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EDITOR'S DESK Time to RAISE PRICES? In the annual "State of the Indus- try" session at this year's Unified Wine & Grape Symposium, Nat DiBuduo of Allied Grape Growers neatly summed up the current state of the U.S. wine industry: "It looks like we are on the cusp of shortage." Steve Fredricks of Turrentine Bro- kerage reported big demand on the bulk market, combined with increas- ingly short supply. Jon Fredrikson of Gomberg Fredrik- son pointed out that overall wine consumption in the United States grew a healthy 4.7% between 2010 and 2011, and that the industry is finally seeing a turnaround at the high end of the wine market. But as Mike Veseth of Puget Sound University told attendees, "There is good news, but as an economist I am bound to warn you against irrational exuberance." This theme was continued at the Wine Market Council's (WMC) annual U.S. Wine Consumer Trends confer- ence, held in New York and California in late January/early February. I fol- lowed up with WMC president John Gillespie and Nielsen's Danny Brager after the conference for their insights on wine pricing trends for the next 12 months. "Wine discounting was a major theme in 2011, and it looks to me like it's continuing," Gillespie told me. "I don't see very much letup, even though everyone is talking about a short crop, and the bulk wine market drying up." When I asked him about the 11% growth of the over-$20 wine catego- ry in 2011, he explained: "One of the reasons the over-$20 segment was strong, was that there was a great deal of price discounting in that cat- egory. When people see a wine that they've bought before for $45 or $35, and it's now $22.99, they buy it." The fact is, Brager pointed out, 10 VINEYARD & WINERY MANAGEMENT MAR - APR 2012 as wine consumption has increased during the last few years, retail prices have fallen. He came to this conclu- sion by comparing the prices of 100 different wines across a variety of price-points and regions. "I went back to 2006 and looked at those hundred key items, and their average price was $9.50," he explained. "In 2011 that basket of items was selling at almost the exact same price as it was in 2006." This undoubtedly has producers champing at the bit to reverse the pricing trend. With a wine shortage on the way, and increasing consump- tion by U.S. consumers, isn't it about time? Perhaps, for certain producers. "Those kinds of decisions need to be made on a company-by-com- pany, case-by-case basis," Gillespie advised. "If I've done a good job of managing down my inventories, and my distributors are not holding a lot of my wine either, I might consider a price hike." And, as Brager pointed out, there's strength in numbers. "There almost needs to be a concerted effort on the part of several suppliers to do that, to make it stick." Stephen Rannekleiv of Rabobank is predicting an "easing" of discount- ing in 2012. "Wineries can't continue to discount the way they have been," he told me. "But nobody wants to be the first to raise prices." If the discounting trend does con- tinue, as predicted, let's hope it gives consumers a taste for higher-end wines – wines they'll be willing to pay full price for when the economy improves. Salute! Comments? Please e-mail us at feedback@vwm-online.com. vwm-online.com WWW.VWM-ONLINE.COM