Wine drinkers lift glass to law of supply and demand

By Leslie Gevirtz

New York (Reuters Life!) - The law of supply and demand has reached the world's vineyards tipping wine prices in consumers' favor.

Pali Wine Co., a small California Pinot Noir producer which started out selling wines for $40, $50 and $60 a bottle in 2005, found itself with cases left from its 2006 crush even as it was bottling its 2007 production.

Most of its Pinot Noirs will now be sold for $19 a bottle.

"We had to do something. We had to bring our costs down. And everyone in the business was seeing the same thing," Tim Perr, Pali's founder said during a visit to New York.

Pali does not have its own vineyards, but sources its grapes from growers in Sonoma and Napa California, as well as Willamette Valley in Oregon.

Pinot Noir grapes that once fetched $5,000 a ton now sell for $2,500.

"You could now make deals with the vineyards," said Perr, 47, who started out as an actuary before taking up winemaking four years ago.

He and his partner, Scott Knight, had built a successful business and were looking for a new challenge.