Wine Between Inflation and Shortage of Raw Materials

 Two thousand and twenty-two, the year that has just begun, could be a difficult year for wine. It will not be – at least for the moment – because of what could happen in the vineyard as a consequence and effect of the weather, especially for the fact no one knows or can predict the meteorological conditions of 2022. Indeed, it could be because of what may happen inside the winery, when the wine is ready to be delivered to the glasses of wine lovers. The possible cause of difficulty for 2022 – this is what many believe – could be determined by the world economic condition and, not least, by the level of inflation and by the difficulty of producers in finding, therefore buying, raw materials and tools that make it possible to carry out the final stage of winemaking, that is, bottling. To this would also be added the lower spending power of people and that, inevitably, will force everyone to make choices and give up some “non-essential ” goods.

 The situation is further complicated for the fact, in addition to raw materials, it is necessary to consider the impact and cost of the energy required for both the production and distribution of the bottles. The energy factor, in fact, is by no means marginal, as any productive process or subsequent to production requires the use of energy, both electricity and generated by the use of hydrocarbons or gas. Including water, of course. The most obvious and easy consequence is that all these factors will inevitably affect the final price of any product, including wine. With these current premises, it is not just a matter of speculation, indeed of management and administration as the increase in production costs leads, more or less significantly, to a consequent increase in the final price. Unless producers decides to give up part of their profit margin – legitimate and understandable – they will inevitably be forced to increase the selling price in order to avoid or limit the economic loss.

 According to the opinions that I have been able to personally listen to by talking to various wine producers, the main fear for 2022 is for everyone about the increase in costs and the difficulty of finding the raw materials necessary for production. To tell the truth, the majority of those with whom I recently spoke to are happy with the market result of 2021, significantly up compared to past years, including 2019 – therefore before the period of the pandemic – in particular, export. A good sign, of course, widely confirmed by the sector data that have been released in recent months. The fear of producers – apparently and by now concrete – is that in 2022 it will not be possible to repeat the same result and the prevailing feeling is dominated by uncertainty. Wine producers, in fact, believe they will be forced to increase the selling prices of their wines because of the sharp increase in production costs, in particular, those of the essential materials for the distribution and identification of their wines, specifically bottles and labels.

 Producers have admitted they already faced in 2021 a significant increase in the prices paid, specifically, for the purchase of bottles, wood, labels and distribution services. This trend will also probably be confirmed in the course of 2022, mainly and in particular, because of the increase in inflation, the cost of energy and the consequent shortage of raw materials. Indeed, it should be noted that, due to the general condition caused by the pandemic, the production of certain raw materials has suffered a substantial decline. With the reopening of the markets and the gradual recovery of commercial and production activities, there has therefore been a significant increase in requests for raw materials which, at this time, cannot be satisfied. This condition has therefore determined, in addition to the difficulty of obtaining these materials, an increase in prices due to the increase in fundamental production costs. The consequences, all too easy to understand, affect all productive sectors, including the supply of services.

 This situation – caused by a series of events that inevitably involve the entire production chain – lead to an increase in sales prices, with an important impact for consumers. Producers predict that starting from this month – January 2022 – there will be an average increase in the selling prices of about 40%. A not exactly negligible raise, also considering this increase will occur again in the course of 2022. The situation is, so to speak, paradoxical. Producers, in fact, have large quantities of wine ready for bottling, but will be unable to carry out this operation because of the lack of the essential raw materials. If at the beginning of 2020 it was the pandemic that kept wine in casks, in 2022 it will be the lack of bottles, labels, wood, paper and cardboard. Without bottles, without labels, with the lack of “boxes”, capsules and “pallets”, it is obviously not possible to provide for the distribution and therefore the marketing of the wine.

 The lack of these materials also signals a strong demand for the wine – which is quite high – and which has led producers to a greater and conspicuous “consumption” of bottles and anything else necessary for sale, in order to release their product to the market. This sudden and important demand for materials has caused their shortage, therefore the difficulty of finding and the consequent increase in prices. It is – after all – a banal law of the market, of supply and demand. Of course, over time, a certain “normality” will return, both in the procurement of materials, and in their production. For the moment, however, producers' forecasts are not so optimistic and everyone believes the final wine prices will increase by about 40%, some even predict more substantial increases. The producers of raw materials needed by wineries for bottling and distribution, not least, complain about the same condition. For them too, in fact, there has been an increase of prices for raw materials, the energy needed for production and the services necessary for distribution.

 In any case, it is undeniable that all this can be traced back to the consequences caused by the pandemic and the relative and continuous effects it has produced – and continues to produce – in the social, health and economic sphere. This, nevertheless, is also the proof of how all economic and productive activities, therefore also social, are so closely connected and interdependent. The criticality of each and any of the elements that make up this system inevitably produces an effect which, just like a chain, affects the efficiency and functioning of all the other ones. Wine, which in order to be produced inevitably requires services, raw matters and materials produced and supplied by other activities, is certainly not exempt from this principle. To give an example, in order to distribute wine it is necessary to deliver it to a courier who, in turn, needs – at least – drivers, vehicles and fuel in order to be able to do their job. Without this indispensable service, it would be impossible for anyone to pour wine into their glasses. If the cost of distribution increases, because, for example, of the increase of fuel prices, the costs of distribution inevitably increase as well. For this reason, but not only for this, the price of wine too increases.