California Grapes May Go Homeless

With the supply line of wine clogged, growers worry over who will buy their crop
Aug 14, 2009

Need Napa Cabernet grapes for harvest 2009? No problem. Russian River Pinot Noir can be had by the truckload. California is facing its worst oversupply of fine-wine grapes in decades. Veteran grower Andy Beckstoffer says it may be the worst market since the mid-1970s, when California wine was in its infancy and a considerably smaller industry. While that's bad news for growers, consumers are in for a potential bonanza in the next year or two.

With harvest just weeks away, contracts typically would have been signed months ago, but growers in Napa, Sonoma and beyond have been left hanging, along with their grapes. The problem is the recession. Consumers are buying less wine in the $20 and higher range, and many wineries, retailers and wholesalers have a backlog of inventory.

Just consider the going rate for Napa Cabernet Sauvignon: In 2008, the average price per ton was $4,689, according to the state's official crop report. While prime vineyards are still going for a premium, online classified ads are offering hillside Napa Cabernet for $2,000 a ton.

High-end Cabernet from Napa and high-end Pinot Noir, particularly from Sonoma County, are taking the biggest hit. Central Coast Chardonnay is also in oversupply, according to Steve Fredricks, managing partner of San Francisco-based Turrentine Wine Brokerage.

The most at-risk are new and small growers in coastal areas who don't have long-term contracts (and didn't need them during the boom years). If a buyer can't be found, they may be forced to make their own wine and sell it in bulk or just let the grapes hang and lose their crop.

Even experienced growers like Beckstoffer are feeling the pinch. "It's a mixed bag in the market," he said. Beckstoffer's top Napa plantings—which go into single-vineyard bottlings by Schrader, Realm and Paul Hobbs—have not been affected, but he has unsold grapes in Lake and Mendocino counties.

For wine lovers, however, the news may not be bad. "I think consumers will be seeing more wines that were once priced out of bounds," said Glenn Proctor, a partner in Ciatti Company, a wine and grape brokerage firm based in San Rafael, Calif.

And it could be an opportunity for winemakers who rely on excess grapes, but so far they're not gloating. Donny Sebastiani, one of the proprietors of Don Sebastiani and Sons, a négociant company that bottles successful brands such as Smoking Loon and Pepperwood Grove, was frank about the situation. "We'd love to take advantage of [the surplus], but given the economy, our supply is backing up, too."

While some producers like Sebastiani may be buying fewer grapes, others are playing hardball, putting off any commitment and hoping growers blink and lower their prices. "I've never seen a sign 'Grapes for sale' along [Napa's] Highway 29," said Harvey Posert, an experienced Napa observer and spokesman for Fred Franzia, who specializes in value brands such as Charles Shaw ("Two Buck Chuck"). Franzia himself declined to comment on the situation and whether it will provide him with opportunities.

There are signs that the grape glut may be short term. First, the economy seems to be bottoming out and the wine industry has reason to hope for better times in 2010.

Grower concerns also have eased somewhat in the past few weeks as brokers and producers have downsized their estimates of the 2009 harvest. What looked to be a record crop in spring is now expected to be just above average. Also, thanks to small crops in 2007 and 2008, there's no glut of excess bulk wine, report brokers Turrentine and Ciatti. Since sales of wines priced at $15 and under remain solid, many of the unsold grapes may eventually find a home as bulk wine.

That's great news for consumers, who have been flocking to value brands. The wine in those $8 and $12 bottles is bound to be better when the vintage reads 2009. Now if only California's growers can make it through the vintage alive.

Economy United States California News

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