Will there be a cost of drinking crisis?

Wineries aren't immune from surging wages and input costs.

© Shutterstock

winery-costs

Wineries aren't immune from surging wages and input costs.

© Shutterstock

http://www.falstaff.com/en/nd/will-there-be-a-cost-of-drinking-crisis/ Will there be a cost of drinking crisis? Wine has so far escaped the eye-watering price hikes of energy and food bills. But the industry is hardly immune to inflation so why haven’t prices jumped yet & how much longer can they hold out? http://www.falstaff.com/fileadmin/_processed_/d/4/csm_winery-costs_edb5a6e964.jpg

So you’ve winced at the cost of your weekly shop – is that really the price of butter? Then you return home to find a new electricity bill. That reflex to immediately turn off the fridge is halted by the urge for a reviving glass of white wine. But how much longer can your favourite Sauvignon Blanc survive the ravages of inflation? And is that its only threat?

The reassuring news is that wine – as even its greatest fans will grudgingly admit – is a discretionary spend. Unlike essentials like bread or eggs, everyone along the supply chain knows that shoppers simply won’t keep putting a bottle in their trolley if the cost leaps up. That helps explain why, although the price of some bottles have inevitably nudged upwards, it hasn’t hit the same stratospheric heights as pasta.

Official data backs up the evidence from those supermarket receipts. So far as UK shoppers are concerned, figures from the Office for National Statistics show that the cost of food and non-alcoholic drinks rose by nearly 15% in the year to September 2022. But for alcoholic beverages and tobacco that increase was just under 6%. It’s a very similar story in other major wine importing markets such as Norway and Sweden.

Before you relax and embrace a compromise of simply chilling your wine outside during the winter months, it’s worth considering just how much longer the wine trade can keep a lid on prices. For the moment, most of the wine on our shelves was bottled before war in Ukraine triggered a global price hike in many commodities. Wheat and vegetable oil may be less of an issue for the wine trade, but energy certainly isn’t.

Wage pressures

As the next vintages come onstream, don’t be surprised to see those fuel bills trickle down too. After all, producers, logistics firms, importers and retailers face exactly the same fossil fuel-related headaches as other sectors. From the tractor that works the vineyards to the temperature control system in the winery and lorry that delivers the bottles to shelves, many energy costs are unavoidable – and impossible to absorb forever.

Wages are another major expense for most wineries. In response to this rampant inflation, salaries around the world are on the rise. In the US, wages rose just over 5% in the year to September; in Italy, several large unions are pushing for a wage increase of over 8% to match the country’s current rate of inflation. Few expect this issue to disappear anytime soon.

Then there are all the rising costs in areas we tend not to think about. Just look at that glass bottle, the label, the capsule. Yes, they’re all getting more expensive and that adds up. Glass is particularly energy intensive to produce. Prices had already been rising sharply for over a year, but recently major wine suppliers have reported additional increases of anywhere between 45% and 75%. Again, at some point that cost has to be passed on.

But when? The good news is that most retailers appear to be swinging merrily into the usual round of Christmas wine promotions. But savvy shoppers with any cash to spare will do well to take particular advantage of these deals with an eye to the months ahead. Several importers are quietly suggesting that it will be impossible to hold prices much beyond the festive season.

So stock up on that Sauvignon Blanc deal, raid the Rioja offer, but try not to drink the lot in a blur of Christmas bonhomie. That hoard could well cushion the blow awaiting less forward-thinking wine lovers as 2023 dawns.

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