Napa wine may cost more in 2023, as 71% of wineries plan to raise prices

It’s not difficult to see why wineries would want to up their price tags. “The costs are skyrocketing for wine producers,” said Rob McMillan, founder of Silicon Valley Bank’s wine division and the author of the report. The bank provides loans and other services to many Bay Area wineries, and this annual report has become one of the crucial industry analyses each January.

Shipping costs are up more than 20%, McMillan estimated, while other crucial components of the winemaking process, like glass bottles and oak barrels , are significantly more expensive due to factors such as supply-chain hiccups.

However, the 71% figure obscures a more complicated reality. Not all wineries that plan to raise prices at the beginning of a year will actually go through with it, McMillan said. And most price increases that do materialize, he predicted, will be small. In fact, when adjusted for inflation , the real cost of wine may actually go down.

“From a certain standpoint, you might argue that wine could become more of a bargain this year,” McMillan said.

In general, the U.S. wine industry is bracing for another tough year. Since 2019, wine consumption in America has been in consistent decline, according to data from beverage industry analyst IWSR, and there are no signs that trend will reverse anytime soon.

The reasons for this slowdown are manifold and have been well rehearsed at every industry conference of recent memory. Millennial and Gen Z customers aren’t drinking as much wine — or as much alcohol, period — as older generations. Other types of drinks, like spirits and hard seltzer , are eating into wine’s market share. A widespread perception that wine isn’t compatible with a healthy lifestyle is hurting the beverage’s public image.

But when you zoom in on subsections of the wine industry, it’s clear that some are doing far better than others. One winner? Expensive wines.

Sales of wine under $11 are declining by about 10%, according to the Silicon Valley Bank report. Meanwhile, sales of wine $50 and over are growing by about 10%. The stark divergence occurs at the $15 mark: Wines at all price segments under $15 are slowing down, while wines over $15 are showing positive growth.

These figures are encouraging for high-end wineries. But they are disappointing for the industry overall, since wines $11 and under represent about 73% of total wine volume sales in the U.S., McMillan said.

Could these numbers incentivize some wineries to increase their prices? It’s not quite that simple. A wine company like Gallo can’t suddenly move the price of Barefoot Moscato from $8 to $50 and expect sales to rise by 10%. Wine drinkers these days are too savvy, with an intuitive sense of what things are worth.

Rather, the trend might move some producers to invest in making the kind of wine that naturally commands a higher price. If a wine comes from a name-brand region like Napa Valley or Russian River Valley, if it gains critical acclaim, if it was made by a famous winemaker — all those factors can justify a larger price tag — or maybe, due to their higher costs, even necessitate one.

How much wine prices will actually rise in 2023 remains unclear. Among the wineries surveyed in the Silicon Valley Bank report that said they will increase prices, 47% said they plan a small increase, and 22% a moderate increase. Only 2% are gearing up for a “strong increase.”

Descriptions like “small” and “moderate” are vague and subjective, but McMillan is confident that these hikes will not, on average, match the inflation rate, which was 6.5% in December . “We’re not raising prices by anything like 6.5%,” McMillan said.

Moreover, McMillan explained, 71% of wineries won’t actually raise their prices. For some segment of the respondents who say they will take an increase at the beginning of the year, “they chicken out,” he said.

Still, more wineries are planning on it now than in the past. In 2020 and 2021, only 44% and 36% of wineries, respectively, said they planned a price increase. That figure shot up to 72% in 2022, and has remained virtually steady at 71% heading into 2023.

Here in the Bay Area, even small price hikes may be noticeable, since Napa wines are already spendy relative to other U.S. regions. The average price of a bottle sold from Napa Valley wineries directly to the consumer reached $73.34 in 2022, up from $65.49 in 2021, McMillan’s report found. The average across all U.S. wine regions was $51.91 in 2022. (Sonoma County wines, by that measure, are a steal, with an average bottle cost of $44.96.)

Certainly, for many Wine Country visitors, the idea of buying a $73.34 bottle at a winery might be out of budget. Yet on average, the Silicon Valley Bank report shows, people are spending much more than that: In 2021, the average tasting room purchase in Napa County was $377.87.

For those spenders, what’s a couple more dollars?

Esther Mobley is The San Francisco Chronicle’s senior wine critic. Email: emobley@sfchronicle.com