The gray grapevines cling to the trellises at Veritas Vineyard in Nelson County. In the fall, their fruits will be picked, crushed and pressed. Their juice will cascade into vats, where the wine will ferment before it is aged in one of the more than 300 oak barrels in the cellar. After months, or sometimes even years, the wine will be bottled and sold in the tasting room or a wine shop or a grocery store.
The grapes, the barrels, the bottles – all of it comes at a cost. And that cost only got higher as inflation started to skyrocket in response to the pandemic in 2020.
While wineries and vineyards were in a strong position during the pandemic, as outdoor venues where customers could congregate while remaining socially distant, crowd sizes have started to return to normal in recent months.
A decrease in foot traffic and an increase in the price of production can mean a markup on the bottle in the tasting room and at the store. Some bottles of wine from the countryside surrounding Charlottesville have increased a full dollar a year since the onset of the pandemic, now three years ago.
Veritas, like other vineyards and wineries in the area, is looking for “efficiencies across the board,” said general manager George Hodson.
But efficiency is a word rarely associated with the wine industry. An acre of land can cost tens of thousands of dollars in upfront costs to plant, according to the Virginia Wine Board. Wood barrels can cost anywhere from $1,200 to $3,000, depending on whether the oak is American or French, according to Hodson’s staff.
“We have to examine where we are on that pecking order of needs. There is an upper threshold of what we can do with our pricing,” Hodson told The Daily Progress.
Inflation in December hit 6.5%, down from its June peak of 9.1% but still far higher than the 1.76% recorded in 2019, before the pandemic wreaked havoc on the overall economy.
It’s had an impact on every part of the economy, big and small. And while it’s no Napa, the wine country that surrounds Charlottesville is a major driver of state and local business.
Virginia is the 10th-largest producer of wine in the entire United States and the second largest on the East Coast after New York, according to 2022 data from the Alcohol and Tobacco Tax and Trade Bureau. Those same figures show the commonwealth produced 2.2 million gallons of wine last year.
Much of that comes from the Charlottesville region, known as the Monticello American Viticultural Area. The Monticello AVA makes up more than half of Virginia’s 2,000 vineyard acres and is home to roughly 30 wineries, according to the Virginia Tourism Corporation.
Those wineries have had no choice but to respond to the increasing price of production with an increase in the price of their products, said James King, the co-owner of King Family Vineyards in Crozet.
“If prices don’t go up eventually, it’s not sustainable and you can go out of business,” King told The Daily Progress.
Today, the cost of a 2021 bottle of King Family Viognier, frequently called the state wine of Virginia, is $30. In April 2020, a month after COVID-19 was declared a pandemic, the price of a 2018 bottle was $26.95. That’s an uptick of more than 11%.
And that uptick is likely not keeping pace with inflation, said Stan Joynes, co-founder and CEO of Valley Road Vineyards in Afton.
“We are largely absorbing those costs right now,” Joynes told The Daily Progress. “The average customer assumes, until you break this unholy cycle of inflation, that you’re passing the cost on to them.”
Joynes owns one of the smaller vineyards in the area. Valley Road has less than 20 acres under vine, compared to Veritas, which has more than 50, and King, which has nearly 30. Joynes said the size of his operation makes it especially sensitive to changes in prices.
“When costs pop up even a little bit, it’s painful,” he said. “When you don’t have any scale, it’s hard to spread your costs.”
Costs aren’t popping up just a little bit.
“Making the wine, bottling the wine, transporting the wine, all the caps that go on the top of the bottles, the corks that contain the wine, all of that is seeing price increases at every stage of production,” Joynes said.
“Once we start bottling is where you really see the most direct pressure on pricing,” said Hodson. “A glass bottle has gone up 30%.”
Trying to substitute for cheaper glass isn’t easy.
“There’s no real low-cost provider of glass,” Joynes said.
Valley Road used to buy bottles from China, but Joynes said that wineries have felt an impact financially as lawmakers have taken a harder line on China politically.
Meanwhile, steps that winemakers had previously taken to reduce their costs, like buying in bulk, aren’t options anymore because of constantly rising costs.
“[Suppliers] won’t allow us to do that,” Hodson said. “They’re concerned that the product that they’re selling us that we’re buying for August is going to be so much more expensive in August than it is now.”
Foot traffic is down at vineyards and wineries in the area, owners and managers said. But it’s unclear whether that’s because prices are going up or because the pandemic is waning.
Unlike other businesses, which had to remain shuttered or limit capacity during the earlier days of the pandemic, wineries were some of the few places people could gather during social distancing. The Virginia wine country attracted visitors from across the country looking for a place to holiday during the health crisis.
“We all had our way for about a year, because we had fresh air, plenty of space,” Joynes said.
Hodson agreed.
“That was a really high-water mark for wineries across the state, not just us.”
Both Hodson and Joynes said the crowds have died down some since the early pandemic.
It’s provided an opportunity for staff at Veritas to assess where their operations are, where they have been and how they can adjust for the future.
“I think 2023 is really the first time since three years ago that we’re really getting into normal business planning and trying to figure out ‘OK, what is permanent?’” Hodson said.
The wine industry didn’t just weather the pandemic, it succeeded in spite of it. That leaves Joynes optimistic, even as his business and others face historically high inflation.
“It’s just fascinating,” he said. “These frankly resilient and brilliant people are adapting to unexpected cataclysmic change.”
Source: www.dailyprogress.com
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