Comments on: The declining dollar, through the wine glass

By: Finance Dollar

Finance Dollar — Wed, 05 May 2010 05:30:41 +0000

we can still find bargains from Europe. Castaño Monastrell is still under $8 in our store. We have wines from Montepulciano d’Abruzzo, Vin de Pays des Côtes de Gascogne, Vin de Pays de l’Hérault, and Côtes de Provence, many producers, many varieties, all under $10. Will these wines remain bargains? In absolute dollar terms, probably not. But they’ll still be good values compared to a lot of domestic wines, regardless of the dollar/euro exchange rate.
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PINTU

By: Dr. Vino

Dr. Vino — Sun, 15 Nov 2009 03:31:03 +0000

Matt S –

Sorry for the delayed reply; your comment came in while I was out and escaped my attention until now.

Reading your equation, yes, it is, in fact, linear. I stand corrected. Aside from fixed dollar margins, margin compression in the face of a rising cost (worsening FX) could also lead to a non-linear outcome.

Thanks for pointing this out and I will make a notation in the post to see your comment.

Best,

Tyler

By: The Wine Mule

The Wine Mule — Sun, 15 Nov 2009 02:13:37 +0000

Dylan: Smart move. Don’t blow it all on Bordeaux futures, man.

By: Dylan

Dylan — Sat, 14 Nov 2009 16:37:48 +0000

I guess it’s time for me to trade in that life-size 24 karat gold carving of myself.

By: winenxt

winenxt — Sat, 14 Nov 2009 15:38:21 +0000

will this effect import of European wines in USA?

By: winenxt

winenxt — Sat, 14 Nov 2009 15:37:31 +0000

Now i can drink American wines cheap in my country….

By: Finkus Bripp

Finkus Bripp — Fri, 13 Nov 2009 10:07:15 +0000

With Italy and France losing ground as quickly as they are when it comes wine exports, I believe US importers will surely find the right wines at the right prices regardless of the $€ exchange.

By: The Wine Mule

The Wine Mule — Fri, 13 Nov 2009 04:23:33 +0000

You can still find bargains from Europe. Castaño Monastrell is still under $8 in our store. We have wines from Montepulciano d’Abruzzo, Vin de Pays des Côtes de Gascogne, Vin de Pays de l’Hérault, and Côtes de Provence, many producers, many varieties, all under $10. Will these wines remain bargains? In absolute dollar terms, probably not. But they’ll still be good values compared to a lot of domestic wines, regardless of the dollar/euro exchange rate.

By: Greg Roberts

Greg Roberts — Thu, 12 Nov 2009 18:49:59 +0000

Even though the French should be thrilled to do Christmas shopping in New York to take advantage of the f/x rate, a weak dollar isn’t favored by the governments or ECB. This hurts not just wine exports but other industries -and companies like Airbus.

I’m not sure how much longer the wine producers from France, Italy and Spain can continue to compete in the under $15 category in the US. For example, at 1.60 euro/USD the export price would need to be around 2.50 eur.

By: Matt S

Matt S — Thu, 12 Nov 2009 18:22:37 +0000

Interesting post, but I don’t follow what you mean in saying that price changes as a result of foreign exchange movements will be “parabolic.” Assuming that the Euro price of a wine and the percentage markups taken by all suppliers are constant, the dollar price is a simple linear function of the exchange rate. The only way you get a dollar price that is not linear to the FX rate is if you assume a supplier somewhere in the chain has a markup that is a fixed number of dollars or Euros — and that assumption would cause the change in the dollar price to vary by *less* than the linear change in the exchange rate, not more.

(In mathematical terms, if E is an ex-chateau price in Euro, M is the aggregate percentage markup taken by all wholesalers/distributors in the chain who buy in euros, x is the Euro-dollar exchange rate and m is the aggregate percentage markup taken by all wholesalers/distributors/retailers in the chain who buy in dollars, then the final dollar price D to the consumer is D = m*x*M*E, a linear function of x. If M or m includes at any point a fixed-value rather than a fixed-percentage markup, then that component of the expression will decrease as x increases.)

By: J. Boyce

J. Boyce — Thu, 12 Nov 2009 17:23:08 +0000

Interestingly, U.S. wine imports in China are up 63% for the first half of 2009 compared to first half 2008, behind only France (71%) and ahead of Australia (41%) and Chile (37%). The other top-six wine sources, Italy and Spain, saw little or no growth. (The U.S. is now the number three source of wine and trails only France and Australia.) I’m guessing the U.S. dollar – and U.S. producers offering better terms – explain this growth at least in part. We’ll see what the year-end numbers show…

Cheers, Jim Boyce

By: Bob W.

Bob W. — Thu, 12 Nov 2009 16:55:08 +0000

I think, particularly with many Italian wines, the demand has fallen enough (due to the current economic conditions) to offset the inevitable price increase caused by the lower dollar. Higher prices paid by importers have to be passed along to the consumer unless they decide to eat the exchange factor. The exporter could also take the exchange risk and eliminate the price increase to the importer.

That said, I have read that Italian vineyards are selling their grapes at a fraction of the price from recent years due to lower demand.

I have also found, for example, that many of the 2004 Brunelli are selling at a lower price than the 2001′s. I think it’s more about demand right now and the average wine consumer not willing to part with $50+ for a bottle.

By: Christian G.E. Schiller

Christian G.E. Schiller — Thu, 12 Nov 2009 16:50:48 +0000

In the center of old Europe, not in the UK, new world wines, in general, also have a bad reputation of being too much an industrial product, manipulated too much during fermentation in the cellar.

By: Lyman Dally

Lyman Dally — Thu, 12 Nov 2009 16:45:05 +0000

I’m still buying south-of-france wines for @ $15/bottle. I still find them the best bargain tastewise. Does this mean with a stronger dollar they should be selling for @ $9 (kind’a like in 2002)? So far I haven’t found any American wines at the same pricepoint that deliver the same kind of taste-surprise as the french ones. Suggestions are welcome.

By: Wine Splodge

Wine Splodge — Thu, 12 Nov 2009 16:36:30 +0000

Outside the US the main problem with good American wine is finding the stuff.