For two decades, wine sales have increased. Until this year.
With wine sales dropping unexpectedly, it has caused an oversupply of grapes that was not in the forecast by California wineries. The result of the oversupply of grapes combined with lagging wine sales is a reduction in the price of wine.
It takes five years from planning to harvest for wine grapes on average. Experts predict the demand/supply imbalance in grape harvests will not be resolved for another 2-3 years.
- Thanks to grape surplus in California, wine prices are expected to drop (KCRA News, Feb 17, 2020)
- Current Global Wine Market Proves Positive for Higher Value Wine… (CaliforniaAgNet, Mar 11, 2015)
This post is based on the CNN article, The price of wine is dropping fast, by Allen Kim, February 17, 2020, and the YouTube videos featured in the Video Spotlight. Image source: Dmitri Ma/Shutterstock.
1. What are the challenges to long-term forecasting for grape production?
Guidance: This article provides a good lead-in to review the risks to long-term forecast estimates. Students should note that all long-term forecasts are very risky due to factors such as market changes, political policies, and weather.
2. What could the vineyards have done to mitigate the risk of over-planting, such as this article demonstrates?
Guidance: Students should be alerted to considering a “read/react” strategy from supply chain management. Students could under-plant to meet the lowest forecasts supply needs, then work with partners to acquire more grape supply should the demand exceed the low forecast estimates of five years prior. This is an opportunity to apply supply chain methods to mitigate risks with long term forecasts.