As the harvest winds down—and it appears to be down 10 percent or more—we need to assess what the current economic conditions will do to wine sales. Will people buy less wine with their diminishing discretionary funds, or is wine really recession proof? This year’s short crop might be Mother Nature’s way of keeping things in balance. Grape prices haven’t fallen and, in some cases, have even risen significantly: Napa Cabernet Sauvignon started out at $4,100 per ton and may go up further. Just what we need: more $50 per bottle wine! Isn’t there some point where sanity will prevail?
With all of the strange things happening on the local front, it’s with great curiosity that I read the latest import and export figures. I have trouble understanding, with all the wine we produce in California, why there’s a need to export or import any wine at all. We’ve had surplus production for the last few years, so that might explain why we export wine, but it certainly doesn’t explain why we import wine.
Between 2002 and 2007, U.S. wine imports grew 74 percent in value and 53 percent in volume. The top five countries we imported from were France (31 percent), Italy (28 percent), Australia (17 percent), Spain (5.8 percent), and Chile (4.5 percent). We also have to keep our eye on Argentina and South Africa, which are becoming more visible in our marketplace.
Is it price, perceived quality, or “just because it’s foreign” that accounts for these figures? I’m sure that, with the Aussie wines, it’s a combination of quality and price, but surplus production down there could keep downward pressure on prices.
Then I ask, with the great number of potential wine consumers in the United States, why spend all of the time and money on exporting? Use it for marketing and education programs right here at home! Between 2002 and 2007, wine exports increased 66 percent in value and 56 percent in volume. The United Kingdom accounted for 31 percent of our exports, followed by Canada (24 percent), Japan (6.2 percent), Italy (5.7 percent) and Germany (5.4 percent).
Total wine shipments from all sources—California, other states and foreign—had a total retail value of $30 billion in 2007, making the U.S. the largest wine retail market in the world. (California accounted 61 percent of this.) It’s interesting to note that, 10 years ago, red wines accounted for 25 percent, whites 41 percent and blush 34 percent; today, it’s 43 percent red, 42 percent white and 15 percent blush. Do you suppose White Zinfandel sales have slowed down dramatically?
Where is all of this activity happening in our wonderful country? The highest per capita consumption, to no one’s surprise, is Washington, D.C. Do you still wonder why they can’t get their act together? It’s followed by New Hampshire, Nevada (mostly all tourist consumption), Delaware, Massachusetts, Connecticut, Vermont and, finally, the true leader, California. All the states listed above us are small population and, in most cases, next to state-owned or controlled states—meaning people cross the state line to buy their wine. The other end of the spectrum goes like this: dead last is West Virginia, then Mississippi, Arkansas, Iowa, Kentucky, Utah, Kansas, Oklahoma, South Dakota and North Dakota. Sounds like maybe all that corn isn’t going into ethanol for fuel after all. Maybe that’s also why the price of copper is so high—stills, you knuckleheads!
Back at home, we need to wonder if we’ll follow history. As we work our way out of a surplus and into a slight shortage, grape prices will probably begin to rise. When that happens, a planting frenzy follows and, before you know it, four to six years down the road, we’re suddenly in an oversupply again.
The big question on everyone’s mind now is, “Will history repeat itself?” There are a few added twists this time around, including lack of available land, its high costs, and environmental compliance. One of our most pressing needs is water, its availability and cost. Fortunately, vines use very little water compared to other cultivated crops…but more springs like this last one could change that need dramatically. (Vineyards use overhead sprinklers to protect against frost. It may sound strange to use water to prevent frost damage, but it really works; it just takes a lot of water.)
Escalating land prices will slow down planting. Add in the very rapidly escalating price of supplies and development labor, and it quickly reaches the point where a return on investment becomes impossible. Should grape prices rise high enough to cover these increases, you and I won’t be able to afford a bottle of North Coast wine. Lake and Mendocino counties haven’t seen these dramatic increases in land values yet, but time will take care of that.
The hidden factor, or ace in the hole, is the fact that many people buying vineyard land, or deciding to plant what they have, are generally those who don’t require the vineyard to pay its own way; they’re buying a lifestyle, where economics don’t really count.
If you’re on the outside looking in, I’d agree that both vineyards and wineries look like lifestyles rather than economically viable entities. And it must be true, since I’ve never heard a winery owner or a vineyard owner ever admit to making money.
The luxury cars in the winery driveways must be loaners, and the new pickups each year in the vineyard must have been bought on the new “employee price” programs. And let’s not forget the vineyard management companies, who are all driving new pickups with new four-wheelers in the back alongside their dog. All the new tractors must be loaners as well. Looks like an awful lot of high living for a bunch of folks who aren’t making any money.
Maybe I’m just jealous that I trained a majority of these people, and I’m still driving a 1998 Chevy pickup. Oh well, I dug my own hole. Go do your homework, and be sure to do it with $40 wines, so we can spread the wealth.
