(NBBJ) - With the U.S. wine market expecting to post its 21st consecutive year of growth in case good sales, a relatively healthy U.S. economy and an even brighter picture in the Bay Area, North Coast wineries are enjoying robust demand for their products, particularly through tasting rooms and club sales.

Nowhere is this more evident than at the high end of the market where some Napa Valley cabernet sauvignon wine producers have taken $10- to $15-a-bottle increases on $100-plus reserve wines that seem to result in no discernible reduction in sales volume.

While this is a very small segment of the market by volume, many wineries have increased prices at the winery level and not seen a drop off in demand. Against this backdrop, quite a few producers are exploring price increases at the wholesale level to help offset higher grape and operating costs.

The healthy market conditions and low resistance to price increases in tasting room as given some winery sales managers the confidence that wine buyers can also tolerate higher prices on store shelves. Despite the strong indicators demonstrated by consumers visiting to wine country, raising prices for wine going through wholesale distribution may prove more challenging.

Headwinds for higher prices

There are several powerful forces working against taking prices up that are independent of consumer’s appetite for wine sold direct. In Rabobank’s latest Wine Quarterly report, our researchers point out several key trends shaping the wholesale channel that are potential headwinds for pricing decisions. One of the major factors highlighted is the growth in chain store accounts that sell wine (up 4% in recent years) compared to independent stores (+2%). Chain stores are now generating most of the growth in the off-premise wine market and success in these accounts can have an important impact on profitability.

However, this channel tends to have a more limited selection of ultrapremium wines and is served by fewer and larger distributors that. These distributors often lock a given winery’s SKUs into a specific price range, in response to chain store shelving demands. Moving out of those price points means that the winery is now competing with a new set of wineries, in both their distributor’s book but the numerous other wineries represented by competing distributors. If that segment is already crowded with other brands, the distributor will obviously be resistant to go along the price increase. A given brand’s strength within its competitive set will influence its price elasticity, which is detailed further in our Wine Quarterly.