Update: Wine prices in 2018

Wine prices 2018: Look for increases later this year and early next, thanks to a weak dollar and the return of inflation

Look for wine prices 2018 to head upward, and not just because of premiumization. Inflation, something that hasn’t been part of the U.S. economy for decades, has apparently returned. In addition, a much weaker U.S. dollar will force up the price of imported wine – one of the few values left for those of us who looking for quality at $10.

I’ve been watching pricing pressures since the end of last year, but I didn’t anticipate this — and the dollar’s weakness in particular. About 18 months ago, it was at parity with the euro, but has fallen more than 25 percent since then. A stronger euro means the cost of wine from France, Spain, and Italy will increase – probably sometime in the next 12 to 18 months, according to several distributors I talked to. The same holds true for Australia, where the Aussie dollar has gained 25 percent since bottoming out at about 50 cents to the U.S. dollar at the end of the recession. The New Zealand dollar is about the only wine-related currency that hasn’t increased in value. It has been stable for about a year.

There’s little we can do about exchange rates; a weak dollar is a political decision to boost U.S. exports to Europe and elsewhere. Inflation is another story, and it’s something that we haven’t really seen in the U.S. since the 1980s. Remember 20 percent interest rates? If not, your parents do – ask them what those rates did to mortgage payments.

The point here is that inflation means producers will raise prices because the cost of their goods increases – bottles, grapes, wages, and the like. We’re already seeing grape prices rise despite yet another bumper California harvest as well as flat demand.

The good news for consumers is that the Federal Reserve, which oversees the fight against inflation, seems ready to try to rein in prices. In addition, inflation will likely hit more expensive wine harder than $10 wine. For one thing, it costs more to make $20 wine – pricier grapes and bottles, for example – and many expensive wine producers are smaller and less able to absorb cost increases. That’s much different from the companies that make cheap wine, which can accept higher grape and production costs without raising prices because they’re so big. Massive, in fact. They’ll put up with smaller margins rather than lose sales and shelf space.

The other thing in our favor? Tremendous – and probably unprecedented competition – among retailers. Never have so many stores sold wine, whether supermarkets, independents, chains, warehouse and club stores, and big boxes. Price matching and discounting are key parts of post-modern retailing, and giving them up to raise prices may be difficult.