Monday, August 23, 2010

Deflation

For many years we have heard about the danger of deflation and how certain moves by the Federal Reserve could keep that from happening and other moves could increase the likeliness of deflation happening.

Well, I believe we are seeing serious signs of deflation happening now in the wine industry. Every week now the new vintage of a wine or a wine region is released and most of the high-end wines are being released at prices that are lower than I have seen in several years. This is a good trend if it is only effecting the wine industry at the higher price points. Wine prices have been out of control since the 2000 and 2003 vintages of Bordeaux were released. But I am worried about how this will shake out in the larger or Macro view of business.

Now this trend is going the other direction for the 2009 Futures market from Bordeaux. But that has to do with the 300 million middle and upper class citizens of China and the change in the import tax on wine in Hong Kong. Seems that some wineries are aware of the opportunity in China and are working to get their wines into that market. China has the most potential in the wine industry for growth, with India, South America and North America trailing just behind. Actually it has been predicted that the US will be the largest consumer of wine in the year 2013, but we might not hold that title for long.