the extended production, the surplus grames go to waste. The surplus grapes could make it to the secondary market, where they’re used for brandy or as grape concentrate. But that secondary market doesn’t typically provide sustainable returns for growers.

“The main cause of oversupply today is the culmination of a few years of slowing wine shipment growth, with an ample 2018 wine grape crop as an exclamation point,” said Jeff Bitter, president of Allied Grape Growers. He said the wine shipment had grown until 2015, for two decades, almost predictably. So the slowdown in growth has caught the industry by surprise.

“Since it takes up to five years to bring wine to market from the initial planning stages of planting a vineyard, it makes hitting future demand very complicated. In this case, we overshot demand,” he added.

To make a balance in the market again, California farmers will need to cut down their grapes production.

”With flattening consumer demand for wine, unless vineyard acres are removed, balance will be difficult to find”, said Rob McMillan, founder of Silicon Valley Bank’s Wine Division and author of the annual State of the Wine Industry report, ”Balance will first be found in Napa, followed by other premium regions in California. It will take at least 2-3 years for grape pricing to stabilize.”

Wine demands are decreasing

For the first time in 25 years, wine consumption in the US has dropped. The main reason behind it is Americans turning to liquor and ready-to-drink cocktails, according to industry group IWSR.

McMillan said people related to wine industry should be concerned about this situation. “We aren’t engaging with the millennial consumer, and boomers who have driven wine sales for the last 30 years won’t live forever,” he said.

He believes that the millennial population has not yet embraced wine, though that would the wine industry’s largest growth opportunity. But he thinks that improved value on wine could lead to millennials becoming “more consistent wine buyers.”

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