The average consumer knows that when they walk into the grocery store, they will pay more for items like eggs and chicken. Now they can add wine to the list.
The wine industry saw a 30% increase in costs this year, and multiple factors are to blame. The COVID-19 pandemic didn’t help, shuttering restaurants and wineries, and driving up costs per bottle.
“The cost of glass bottles in the U.S. has risen by as much as 20%, according to some brand owners, although most operators have seen much more modest price increases,”
Stephen Rannekleiv, a global strategist for the beverages division of Rabobank, wrote in the financial giant’s second-quarter wine outlook. “However, we would not be surprised to see some glass suppliers implement additional price increases as the year progresses. Nor would we be surprised if the extent to which their input costs are increasing turns out to be structural rather than transitory.”
Glass bottles have become more costly to make and ship. But if the increased prices keep getting put on consumers, eventually they’ll stop buying the wine.
Wine distributors and makers have already taken an interest in alternative packaging as a way to drive costs down.
Alternative packaging can help because lighter materials may be easier to ship and less likely to break than glass bottles. In addition, if done correctly, alternative packaging can offer a novelty to the consumer, such as wine in a can at a sporting event.
Rannekleiv wrote that a complete overhaul of how the industry thinks about packaging might be necessary. “While pricing actions will be necessary, wineries may also need to consider additional measures to help maintain margins and mitigate risks moving forward,” he said.
Globally, wine lovers are also suffering from price hikes. The price of Beaujolais Nouveau increased 40% in Japan this year, the company announced in July. They blamed rising transportation costs.
Last year, U.S. consumers struggled to find bottles of Beaujolais Nouveau because of a dramatically reduced and delayed harvest. The company has yet to announce if drinkers in the United States will also need to pay more.
Japan consumes the most of the notable French wine, with the United States consuming the second largest amount.
How wine distributors and wineries can deal with rising costs
Every business has to deal with inflation and the rising costs of materials, transportation, and labor. Increasing the price of your product is one way to make up for the cost increase.
However, some customers will stop paying up.
Other strategies companies can take include exploring alternative packaging, such as cans or recyclable materials, like boxed wine.
The data can make a difference as well. Companies can look at transportation routes, the costs, and analyze how many bottles were sold last year to help decide what needs to go to each destination.