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When Will the Wine Glut Disappear?

Photo by: Greg Gorman

Posted: Nov 28, 2006 10:03am ET

Yesterday a reporter for U.S. News & World Report called to discuss the global wine glut.

It was the kind of interview where you can spend hours answering a seemingly endless stream of questions.

Reporters are like that. So are complex subjects, such as wine gluts.

The last time I spoke with this reporter, three years ago, I spent about an hour talking about various wine trends. When the story came out, I think my thoughts had been reduced to one sentence, or one paragraph.

This time when he called, I said, let’s cut to the chase: Yes, there is a wine glut. But it’s not with the elite wines of the world.

A year ago, a vintner from Australia told me that his country could probably skip an entire vintage and still have a healthy supply of wine. (This year, a severe frost cut the crop size drastically and may reduce that glut.)

This morning I read a story about how too much wine is being produced in European countries--France, Italy and Spain in particular, where consumption has declined. Their solution to the oversupply: Distilling excess wine and turning grapes into fertilizer, according to the story.

There is also an oversupply of grapes and wine in California, which is probably a good thing, since it keeps prices down. But of course it’s not good news for those who are growing grapes or making wine in areas where there isn’t sufficient demand.

Elsewhere, as wine becomes more popular, more countries are producing it. It won’t be long, we’re told, before the middle classes in China and India become target consumers. Both countries will also continue to make strides as winegrowers.

Trouble is, predicting consumer trends based on agricultural models is always challenging. Just when you think you need more vineyards, there are too many.

All this is a reminder that at the end of the day, for all its glamour and glitz, wine is farming, subject to the vagaries of nature and consumer whims.

When will the gluts end? When people drink more wine than producers can make.

When will that happen?

Anyone’s guess.

Read our previous articles about the wine glut in Australia and in Europe.

Peter Cargasacchi
Sta. Rita Hills —  November 28, 2006 11:47pm ET
Sometimes I think the wine industry is it's own worst enemy. I say this towards those who try to mystify this amazing beverage and insert unnecessary hurdles for the consumers. I think the wine glut is the best thing that could happen for wine. Just like the movie "Sideways" punctured the hurdle of pretentious "effetiquette" (scrabble word) I think the wine glut will let more people enjoy the pleasure as well as cultural and health benefits of this oldest of magic potions created by our ancestors a long time ago.
Robert Fukushima
California —  November 29, 2006 1:08pm ET
While I do feel that any attempt at deflating the pretentiousness of wine is a good thing, I doubt that lots of cheap wine, or funny movies, or well meaning people will chamge the snobs out there. There are many excellent values out there in wine. A snob is a snob, not just in wine, but everything else as well. The poor laborers, farmers, truckers and winemakers are the ones who suffer as supply outstrips demand. For them, I feel compassion. Agriculture is a tough way to make a living. As for me, there is certainly more great wine out there than I can afford, conversely, I can afford more than I can possibly drink, storage is becoming a problem.
Paul Manchester
Santa Cruz, CA —  November 29, 2006 1:54pm ET
It's probably discouraging for the wineries but it's sure nice for the consumer to have prices drop or at least stay even. Unfortunately though, this is definitely NOT happening with the wines that we really desire. The truly great "cult" wines, great Bordeaux's, etc... are still climbing and are only attainable by the super-rich or by mortgaging the house. It seems to me that ALL wine is way overpriced anyway, when I see a wine that's produced in another country.. bottled.. shipped.. taxed.. etc... and sold for $10, and it's VERY GOOD!!! Are they losing money on it?? Or is everything else just price-hiked because they can. Although if someone came up to me and offered me $500 for a $10 product I'm sure that I would take it. So I'll continue to seek out the good-great wines that don't set me back a month's wages. Thanks for all the great work James and everybody at WS, I enjoy all that you do. Have a great Christmas and holiday season!!!
Peter Cargasacchi
Sta. Rita Hills —  December 1, 2006 9:25am ET

"Humans, now that vitis vinifera has taken over planet earth you will revel in servitude...ha...ha..." There are a lot of grapevines out there, all over the world. Clearly there is economic pain as production adjusts and traditional systems change. But is it perhaps a social cultural change rather than a glut?

Wine drinking habits are changing. We are adopting European habits. In Europe consumption is decreasing and in the new world it is increasing. Here the media plays a critical part. I'm not saying it is going to solve the wine "abundance," but in getting the wine message out there, the media "floats everyone's boat" from the laborer, farmer and winemaker. There is a strong correlation between consumption of wine and exposure to wine media. Either by introducing or helping appreciate wine for/to the consumer, the media has a clear and strong effect on consumption. Wine is not way overpriced.

Have you ever considered labor costs? It takes half a billion yeast/winemakers to make a bottle of wine. Throw in the fact that they are intoxicated and require hazard pay and the costs mount up. (Fortunately most yeast are passed out at the end of their shift and thrown into a compost pile without getting paid.) Seriously, for many wines there is great deal of hand labor, capital and expense that goes into the juice in the bottle from the vineyard to the winery to restaurant to get into your glass. It is labor and capital intensive.

There are many examples of winemaking models with too much expense/cost into making the wine and it not working because they could not recover costs. (There are lots of wines in between.)
John Jorgenson
Seattle, —  December 22, 2006 12:17pm ET

This problem is probably as complex as the finest Hermitage anyone ever built.First, quit planting vineyards in the Mercedes of the world. Second, in areas that have shown potential for truly great wines, send the vineyard managers to Shafer Hillside about a month prior to harvest. Let them see what it is to drop good fruit to enhance the quality and concentration of the remaining fruit. Then send them home to manage their vineyards at 2-3 tons an acre instead of 5-6.

These two steps (if implemented) would greatly reduce the juice and make what's left better. At the same time it would make what's left more expensive. The "Cult" wines are already harvesting from great vineyards and using the proper methods to achieve the concentration that sets them apart, so their prices shouldn't be impacted. The artisan in Santa Maria or Walla Walla or Haro will see their costs go up, but not so much that consumers stop purchasing their products. The problem is (and always will be) that guy in Fresno that plants a vineyard in an old cattle yard and thinks his wine is worth $35 a bottle.

I don't care if the guy's your neighbor or brother-in-law, don't buy it if it's not good $#!+. Doing so just aggravates the problem.

On another note: Cut a tier or two out of the Wholesale pipeline so that the guy willing to pay for the quality that's there after steps one and two are implemented will get a great value for his money regardless of what it costs him.

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