Now is the time for California cheap wine–will producers drop the ball again?
Gisele Bundchen doesn’t want our dollar any more. Jay-Z flashes a wad of 500 euro notes in his latest video. Jim Rogers, former parter of financier George Soros, is selling his house and all assets in the US dollar and moving to Asia.
I was stuck on a local subway yesterday when I should have been on the express. That gave me time to flip all the way to page C14 of the WSJ and read the currency table and see what’s got Gisele, Jay-Z, and Rogers running for the hills. Not a pretty picture. The greenback is down across the board: -10% against the euro YTD, -12% against the australian dollar, -7.6% against the kiwi dollar, and even -4.7 against the Chilean peso. (Trivia: which significant wine producing country has the dollar actually appreciated against this year?) Elsewhere I read that the euro has appreciated by 50% since 2002 against the dollar.
Thanks to our dollar looking like the currency of a banana republic, imported wines are getting more expensive. Who stands to gain? Why, producers in America since we’re in the same, downtrodden currency zone together.
Paging California! Will you please answer the white courtesy phone? This is your moment to shine. Start making interesting wine under $10. Imported wine often has to go through one more tier (the importer) than your wine so there’s a built-in cost advantage. Now with the declining dollar, that gap widens.
Imported wine has grown to account for almost a third of all wine in America, up from only 13% in 1990. The Silicon Valley Bank ripped California a new one in a report last spring as they stared in awe at the whirling vortex of Yellow Tail, pinot grigio, and Chilean cab: “Are American vintners starting to look like Detroit in the 70’s, when gas prices soared and automakers kept putting out big gas guzzlers?”
But their same report this year suggested an American market of strengthening demand and short domestic supply. They predicted foreign wineries to fill the gap. But at some point in the dollar’s decline, the importers and the producers will stop sharing the pain and pass it on to the consumer in the form of higher prices. I talked with Bill Deutsch, importer of Yellow Tail, a few years ago and know that he is a savvy currency hedger. But with hedging, you can run for a while but you can’t hide forever.
Sadly, rising prices for foreign wines just means less competition for California. And as we wine consumers know all too well, a lack of competition too often means a rise in prices or a decline in quality. That would be a sad direction for them to go.
Hit the comments if you have had a stand-out wine under $10 from California (or elsewhere in the US). Not that Gisele and Jay-Z are interested. But some of the rest of us in this currency zone are.
(Image: victoriassecret.com)
On November 16th, 2007 at 2:00 pm ,bb wrote:
I’ve always been a fan of Reds from Laurel Glen. That’s always an under $10 goodie.
On November 16th, 2007 at 2:09 pm ,Dr. Vino wrote:
Indeed. I haven’t tried it for a few vintages (last time was here), but Patrick Campbell likes wine for the people. His Terra Rosa is a good value too.
On November 16th, 2007 at 3:13 pm ,bb wrote:
I have always liked Terra Rosa as well, but I think that it is all from Argentina these days.
On November 16th, 2007 at 8:24 pm ,David J Rodriguez wrote:
…speak of Argentina, is that the country with currency dropping faster than the greenback?
On November 17th, 2007 at 1:47 am ,Living Off Dividends wrote:
thank god for 2 buck chuck!!
On November 17th, 2007 at 8:43 am ,Marco Romano wrote:
IMHO, Spanish reds under $10 still trump anything from California.
On November 17th, 2007 at 9:38 am ,Dr. Vino wrote:
BB – right. He used to source it from both Chile and Argentina but now its only Argentina…which leads us to…David’s comment. You’re right! The US dollar is up 2 percent YTD against the Argentine peso. And we thought WE had it bad! (btw good thing we import scant amounts of wine from Canada since their dollar is thumping ours to the tune of 18% YTD).
Yes, Fred Franzia (maker of two buck chuck), we’re ready for more (and tastier) value!
Marco, paradoxical, isn’t it?
On November 17th, 2007 at 9:44 am ,Joe wrote:
That 18% Canuck Buck run was timely, and made my recent trip to Sonoma much more enjoyable! Wine prices from everywhere are coming down up here. Canadian wine (aside from Ice Wine) never leaves the country, so I don’t think you would notice the sticker change…
On November 17th, 2007 at 1:40 pm ,David j Rodriguez wrote:
I’d hate for Argentina to go into another hyperinflation spiral…I’m on my way there on Monday…
On November 19th, 2007 at 11:46 am ,Michelle McCue wrote:
Just over the $10 mark, but it’s a sparkler, so what do you expect… has anyone tried Korbel Rose lately? Not bad, considering the extreme value.
On November 19th, 2007 at 12:33 pm ,Tish wrote:
Bogle and Cartlidge & Brown seem purty good for the price to me.
On November 23rd, 2007 at 9:04 am ,Marco Romano wrote:
Paradoxical, yes. Unfortunately, pricing is a large part of the paradox. I should add that southern Italy and Sicily are producing good wines for under $10 right now. This might not last for long though.
On November 24th, 2007 at 12:54 pm ,Rory wrote:
An excellent article that brings up what I think is a very important issue. My opinion is that the opportunity here is most interesting for local wines. All 50 states produce wine, and there is pretty good stuff coming from places like Missouri, Virginia, Arizona, Michigan, and New York. If we are going to build a real and viable wine culture in this country it should include something that your friend the locovore would drink. So, look around your American State and find the wineries within driving distance and go for a visit. Also, write to your state government and start to campaign for support for our (hopefully some vinifera) grape growers.
On February 12th, 2008 at 2:25 pm ,Dr Vino’s wine blog » Blog Archive » Alert Ben Bernanke! All finance edition - tasting sized pours wrote:
[…] a dollar rally. As lovers of imported wine, we can but hope! (But why did they neglect the supermodels refusing dollars as payment as a contrary indicator a few months ago?) They did, however, neglect the generous (for him) rate […]