Prices for California wines are expected to drop to the lowest they have been in the past five years. Wine consumption in the US has consistently grown over the past 25 years. In preparation for continued growth, vineyards in Northern California planted thousands of acres of new vines in 2016. Those vines are just beginning to be harvested and turned into wine. However, wine consumption fell in 2019 for the first time since 1994. This combination of an increased supply of grapes and falling consumer demand has analysts expecting lower wine prices for the next 2-3 years.

In order to boost demand, wine makers will need to do more to attract younger consumers. Wine consumers tend to skew older in age, and as they start to drink less wine, younger consumers are not replacing them. Not only are younger generations drinking less, in general, but those who do drink are gravitating toward craft cocktails and low-calorie drinks, such as hard seltzers. For wine enthusiasts, however, this may be a great time to stock their cellars.

Discussion questions:

  1. What impact will the larger grape harvest have on other grape-related industries, such as jelly and grape juice?
  2. With an increase in supply and a decrease in demand, we expect the price of wine to decrease. What can we expect will happen to the equilibrium quantity of wine produced?
  3. Given that grape vines take 3 or more years to bear fruit, what can you say about the price elasticity of supply for wine?

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