Update: Wine prices 2021

Making sense of an $18 Italian chardonnay blend, the California grape glut, and higher wine prices despite flat demand

Would you pay $18 for an Italian chardonnay blend? Chardonnay, of course, is hardly an Italian white grape and it certainly doesn’t speak to terroir the way Italian wine is supposed to. But there it was, on the dinner table, in its heavy bottle with a big punt – just like any other luxury wine.

Which, as much as anything, speaks to the pricing conundrum that wine drinkers are facing this year.

I’ve spent the past couple of weeks trying to make sense of why, despite the law of supply and demand, wine prices are higher than they should be.

I’ve spent the past couple of weeks trying to make sense of why, despite the law of supply and demand, wine prices are higher than they should be. It baffled me at the beginning of the year, and it still does.

And I’m not the only one who is confused:

• Jeff Bitter, who oversees the Allied Grape Growers trade group, says California has way too many vines, and needs to pull out almost 50,000 acres. Otherwise, he says, the continued oversupply will cut prices in a flat market.

• Wine critic Dan Berger doesn’t pull any punches: “One of the wine industry’s Achilles heels, and a topic no one ever talks about, is that domestic wines’ retail prices always seem to go up and almost never come down.” His analysis: Price has been associated with quality for so long that producers are terrified that lower prices will mean their wine is crummy.

• Steve McIntosh, writing in the Imbiber’s Journal: “By far the most frequently discounted variety on my radar this year is not nebbiolo or grenache or sangiovese. It’s cabernet. And you know who bottles cabernet labeled as such? Not France. Not Italy. And certainly not Spain or Germany. California does. More specifically, Napa Valley cabernet.” In this, Napa caberent – and, to a lesser extent, other California cab – is being heavily discounted on so-called flash sites, which buy from producers who can’t sell what they make through normal channels.

So what’s going on?

Why are we seeing $18 Italian chardonnay – and so much other pricey wine – when the evidence shows there is no apparent economic reason for it?

My guess – and it’s only a guess, without a study to support it – is that wine is finally crossing the divide from agricultural product to consumer packaged good. The former’s price revolves around the cost of the grape; higher grape prices mean more expensive wine, and lower prices mean less expensive wine. That’s been the case for centuries.

Consumer packaged goods, on the other hand, are priced according to brand. That’s why Tide detergent costs almost three times as much as Arm & Hammer, even though the ingredients are mostly the same. You’re paying for the Tide name, which the manufacturer has worked diligently to promote as denoting quality that’s worth three times more.

Is that where we are with wine? The $18 Italian chardonnay was well-made, but was it worth almost 30 percent more than my Domaine Tariquet? Has packaging and price become the symbol of quality, just like laundry detergent, rather than what’s in the bottle? Are we expected to pay more for a wine not because it’s better or more interesting, but just because we’re supposed to?

I hope not, but premiumization’s continuing presence in the face of economic logic seems to say otherwise.

Photo: “Wine Prices” by mason bryant is licensed under CC BY-SA 2.0