(lively music)
- Naturally, in the wine industry,
we have good years, we have bad years.
Last year, we had the fires.
Major fires here in California, in Napa Valley,
and then this is the second year of drought.
So it's been rough just from that aspect.
It is certainly difficult times.
Not only we have labor shortages
but at the same time,
there's scarcity of supply,
and there's an abundance of demand.
- [Narrator] Business owners, like winemaker Malek Amrani,
are facing three main pressures
on how they price their products.
High demand, rising costs of labor,
and rising costs of supplies.
Whether Amrani and others like him absorb these costs
or pass them on to consumers
determines the course of inflation in the US economy.
- The US economy is made up of literally hundreds
of millions of individual workers,
businesses and employers.
And inflation is really the output
of what all those hundreds
of millions of people, tons basically
are deciding in the transactions between each other,
and their own decisions.
(tractor rumbling)
- [Narrator] These decisions have big consequences
for business owners.
Eating the rising costs they're facing
could destroy their profit margin
but passing them on could drive customers away.
- So this is the equivalent of a glass of wine.
The Vice Wine is a mid-sized Napa Valley winery.
We produce about 25,000 cases a year.
Typically we are a little bit
under what the typical price point
for a Napa Valley wine will be.
The house tier,
we are between $22 and 33 bucks.
For our single vineyard reserve tier,
that starts at $38 and it goes all the way up to 69.
- [Narrator] Like many businesses right now,
Amrani says he's experiencing strong demand
for his product.
But he's facing a lot of obstacles to meet that demand.
- We are in a perfect storm
where kinda all the elements,
things that we never had to worry about
are becoming really difficult to source.
It's been very hard to source labor
since the start of the pandemic.
(grapes rolling)
It's kind of getting harder this year.
The $15 minimum wage really kind
of doesn't apply to Napa
because we've been paying here 20 to $22 pre-pandemic.
And now since we can't find labor,
we are in the upper 20s to lower 30s
just for basic vineyard labor and seller labor.
(glass rattling)
- [Narrator] Glass has been
particularly difficult to source.
- I will say generic glass mold
that used to take me a text message,
maybe a phone call or an email to order,
now takes me 20 to 40 hours on average to find.
I have so many of them.
Wine glass suppliers.
It's like you've gotta be talking
to 12 people all the freaking time.
(phone ringing)
- [Cynthia] Thank you for calling West Coast Bottles.
How are you?
- Hey, I'm good, Cynthia, how you been?
- [Cynthia] I don't have any good news for you today.
- Oh shoot.
- [Cynthia] How much are you selling this wine for?
You need to raise the price.
- 29 bucks.
And then when I do find the glass,
after spending a long time looking for it,
then I'm paying 30 to 50% more.
Bringing a container out of China of glass a year ago
would have been somewhere around 3 to $4,000.
Today we're north of 12 to $15,000.
She wouldn't even tell me the price on the phone.
That's how bad it is.
I wouldn't be surprised if she doubles the price.
She's saying it's all because of the shipping.
Even cardboard's been hard to source.
I didn't expect that the cardboard would be an issue,
especially generic craft cardboard
that doesn't have anything printed on it.
The prices dramatically went up.
No less than 50% in some instances.
The only thing that may help ease the difficulties
on the supply chain is lower demand,
and I really don't see the demand slowing down
any time soon.
- So we know that a big part
of the inflation process is psychological.
Inflation will partly depend
what people think it will be.
So think of the business
that's facing an increase in its costs.
It could either decide all right,
these higher costs are here to stay,
and I'm gonna raise the price for my customers
or he can decide I've got a pretty good sense
of this temporary disruption,
and those costs are going back a year from now.
If I raise my prices now,
I'm going to lose market share,
and it'll be for nothing
because those costs will go down a year from now.
So he's got to make that call.
- We're absolutely trying to swallow the cost
and just deal with it
but because it's not a 5% or 2% or 10% inflation,
in many cases, it's 40% up,
it will certainly have consequences
when it comes to price increases.
Our brand was born on the idea
of making Napa Valley accessible
for that everyday occasion.
If we are forced to raise the prices in the house tier,
it's almost like we're in a different territory,
appealing to a different consumer.
A lot of our fans of The Vice Wine,
I can see them remaining loyal to us
but for others, they may just not be able
to afford that price increase
and they may look at other regions
besides Napa Valley.
Maybe go to a different wine region
or even international wines versus the local wines.
(playful music)