Why has wine become so expensive?

I sometimes joke that a reason I live in Spain is because wine is affordable here. It’s just a joke, but I do remember drinking mostly beer when I lived in Napa as a harvest intern. Post-pandemic, it feels like the price of wine has crept up considerably, especially in restaurants. And while I can’t change that, I can try to explain why, and maybe it will make us feel a little more justified in ordering that 18$ glass of Sauvy B. 

Cost of Production

This part is simple. The cost of materials to make wine has gone up, and therefore the price per bottle. Due to supply chain issues post-COVID, as well as the war in Ukraine increasing energy costs, materials from Europe such as glass bottles, corks, and packaging have ballooned in price. For example, the price of glass went up 20% in 2022. Labor prices have also risen, especially in the US, making domestic wine more expensive. So know that part of this price increase is going to winemakers covering their costs, and paying their people right. Yay!

Restaurants

When we go out for dinner, we know we’re paying more for our food than if we had cooked at home. It’s covering the costs of the restaurant’s rent, staff, supplies, and more. But most restaurants just make a 5% margin off of their food. Restaurants cover costs and make a profit with alcohol. Wine bottles are often marked up  3-4x the wholesale price, or 2x what you would find in a liquor store. Wine by the glass (BTG) is usually priced at whatever the restaurant bought the bottle for wholesale. So if the wine cost the restaurant $15, each glass will be $15. On the one hand, I understand this. It’s a risk for the restaurant to open the bottle, so they are going to make sure it’s covered. On the other hand, I think this pricing structure has become too much in certain places. I would like to see more affordable BTG options, like offering wine on tap. Marking up wine is what keeps the lights on in our favorite spots, especially in the past few years as many restaurants tried to recuperate from pandemic losses. Aside from a few bad apples, take solace in knowing that perhaps your expensive glass of wine is going towards paying the kitchen and dishwashers. (That’s what I tell myself).

Distribution System

Another reason wine is expensive in the U.S. is due to our three-tier distribution system. After the repeal of prohibition, the U.S. re-established the distribution of alcohol via a “three-tier system”. This means producers can usually only sell their products to intermediaries called distributors. The distributors mark up the price of the bottle, and then can only legally sell to retailers. The retailers take their cut by once again raising the price of the bottle and selling to the consumer. The purpose of this system was to provide checks and balances to the producers and retailers, but a direct result is serious price markups by each tier trying to earn their cut. 

Climate Change and Big Corporations

It’s also necessary to mention that producing wine is becoming more risky and variable in our changing climate. Wildfires, late-spring frosts, droughts, and unpredictable weather events can destroy a year’s crop. Due to the new difficulties of farming and uncertainty of product, prices have increased. The wine industry is also experiencing very large companies producing massive amounts of wine and also buying up smaller wineries. This makes their wine less expensive, but many smaller producers who want to remain independent have stopped producing ‘entry-level wines’ as they can’t compete in the low-mid range sectors with these massive corporations. So to buy a bottle from a small, independent producer probably means a higher price. 

To summarize, I suppose the rising cost of wine is due to a mixture of a global pandemic, the war in Ukraine, climate change, big corporations taking over the industry, and leftover rules from the Prohibition Era. Fun! But it's also to help winemakers with their production costs, restaurant employees make ends meet, and small producers stay independent! So I like to remind myself of the good parts and buy directly from the producer when possible!