Wednesday, May 25

Making wine also costs more

“The world has stopped and it is difficult to start it again.” This is how Pedro Rodríguez, owner of Bodegas Guímaro, summarizes the current situation of the wine sector. A product like wine is affected by the general rise in prices, but also by the lack of knowledge of how the world economy will behave in the coming months. The price of electricity and diesel, which have increased their bill by 30% in the last year, are part of these fixed expenses, but the rest of the basic materials related to viticulture and winemaking have also risen.

Pour me a glass of DiCaprio

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Total costs have grown between 10% and 15% this year, depending on the level of production of each winery, which may allow them to negotiate with different margins. Phytosanitary products cost twice as much as last year, as well as a basic product for pest and disease control such as sulfur. The dry matter, essential to bring a wine to market, has also seen its price skyrocket. The bottles cost at least 10% more since the beginning of the year and some companies review their prices every 15 days.

“Since October, the price of glass has increased three times. And everything has gone up: corks, labels, cardboard, capsules, sealing wax, everything”, emphasizes Silvia Herrera, who works in the world of wine in two ways: as a salesperson freelancing of products such as barrels, deposits and bottles, and as a producer at Mélida Wines. “Concrete deposits, for example, have risen 20% and here part of the cost is due to the increase in transport,” she explains.

Pandemic, shortages… and now a war

The increase in the price of the dry part and of products for the winery is added to the scarcity of some materials for the production of wines, which has added costs and reduced certainty for the wineries. “The rise comes from the suppliers, there are basic products that have doubled the price and the proposals now have a shelf life of 8 days,” explains Adrián Alonso, commercial director in Spain of the wine product company SAI Enology, which works with products biotechnical substances such as acids, bacteria, yeasts or tannins. The moment of reactivation of demand after the pandemic has coincided with the problem of lack of supply and the prices of some materials have skyrocketed. Sometimes, as he points out, not because of a lack of materials, but because there has been a great demand. And now there is the situation in Russia, which is one of the largest producers of fertilizers and compounds such as ammonium phosphate (DAP), which is used as a nutrient for yeast in winemaking.

Everybody goes with the handbrake on

Tao Plato

Rising the price of these materials is a problem, but also finding them: the increase in production costs has affected bottle factories, which has caused shortage problems. Foreign sales are also noticing the situation: shipping a container now costs almost twice as much as it did a year ago, to which are added the doubts of importers due to the economic situation and Russia’s invasion of Ukraine. Tao Platón, winemaker at Península Vinicultores, also uses the car simile to explain it: “Everyone goes with the handbrake on”.

How much will the wines go up?

It is difficult to predict how the rise in prices and the insecurity of the market will affect the final price of the wine, although it will end up being noticeable because, in the case of many producers, the margins are already very fair. It will be necessary to see to what extent and who will notice this adjustment more: “The uncertainty does not benefit this sector, and least of all, the farmer. It squeezes the one at the bottom, which is the weakest”, adds Plato.

Wine has risen, but not proportionally to how products have risen. “Not everything has been passed on,” says Silvia Herrera. César Ruiz, director of the distributor Alma Vinos Únicos, adds that the rise in all costs is not the only factor that influences the price of wine, which, after all, is an agricultural product. “In some areas like Burgundy, with the inclement weather of recent years, production has been reduced.” To which must be added the behavior of consumers, who have changed their habits as a result of the pandemic. It remains to be seen how this whole situation will affect businesses and the hotel industry, the last link in this chain.