A bottle of wine could cost $5 more this year as California winemakers grapple with a glass crisis

2022-08-20 01:35:12 By : Mr. Eric Chang

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Kathleen Inman pours a glass of 2018 Pratt Vine Hill Pinot Noir in the tasting room at Inman Family Wines in Santa Rosa, Calif. Inman said the global supply chain issues have impacted her glass bottle and wine barrel supply.

Kathleen Inman packs a box of wine at Inman Family Wines in Santa Rosa. Inman said the global supply chain issues have impacted her glass bottle and wine barrel supply.

California winemakers are grappling with a glass crisis that has sent the price of bottles shooting up, raising fears that they’ll have to increase costs for consumers.

For Kathleen Inman, owner of Inman Family Wines in Santa Rosa, the challenges began in 2019, when the Trump administration imposed tariffs on scores of Chinese goods including glass bottles, which now have an 18% duty.

The strategy to get more companies to buy American glass worked, but it raised domestic prices and competition, said Inman, who wasn’t able to get her usual American bottle in 2020 and had to use a Chinese alternative, paying the duty.

The next year, 2021, was worse. Inman had to order the same glass to match the previous year because she had leftovers. But global port congestion, the Suez Canal blockage and the lack of transportation workers due to COVID-19 caused headaches and raised prices.

It cost Inman 50 cents more for a case of a dozen glass bottles, for a total of over $7 per case. And there’s a new ocean freight surcharge of $6.60 a case, almost doubling the cost.

Everything else has gone up too. Total packaging costs have increased by more than $1 a bottle, and a labor shortage means wages have gone up while years of wildfires and drought mean a lower harvest and less revenue. Inman is now contemplating price increases of $2 to $5 per bottle of wine. Her Pinot Noir is currently priced around $73 per bottle, and prices have been steady for about five years.

“When your glass cost twice as much as it did the year before, you have to do something about it,” she said.

Inman isn’t alone. In a Silicon Valley Bank annual survey on the California wine industry this week, 76% of wineries said that glass was difficult to find in 2021, by far the most of any material. Corks, capsules and closures were second at 37%.

For Inman, wine label costs have also doubled and aluminum screw cap closures, which usually take six to eight weeks to get, aren’t available until the end of June.

Kathleen Inman samples a glass of 2021 Chardonnay from her barrels at Inman Family Wines in Santa Rosa. Inman is considering price increases of $2 to $5 per bottle of wine because the cost of glass ha doubled.

Wine barrels from Burgundy, France, were supposed to be delivered in August but were stuck at the Port of Brussels. They ended up arriving in December, after the fall harvest already happened. Inman had empty, unused barrels from the prior year, but if they weren’t available the entire harvest would have been jeopardized.

“Crazy, isn’t it?” said Inman, who will be bottling more wine in February. She bought glass bottles in December, afraid they would disappear if she waited, and will store them for three months. But space is limited so she can’t stockpile a lot.

Anthony Beckman, a winemaker at Balletto Vineyards in Santa Rosa, has seen glass prices rise 40% to 60% in the past year and is now paying $14 to $18 for a case of a dozen bottles. The winery distributes 25,000 cases a year.

Beckman doesn’t see any near-term relief but hopes prices come down within a couple years.

Business has been good and sales are above 2019 levels, but Beckman fears that the higher packaging costs may force wine price increases this year.

“Everything’s gone up but I would say glass is the highest,” he said. “Glass is the most difficult to secure right now.”

The winemakers’ pain is because of supply chain congestion, which has snarled the delivery of everything from clothing to food to semiconductors, not because of a shortage in glass, said Scott Defife, president of the Glass Packaging Institute, an industry group for container manufacturers and suppliers.

“This new issue is almost entirely a logistics thing. Not a shortage, it’s a backlog,” he said. “Consumers shouldn’t freak out. It’s not like there’s less glass. There’s more glass. Demand is way up.”

A September fire at a glass bottle factory in Argentina hurt local winemakers and cut exports. Factories have also been hurt by workers infected with the coronavirus. But Defife said U.S. bottle production hasn’t been disrupted.

“North American production is fine. It’s tight and it’s heavy, but it’s fine,” he said. “This is all about unfilled imports.”

Imports account for 20% to 25% of the North American market. China had been the largest supplier for a few years, but deliveries shifted to other parts of Asia due to tariffs.

Smaller firms like Inman’s don’t have as much negotiating power as larger beverage companies and may want a specific kind of glass bottle, limiting their options and potentially forcing them to rely on imports, Defife said.

The pandemic shift from drinking in restaurants and bars to ordering alcohol at home also increased demand for glass bottles. The issue is more pronounced for beer, which is often served on tap at a bar, but stored in bottles and cans at home, Defife said. There’s also increasing demand for glass containers for other non-alcoholic beverages and food products.

U.S. production has expanded with a new glass bottling plant in Georgia and a Pennsylvania factory is expanding, Defife said. But it isn’t enough to offset international supply chain problems.

And it isn’t just glass bottles. Glass windows, which are manufactured by different factories and have a separate supply chain, are also difficult to get and prices have shot up. It’s a challenge for homebuilders, as well as landlords and retailers who need to replace broken windows — sometimes in the wake of thieves smashing them.

The Bureau of Labor Statistics reported an 8.4% increase in flat glass price index between November 2020 and 2021, the biggest jump since 1981. The year prior, the index rose only 1.2%.

Demand for scientific glass, a separate supply chain, has also grown as the world issues billions of COVID-19 vaccine doses, but there haven’t been reports of widespread shortages or price increases.

For now, winemakers will have to wait out supply chain delays and contemplate price increases, something that Inman is nervous about.

“That’s obviously, as a businesswoman, a fear — what are people going to say? Hopefully, if I explain it well, people will understand,” she said. “I’m expecting some pushback. It’s a little bit scary as a small business.”

Roland Li is a San Francisco Chronicle staff writer. Email: roland.li@sfchronicle.com Twitter: @rolandlisf

Roland Li covers commercial real estate for the business desk, focusing on the Bay Area office and retail sectors.

He was previously a reporter at San Francisco Business Times, where he won one award from the California News Publishers Association and three from the National Association of Real Estate Editors.

He is the author of "Good Luck Have Fun: The Rise of eSports," a 2016 book on the history of the competitive video game industry. Before moving to the Bay Area in 2015, he studied and worked in New York. He freelanced for the Wall Street Journal, the New York Times and other local publications. His hobbies include swimming and urban photography.