Another credit crisis victim: wine prices
NEW YORK |
NEW YORK (Reuters Life!) - The subprime mortgage crisis may be pushing housing prices down but it could soon have the opposite effect on Chardonnay, Chianti or Shiraz.
Concerns about the economy, lower interest rates, rising oil prices and a weak dollar are expected to push the price of wine higher by the end of the year.
Jim Galtieri, head of Pasternak Wine Importers, described the combination of economic events as a perfect storm and said we are all wearing foul weather gear.
"The dollar is weak and the prognosis is that it is not only going to stay weak, but get weaker when interest rates fall as they are doing now," he said in an interview.
"As an importer, we don't gamble on our currency. We hedge six months at a time. Last year, when I was buying for January to the end of June, I was locking in the Euro at $1.20. It's now $1.45," he said.
"The difference is 18.8 percent. That's a 19 percent difference without any costs raising prices from my suppliers."
Kurt Eckert, director of fine wine for importer Frederick Wildman & Sons supported Galtieri's comments when asked what his company plans.
"It's simple. We're raising our prices. We held the line as long as we could. For the last 18 months, as the dollar has declined, we've watched our margins shrink. To stay in business we have to restore our margins," he said.
Natalie MacLean, publisher of the wine newsletter www.nataliemaclean.com, believes rising oil prices, the declining dollar and the end of an oversupply of wine in various wine regions will have an impact on the wine market, but in different ways depending on the price category.
"At the low end, for wines less than $10, there'll be tremendous pressure to not increase prices substantially, because consumers are most price sensitive in this segment and will simply trade to a cheaper brand if their usual pick gets too pricey," she said.
Marcy Whitman of Palm Bay International imports, noting that the currencies of Chile and Argentina had not gained on the dollar, said she expected U.S consumers to turn to South American wines for value.
"This is a tremendous opportunity. There are some fabulous wines being produced there," she said.
"Chilean wines represent an amazing value, and not just at the popular price range, but also at the premium range say at prices around $20 a bottle."
Tyler Colman of the award winning blog www.drvino.com, also thought the price hikes present a great time to experiment and explore.
"It creates an opportunity for Americans to try new grape varieties and things that not everyone can pronounce," he said.
His recommendations for food-friendly reds included wines made from grapes such as Sicily's Nero d'Avola or Spain's Mencia from Bierzo; for whites, Falanghina from Italy's Campania, or Chenin Blanc from the Loire valley.
And Galtieri, who has been in the wine business for more than 30 years, added, "Both wine and spirits are somewhat impervious to the economy. People drink in good times and they drink in bad times."
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