2008, a wine price apocalypse?

I’m sure you’ve read in the press that wine prices are set to rocket in 2008.  I wondered if this was just another ruse by the wine trade to panic people into parting with their hard-earned cash, or a genuine concern.  I don’t like wasting money, or looking like a mug, so I thought I better investigate.

It seems there are a number of factors conspiring to increase the price of wine in the UK during 2008.  The strength of the Euro against sterling is the largest factor causing European wine prices to rise according to Oliver Johnson, Chief Executive of The Wine Society.  Rowan Gormley, founder of Virgin Wines agrees, but points to Spain as one area of Europe with improving wines at reasonable prices.

Rowan also suggests dropping areas that are “taking the piss” in favour of better value regions.  Gormley singles out Chile and Argentina as rapid growth whilst “France plummets”.  Guy Watson of Laithwaites, which also supplies and manages the Sunday Times Wine Club is another who thinks that South America represents the best value right now, with Chilean and Argentinean quality at an all time high, but favourable exchange rates keeping prices down.  But buying from South America is not a panacea “Chile recognises the quality of its products now”, warns Johnson.  He thinks they are likely to try to maintain their sterling prices by increasing their dollar prices which will surely ultimately lift prices in the UK.

Harvest results also seem to be having an effect on prices.  Johnson and Watson both point to short crops in the latest harvests from Italy and Australia.  Gormley agrees but suggests that 2008 is looking good in Australia and that this will stabilise prices.

Spikes in raw materials costs (especially glass) and increased transport costs driven by higher energy prices will add to UK wine consumers’ misery and will barely be forgotten before we are hit by a “threat from the government of a larger than usual duty rise in the next budget” says Watson.

The Wine Society is seeing demand for top wines continuing to grow according to Johnson, “largely because they are now premium brands in the way that expensive cars, clothing and watches are.  This is a global phenomenon and the demand growth is particularly strong in emerging markets such as China and Russia where there are some very rich people who want to have, and show that they have, the very best.

“On the other hand, some rich individuals may lose money in the credit crunch and share price declines.  There is some evidence that the price of the most expensive wines, which are traded and auctioned, is just off its peak.” Johnson says.

So should we mortal wine lovers buy wine now to avoid price rises?  Rowan Gormley of Virgin is confident that we can continue to find value if we choose carefully.  Whilst acknowledging the real price pressure in some regards, he suggests that “the cry from the trade has more to do with a desperate attempt to drum up sales than any real pricing pressure”.

Guy Watson at Laithwaites is more circumspect.  He is advising his members that they will certainly save money by buying early.  Laithwaites is “negotiating hard on behalf of our customers to keep any price rises to a minimum [but] there is nothing we can do to stop factors like the duty increase”.

Oliver Johnson at The Wine Society sees prices rising but not uniformly.  The risk of duty rising by a larger amount than normal may be one reason to buy early in the year.

In the UK in 2007 we witnessed an unprovoked and unwarranted attack on middle aged, middle class binge drinkers with the UK government complicit in the attack.  This is surely an early warning that the government sees wine as an easy target for its next tax raising wheeze.  This may be the single factor that will drive me to stock up before the next budget announcement.  Am I the only one who doesn’t trust Gordon Brown’s nanny state?

3 Responses to “2008, a wine price apocalypse?”

  1. robert Says:

    you are not the only one

    good article – you must have spent a great deal of time researching.

    fixed price elements such as dry goods are a major factor. high oil prices are driving up the cost of many elements such as glass, paper, transport, etc. These can make a big difference to the winery gate price of wine, which translates to much higher market prices.

    There is also a cumulative effect here in the UK. Many years of taking the pain (to be polite) and being forced to accept 4-5p duty rises, means that there is very little margin for producers. Duty is supposed to be a tax on the consumer, not the producer.

    If you combine the two, and the prospect that Duty will, once again, rise, and this time probably even more substantially, producers are saying enough is enough.

    Prices will go up. I don’t think it is really right to be marketing the wines on the basis of “stock up now before the rise”, but it might save you some money in the short term. The question is, will it last, so will it really make a difference, or will you just have to get used to paying another 50p a bottle?

    I suspect these rises are here to stay for the medium term.

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  3. Douglas Says:

    Fabulous article. Temperance Brown no doubt has dubious motives…

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