U.S. wine prices headed higher for consumers-report

Grass growing between rows of Merlot grapes is mowed at a vineyard near Galt, California April 30, 2010.

NEW YORK (Reuters) - U.S. consumers are going to be faced with a choice this year: pay more for a bottle of domestic wine, settle for lower quality, or buy cheaper imports, the Silicon Valley Bank forecast on Tuesday.

SVB, a commercial banker to the wine industry, said in its latest "Annual State of the Wine Industry Report" that it expects vintners to raise prices as the supply of grapes declines and evolves "into a state of shortage that will last for some time domestically."

"We hope you stocked up on a few cases because reality is knocking at your cellar door ... inventories are now starting to run to the short end of the scale, and bottle prices will start to increase in 2012," the report said.

Prices for California wines will be the first to rise, followed by wine from Oregon and Washington State, according to the report.

SVB has also cooled on European wines. It forecasts that prices for European wines, especially those from Spain and Portugal, should decline.

While SVB predicts 2012 sales growth for the industry at 7 percent to 11 percent, a slight drop from 2011, it also foresees declining "wine quality for the price paid, pushing consumers to decide if they are willing to drink lesser quality domestic wines, or pay higher prices, or find foreign substitutes."

(Reporting By Leslie Gevirtz)