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The dollar meets the euro

And it's not such a great match for wine buyers. American restaurateurs who specialize in fine wines imported from Europe are bracing themselves for what could be a stretch of price hikes. The culprit? A weak dollar and a strong euro.

“There’s no doubt that wine prices have increased from countries where the unfavorable dollar is making it more difficult to bring in wine at the same landed prices as a few years ago,” says Michael Green, president of New York-based Liquid Assets Consulting Group.

Still, Green doesn’t think wine prices have increased as much as they might, or that they will necessarily continue to rise. “Importers and distributors are putting pressure on the supply chain to maintain prices,” he says.

How much prices actually rise depends upon distributors’ inventory, how they pay for shipments and currency futures. Many wine importers have been absorbing some of the impact of rising prices by taking lower margins, says Robert H. Smiley, PhD, director of Wine Industry Programs at the University of California, Davis. “They’re trying to hold onto their loyal customers and hold onto their market share,” he explains.

“Keeping pricing stable is vital for distributors,” notes Green. “Distributors really need to hit certain price points in some categories, especially for on-premise business.”

Holding that line won’t go on forever, though. “[Importers and distributors] don’t know if this decline is permanent or not, and if the dollar is going to improve they don’t want to hurt their market share in the interim by taking short-term profits,” explains Smiley. “But if the dollar doesn’t improve in six months to a year they’ll further increase prices.”

What can restaurant operators do?

“Stock up,” advises the UC Davis professor, as a hedge against future hikes. “Buy more cases than normal, store it away and see what happens with prices.”

Green recommends looking to wine regions where the dollar is still strong, choosing wines that offer the same flavor profiles and styles as those on your current list—“stunt doubles,” as Green terms them. Replace that expensive Bordeaux with an inexpensive cabernet-based wine from Chile, for example, or those bottles of Sancerre and Pouilly Fume with a sauvignon blanc from New Zealand.

But don’t look to America for a break. Many producers here have raised prices in response to competitors’ hikes. Plus, says Smiley, “It’s looking like a short crop in California, so you’ll see an upward pressure, albeit mild, on prices for the next year.”

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