By the time this gets to print, the bloodletting may well be over. Between the weather and the economy, things could hardly be much worse. From the growers’ side, there’s great disease and insect pressure. Mildew and bunch rot have ideal growing conditions, and any rains prior to harvest would complete the disaster. Some new insects are also creating new problems, making quarantine necessary and adding one more layer of bureaucracy and cost. Another dilemma is not having a contract for your crop and quite possibly not picking it. Do you continue to pour good money into what might be no income? Will my fruit even get ripe enough to sell if a buyer can be found? Due to the poor market for wine, especially in our area producing only high-end wines (or so we think), warehouses are left full and, in many cases, so are tanks. Hopefully, by the time your next issue arrives, we’ll have some answers and there will be less doom and gloom—but I’m not holding my breath.
Grower costs need to lessen, and that will only come with mechanization (where we’re still a third-world country compared to all of our competing nations). And maybe, just maybe, much of the work wineries want done by hand might be just cosmetic. Mechanical harvesting is the largest single cost saver, and winemakers need to adapt to it. Every other high-end wine producing country uses mechanical harvesters to their benefit. Savings of $1,000 or more per acre would not be uncommon. If wineries could all sell their wine for $40 per bottle and consumers continued to relate price to quality (albeit untrue), then things would be better. At $40 per bottle and about 700 bottles per ton, there’s a $28,000 gross per ton. Subtract $3,500 per ton for the fruit and perhaps another $1,000 per ton for processing (grapes to bottle), and that leaves a pretty tidy sum left over. Marketing costs should be minimal, since it must be great: I mean, you think it’s worth $40, so customers would naturally beat down the door to be lucky enough to get some. Isn’t winemaking fun? Do you suppose the consumer is learning that less than $20 will get you a damn fine bottle also?
OK, we have a glut of grapes and wine currently in the system. We need a surge in wine buying. Maybe the government can give everybody a $100 grant to buy wine as a stimulus. We’re certainly more honest than the bankers, insurance companies and the rest of society that received stimulus funds. Maybe a share of the money being spent for bicycle paths and traffic lanes could be given to us as a stimulus. We pay our fair share of costs and the bike community gets it all free. They don’t even need to register their bikes anymore like we did in our youth. Oh well, just a thought.
If misery loves company, then Europe and Australia have just as many problems with over-supply. The Aussies are in dire straights, but, with Fosters pretty much the big player, this is no surprise. It appears that, like Fosters, Constellation and maybe even Diageo (all big players) are in a race to see who can screw up the wine industry the fastest and the worst. Right now, it looks like a three-way tie, but all they need is a little more time and we’ll really be a topsy-turvy industry. When will we—or they—understand that corporate mentality doesn’t even know what the word “quality” means if it doesn’t increase the bottom line? Does that sound familiar?
As for Europe (EU), it’s in worse trouble and is taking some extreme measures to curtail the glut. It’s mandated a vine pull program that will require the removal of 450,000 acres (175,000 hectares). It’s voluntary at this point and growers will be compensated $1,400 per acre and encouraged to plant other crops such as fruit and grains. A EU-funded marketing program will be put in place to help exporting. Also, vine planting cannot continue before 2017. What about the existing supply? New regulatory measures will include the distillation of surplus wine into potable and non-potable alcohol, with some going into fuel. You can see it now: There goes a Black Mercedes and the exhaust smells slightly woody with a dash of black cherry aroma—or is that blackberry?
With the entire EU community in economic turmoil, it might be interesting to see how much effort will be expended to follow through. We do have to realize that the wine industry is far more critical to the entire economy compared to here, where we’re just small peanuts. The increase in wine from all over the world is going to play havoc with us all over the next 20 years. One also needs to remember that a very large amount of the surplus has been brought on by a continuing reduction of wine consumption by Europeans. This compounds the problem for sure. Consumption has gone from about 30 gallons per person per year 20 years ago down to less than 20 currently, and is still receding. That 10-gallon drop would last us Americans five years with our miserly 2+ gallons per person per year. Can you believe that? We only drink 2+ gallons per person per year. Are you still doing your share?
Jim Lapsley, a retired UC Davis wine economist and winemaker, recently spoke at a World Wine Market Symposium. He stated, “Every California grape market prognosticator of late refers to the ‘world wine market’ as a new paradigm. Those are fancy words for the bloodletting many grape growers are experiencing with low prices and no buyers for uncontracted grapes.” The Central Valley is suffering with wine grapes, but at least it has a lot of other crops to fall back on, unlike the North Coast. Oh you foolish one, have you forgotten about olives? No, but $35+ per little bottle of olive oil will have the same fate as $40+ wines and even a small overage would be disastrous.
Let’s all keep our fingers crossed that I’m dead wrong about the bloodletting, and maybe a big rain would help so at least you could collect on your crop insurance and hold off the dogs for another year. And my prayer will be that we can learn how to make good wine at $20 per bottle and still pay the growers enough to make a living. OK, homework time!
