If one listens to the news or just associates with grape growers and other farmers, things seem to be going from not so good to really bad. I think we all really know that farmers are never happy because it can always be warmer, or cooler, wetter or drier, early season or late season, and so on. The old farmer rule of thumb about never making any money may soon be true. For the last 50 years, farmer math went like this: Gee, I only made $200,000 this year and budgeted for $250,000, therefore I lost $50,000. That seems better than investing your own money with a couple of Sonoma County financiers, so maybe you better hang in there with the grape business.
Unfortunately, a poor grape market is only one of the big problems today. We’ve always had our fair share of diseases—and complained about them—but we knew how to control most of them. Today the new kids on the block are very difficult to control. These include the light brown apple moth (LBAM), the European grapevine moth and some pretty strong strains of powdery mildew (green rot, as they call it) and its relative, Botyrtis bunch rot. As the vice starts to tighten on the pocketbook, a real dilemma starts to happen. If you don’t have a home for your grapes, do you spend the extra money to do the hand labor and spraying that might help control the problems and have it all be a waste if you don’t sell your fruit? A tough call for sure.
As we look at the market this close to harvest (remember, my deadline for this issue is mid-August), things are gloomy at best. No one is out buying any fruit at all—and that’s very unusual. Under any other conditions, at least the bottom feeders would be out trying to steal fruit at very low prices. At a recent grape marketing conference in Santa Rosa, one speaker noted that if a bottom feeder comes along, you better bite, because there’s very little hope in sight this season.
Chardonnay bulk wine (2009), with what little is selling, is going for $5 to $8 per gallon. That may sound like a lot, but if you figure 160 gallons per ton, that’s about $1,000 per ton—and winemaking charges need to be subtracted from that. (It ranges between $300+ to $750 per ton.) That shows, I think, that even among friends, there are enemies lurking.
One readily admits that the wineries are having sales problems and therefore have full warehouses and tanks from the last couple of years’ crops. Reducing prices and having a big “friend” sale with 30 to 50 percent off helps move some product, but what if your customer gets used to that? What happens when the market turns around? It’s easy to lower your prices, but how do you go back up when things are good again? This is one of the reasons that justify the expense of relabeling to let you sell product at a lower price just to unload it. And do you think lower prices will move more that 14.5 million gallons in bulk available with about 3.5 million of that being Chardonnay and almost 50 percent being from the Central Coast? The bigger surprise is the 800,000 gallons of Pinot Noir, up from only 200,000 gallons last year. My prediction of the Pinot bubble burst might be coming true and emphasizes the fact that it’s a tough market over $40, which Pinot growers think it’s worth. As one wine broker stated, there’s probably enough demand to use it up, but at prices far below the cost of production.
Speaking of lowering prices, I was in a Grocery Outlet store the other day (which isn’t exactly where you’ll find any high-end wines) and I saw a bottle of Wildhurst Sauvignon Blanc for only $2.99. I thought to myself, “That’s a helluva deal,” and reached out to grab a few bottles when something inside my pea-sized brain said, “Look at the label closer”—and I did. It was a 2005. What in the hell is 2005 Sauvignon Blanc doing still on the market? Talk about an inventory backup! I did, however, buy a couple bottles of Night Harvest Sauvignon Blanc from the old RHPhillips Winery. At $5.99 for a magnum, it was quite good and, of course, before I figured that out I went back to get more and it was all gone. Other people are also looking for sleepers among what’s available at low prices. Sorry for the doom and gloom feeling of the column, but if you look around, you’ll find that misery likes company—and we do have that.
A recent headline states “EU awash in oversupplied wine market.” The European Union is currently draining wine tanks in what it calls “crisis distillation”—selling it to refiners for auto and truck fuel. Does your car prefer red or white? Other efforts are: the removal of 175,000 hectares (2.4 acres = 1 hectare) and the replanting with other crops; EU-funded marketing programs to promote EU wines; and new regulations to distill more wine. Growers voluntarily removing vines will receive $1,400 per acre, and there’s currently a prohibition on new vine plantings until Dec. 31, 2016.
One EU spokesman stated that “as draconian as these measures are, it’s not clear whether they’ll solve any of the problems.” The economy is certainly part of the problem, but a rapidly dropping per capita consumption is also a major part. Per capita consumption has dropped more than 30 percent over the last 20 years, but still remains about 20 gallons per capita compared to our paltry 2+ gallons. Yes, that’s per year, not per week or month. Can you guess what that big surplus is going to do for cheap imported wine into our marketplace?
Let’s finish up this gloom with a quote from an old college classmate named Tom Selfridge, who’s the former president of the Hess Collection and Chalone Wine group. He stated “luxury consumers will come back.” However, he added, many wines from Napa, which rode the last cycle to the top of the demand curve, didn’t deserve their $100 reputations. “They won’t benefit from the rebound.” Boy—will that be an ego buster. I’m overwhelmed by my own tears.
OK, homework time, and keep it less than $20 per bottle.
