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Survey: Fine wine prices expected to rise

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BILL SWINDELL, THE PRESS DEMOCRAT

Customers are likely to pay more for a bottle of fine wine this year as wine prices rise, the result of an improved economy and strong demand, according to a new survey by Silicon Valley Bank.

The survey, based on responses from almost 600 West Coast wineries and ongoing research, found that fine wine sales should grow between 14 to 18 percent in 2015. The fine-wine business is defined by bottles that cost $20 or more.

“My expectation is we’re going to have absolute breakout year of sales growth,” said Rob McMillan, founder of Silicon Valley Bank’s wine division and author of the report.

The price increase comes despite a large supply in cellars and warehouses thanks to three consecutive large harvests in the North Bay wine region.

McMillan attributed the expected growth to good news on the consumer front in the U.S. economy with lower unemployment, reduced gas prices and a strong dollar combined with growing demand, especially as overall wine consumption increased for the 20th consecutive year in 2014.

Winery revenues grew 8 percent through the first nine months of 2014, according to the bank’s database. Other factors contributing to the growth include overturned blue laws, fewer restrictions on wineries shipping directly to consumers and some customers trading up to more expensive brands, red wines in particular.

But not all the news is good for the industry. Wines priced less than $7 per bottle had poor sales last year and that trend is expected to continue into 2015.

“That’s a market not doing well,” McMillan said. “It’s got a structural oversupply and it’s going to have to deal with imports that are even cheaper” because of a strong dollar.

The survey also addressed other issues in the industry, including how Oregon and Washington are showing strong growth in vineyard planting based on a percentage basis. That trend should continue into the future given cheaper land prices in the Pacific Northwest — some Napa Valley vineyards are priced as much as $350,000 an acre — and greater availability of land.

You can reach Staff Writer Bill Swindell at 521-5223 or bill.swindell@pressdemocrat.com.