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  • June 11, 1999
    Web posted at: 2:35 p.m. EDT (1835 GMT)

    From Financial News Correspondent Casey Wian

    (CNN) -- Americans are drinking more wine than ever. The increase in demand and weather-related grape production problems in the United States are pushing domestic wine prices sharply higher.

    Prices of premium California wines have jumped 25 percent or more in the past 12 months. Even the price of bulk wine, the cheap stuff, is up 18 percent this year.

    According to Al Scheid, chairman and CEO of Scheid Vineyards, Americans have "discovered they are drinking better and they are willing to pay for it. It's a matter of economic times to some extent."

    Americans consumed 435 million gallons of domestic wine in 1998, but price increases are not due to demand alone. Smaller crops because of weather damage due to El Niño also play a role.

    "A rainy and cold 1998 brought a small grape harvest," said PricewaterhouseCoopers' Adam Brecht. "It's a shortage in supply. Match that with the great increase in demand in wine for the United States, and wine prices are headed up."

    The reputation of California wines has continued to improve worldwide, meaning an increase in exports, which are also putting the squeeze on domestic supplies.

    "The more they find avenues to sell their wines elsewhere, the more the price goes up here at this level," said the co-owner of Briggs Wines Frank Sharafi.

    But why are Americans drinking more wine?

    Some believe two factors are medical studies promoting the health benefits of moderate wine drinking and the aging baby boomer generation.

    "Middle age is when you drink wine.... That combined with the health message means that you get a lot of aging baby boomers with coins in their pockets that are out to buy better quality wine," wine industry economist Jon Fredrikson said.

    French premium wines, which are still considered the best in the business, have also experienced a spike in pricing. And with the year 2000 fast approaching, the industry's biggest price hikes may be ready to bubble over.

    French champagne producers have held back some of their inventory in anticipation of heavy demand from millennium celebrations. Demand is expected to exceed supply and prices for premium champagnes are expected to rise 40 percent or more by the end of the year.

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