NorthBay biz gets the word on the upcoming grape harvest from grapegrowers and industry analysts.
It’s easy to discount “cautious optimism” as a safe-yet-noncommittal position for those who prognosticate on the future of the wine industry. After all, forecasting something as unpredictable as farming wine grapes is as fraught with uncertainty as predicting the weather. But given the current conditions of the wine market, there’s evidence to suggest that growers and vintners in Sonoma and Napa may be justified in their expectation of a more robust 2011.
Despite a rocky harvest in 2010, when volatile weather and sluggish demand combined to put a damper on grape yields and prices, wine industry representatives now point to signs that demand for their product will increase and growers will see stable prices and more interest from buyers.
The Preliminary Grape Crush Report, issued by the California Department of Food and Agriculture in February, showed an 11 percent drop in the Sonoma County grape crush and a 3 percent drop for Napa tonnage. A drop in prices accompanied the smaller harvest, with Sonoma grape prices dropping 8 percent compared with the 2009 average, and Napa grapes fetching 5 percent less than the previous year. But even with a light crop and lower prices, there are bright spots on the horizon for winegrowers whose world-class wines constitute an integral component of the North Bay economy.
Inventories shrinking
One ray of hope is that wine inventories are coming back into balance after big crops in 2006 and 2009 swelled the amount of wine stored in barrels and cased goods. A small crop in 2008 and another in 2010, “were hard for growers, but it corrected an inventory imbalance problem,” says Nick Frey, president of the Sonoma County Winegrape Commission. As long as wine sales continue to increase as expected, “those wineries are going to have to make up for that shortfall. It bodes well for grape sales this year.”
A bellwether for grape growers is the willingness of wineries to enter into contracts for grapes from the coming harvest. “For the first time in several years, there are wineries talking about contracts [with growers],” says Frey. “The mood in the industry is much more upbeat. Right now, with the shorter crop in 2010 and some recovery in the economy, there’s a lot more optimism about the prospects for 2011.”
Frey and Balletto both point to the slowdown in vineyard plantings in recent years as another positive factor. “There hasn’t been a lot of new acreage planted in Sonoma County,” says Balletto. “If there’s any kind of uptick in demand, there’ll be a grape shortage. It won’t mean wine shortage, but for Sonoma County grapes, if there’s any kind of uptick, there could be a shortage.”
Sales growth despite recession
Another bright spot for the wine industry is the indication that, even during a recession, wine sales have grown steadily and are expected to continue growing. “What we see coming off [last] year is a gradual return to sales, and people getting a little healthier when it comes to wineries moving case goods,” says John Ciatti, a partner and broker in the Ciatti Company, a San Rafael wine and grape brokerage. “Our inventories aren’t completely out of whack. If you told me a couple of years ago that we’d have a recession and back-to-back large vintages (2006, 2007), I’d have predicted that we’d have a lot more inventory than we do.
“Now, if you’re an ultra-premium winery with 2,500 cases of wine sitting in a warehouse, you might not agree with that statement. Overall, the industry isn’t that bad in terms of inventory. We’re in one of the more stable inventory positions.”
Ciatti says the California wine industry, “is growing, and it’s grown throughout the recession. Most of that is fueled by value brands, but some of the value brands that are less than $15 per bottle have been chewing up a lot of those grapes, and because of that, the floor of our industry is very stable.” According to a presentation by Danny Brager, vice president and group client director of the Nielsen Beverage Alcohol Team at the January 2011 Unified Wine & Grape Symposium held in Sacramento, sales of U.S. table wines grew from 270 million cases to an estimated 278 million cases between 2008 and 2010.
Another boost to the industry comes from the millennial generation of wine drinkers, the 21-to-34-year-olds who’ve come of age and “are exploratory and willing to try new wines. They’ll try a lot of different wines, a Malbec from Argentina or a nice California wine. The baby boomers are still drinking wines, but they may not be spending as much as they used to,” according to Ciatti. The presentation given by Brager at the Unified Wine & Grape Symposium indicated that millennials had a higher consumer confidence rating than gen Xers, baby boomers or seniors. Another survey by Nielsen indicates that millennials are much more likely to spend cash once they’ve covered their essential living expenses.
2010 harvest had its bumps
Napa Valley grapes continue to be the most sought-after fruit in California. Even with a 5 percent drop in price over 2009, the 2010 harvest averaged $3,243.66 per ton, easily outdistancing Sonoma County’s per-ton average of $2,008.43, which is the second highest price in the state. The reasons for the price difference are complex and lengthy, but suffice to say the Napa Valley cachet— carefully cultivated by decades of marketing, controlled appellation designations and strict labeling codes—not to mention world-class grapes and winemakers, have kept Napa Valley prices well ahead of others.
Terry Hall, communications director for the Napa Valley Vintners, points out that 95 percent of Napa Valley wine producers are family-owned business, with 77 percent of the wineries producing 10,000 cases of wine or less. Of that number, 65 percent produce less than 5,000 cases annually. “That makes for a very sustainable model of agriculture and small family farming,” he says.
The 2010 harvest didn’t discriminate by price or appellation when it came to roller coaster weather patterns. A cool, even growing season was interrupted by a sudden heat wave in late August that sent temperatures soaring past the century mark in Napa and Sonoma counties. Then, in late October, came the rains, bringing ideal conditions for botrytis and bunch rot.
“The feeling about the 2010 harvest was that it definitely wasn’t for amateurs,” says Dave Pramuk, a partner in Robert Biale Vineyards in Napa, who handles marketing duties for the 10,000-case operation. “It was a vintage where experience and professionalism counted. It was a real dogfight, with lots of twists and turns. We had the coldest summer since 1982 and then it went to 100 degrees. For the grapes, it was just kind of a shock wave. It wasn’t necessarily sun damage as much as it was the grapes just getting wasted. We had heavy losses because of that.”
The cool summer also prompted vintners to strictly manage the crop and canopy—a decision that didn’t seem so wise when the August sun starting beating down on the grapes. “You drop leaves and grapes to open up the canopy and to prevent mildew and botrytis,” says Pramuk. “That’s what drives growers nuts. When you do all that hand labor and then it backfires on you.”
Over in Sonoma County, Balletto says a cool July and August also had growers cutting back on irrigation out of concern that the moisture would create ideal conditions for botrytis. “So when the hot weather hit, the vines didn’t have a lot of reserves. If you leafed your vineyard, like you’re supposed to do to prevent botrytis, you really got hit because the bunches were exposed to the sun.”
Robert Biale Vineyards, which specializes in Zinfandels from historic vineyards [See “It’s a Zin,” Feb. 2011], lost about 30 percent of its Zinfandel crop, which comes from estate vineyards and selected vineyards in Napa and Sonoma counties. The silver lining to the volatile weather, says Pramuk, is that, “We ended up with some really thick skins, which is where all the flavor and colors come from. It could actually end up being a good, long-term vintage. We lost about 30 percent, and we took out a lot of stuff that didn’t belong in there, but there was a lot of good fruit. The stuff that made it really turned out some great wines.”
Now, as the wines have been barreled and the aging process begins, the flavors and aromas are impressive, he continues. “It’s quite astonishing to be in the cellar, sniff and sip these wines, and then flash back to the carnage in August, with all the dead bodies—all that fruit on the ground,” says Pramuk.
Even with a lower crop and the heat spikes in August, NVV’s Hall says “Everybody’s pretty excited about the quality for 2010.”
With regard to the wine market overall, the feeling is upbeat among Napa’s vintners, where wine averages $34 per bottle. “People are cautiously optimistic,” says Hall. “We’ve seen gains in the market. Wine and fine wine sales are improving. They’re cautiously optimistic that things will continue to improve in the overall market. I don’t think anyone is looking at the world’s wine palate changing away from fine wines. That’s the good news. People, whenever they can, drink better wines.”
Hall points to another ingredient in marketing success that’s not exclusive to Napa’s wineries, but applies to wine producers everywhere. “The number one way a wine is recommended is through a trusted friend or adviser,” he says. “A lot of our vintners are traveling a lot and showing their wares; they’re constantly in the marketplace. It’s really critical that you have those personal relationships.”
Sonoma County Vintners Executive Director Honore Comfort also believes the wine market is poised for an upswing. She says wine market data indicates, “there are signs of less buying down, though consumers are still being careful with spending. They’re staying in the same price points, or starting to creep upward. The $20-and-up category is warming up, which is good for Sonoma County wine. Research also indicates that restaurant business is increasing. Though most estimate that industry’s recovery will take some time, it’s good to see upward movement in this important area of our business.”
August’s heat waves and October’s rains were a double-edged sword, according to Frey, because the cool weather for most of the growing season delayed maturation of the crop, resulting in lower sugar levels at harvest. “The 2010 harvest was very difficult for growers, but it also made for good grape quality, particularly if you didn’t experience damage from the heat or were already harvested when the rains came,” he says. “There were good acids, good flavor and lower alcohol. Winemakers may have less to work with, but what they have is very good.”
Adding to the complicated growing season was the presence of yet another uninvited vineyard guest: the European Grapevine Moth. Both Napa and Sonoma counties were under quarantine last year, which called for insecticide treatments if a trapped moth was found within 1,000 feet of a vineyard. Frey says 59 moths were found in Sonoma County. Napa County was the hardest hit statewide, with 100,000 moths detected in the first generation, but only 1,000 in the second generation, according to a report from the UC Davis Integrated Pest Management Program.
The European Grapevine Moth lives inside grape clusters, and the first generation infests vines before they flower. The second and third generations of the moth infest the berries and consume the interior of the fruit, creating an ideal environment for the growth of botrytis. Frey says most growers don’t typically have to use insecticides, but they had no choice if the moths were detected. “It made for additional costs at a time when grape prices and demand were weak,” he says. “It kind of added insult to injury.”
Quality first
After a year like 2010, with lower prices and demand for grapes, what adjustments does a winegrower make? Frey says, “Growers are anticipating that price pressure will continue, so cost controls will be an issue. Everybody will be looking at their practices and seeing where can they save money or increase yields without sacrificing quality.”
“We farm the same way every year to get the maximum production out of our plants,” says Balletto. “When you have a crop failure like last year, it wasn’t the amount of bunches you had, it was the heat wave. If you tend to start cutting costs on fertilizer and other things, it could affect you down the road. You don’t want to sacrifice on quality.”
You also don’t want to raise your prices based on one down year. “You try to maintain your price points in this economy,” he says, “and ride it out from year to year. It’s pretty difficult to change your price points when you have a lot of people out there that would love to occupy the space you’re occupying in the marketplace.”
Balletto is optimistic that things are going to be better this year for the local wine industry. “I’d actually bet that things are going to be better in 2011,” he says. “But I’m a gambler. I think there’s going to be an increase in demand.”
At Robert Biale Vineyards, Pramuk thinks 2011 is a critical juncture. “It’s kind of a crucial year for all of us, to see what the recovery is going to do and what people’s spending habits are.” Biale has a loyal following of customers, many of whom buy directly from the winery through its wine club and from the tasting room. Its wines are in the $35 to $50 range.
“We like to think we’re an affordable luxury,” he says.
