Farm Progress

Record wine grape crush in California for 2012 should not dissuade growers from stepped-up production."Factors that drive wine grape prices have been in the grower’s favor lately.""Don’t plant on speculation; get a contract for the grapes you’re about to produce."

Dennis Pollock 1

December 10, 2012

7 Min Read
<p> BEN SLAUGHTER, left, with Correia-Xavier, and Jeff Bitter, vice president of operations for Allied Grape Growers in Fresno.</p>

A record wine grape crush in California for 2012 should not dissuade growers from stepped-up production, a wine industry leader told those who attended a San Joaquin Valley Winegrowers Association Wine and Grape Industry Forum in Fresno.

It was a message that would have been unthinkable 10 years ago when the association had its beginnings, a time when growers, most notably in the central San Joaquin Valley, were removing scores of thousands of acres of grapevines to try to stabilize a glutted market.

But much has changed in that decade, including a decline in wine grape growing and wine production in Europe, said Jeff Bitter, vice president of operations for Allied Grape Growers, a statewide 600-member wine and concentrate grape marketing association.

“Factors that drive wine grape prices have been in the grower’s favor lately,” Bitter said. “The market is always looking for equilibrium and it feels like we are there, at least for now. I don’t think we’re entering a time of excess supply.”

But Bitter and others issued what has become a standard cautionary note to growers: Don’t plant on speculation; get a contract for the grapes you’re about to produce.

A shorter crop in 2011 meant California wine shipments are down slightly, by about 1 percent, compared to an increase last year of 6 percent. After the shorter crop, imports jumped by 600,000 tons in bulk wine, and imports continue to pose a threat, especially to producers of wine in the lowest price ranges.

Bitter said a record 3.9 million tons of grapes will be crushed into wine in 2012.

“While the California wine grape crop as a whole is estimated to be 10 percent above average,” he said, “the Central Valley wine grape crop was close to average.”

But the supply of grapes crushed for concentrate in the Central Valley plummeted in 2012. Central Valley yields for Thompson Seedless and Fiestas dropped by 27 percent and Rubired by 24 percent compared to the year before.

Also figuring into a spike in prices for white concentrate was a robust raisin market and lack of competition from other sources. Bitter cited non-availability of table grape strippings and said, “Apples for concentrate from China are now a non-issue.”

He predicts the white concentrate market will remain strong and the red concentrate market stable and dominated by California.

After at least two consecutive years of good returns for wine grapes generally across the state, Bitter remains bullish on the prospect for continued success for the industry’s growers and vintners.

Among the reasons he cited: A relatively weak dollar that thwarts imports and encourages exports; competition from alternative crops, notably almonds; re-establishment of a mid-market for wines selling at $7 to $14 a bottle; and, with the exception of a few “smaller” world producers like Chile and California, most wine growing regions are not expanding their acreage.

Bullish on wine industry

Others who appeared bullish on the state’s wine industry during the meeting included members of a panel on investing in the industry and Ben Slaughter, real estate authority with Correia-Xavier.

Slaughter also talked of the boost the U.S. industry has gotten from a cheap U.S. dollar, “making exports attractive and imports expensive.” He talked of a limited “ag is cool” sentiment that has some seeking to buy agriculture properties, including vineyards, and especially as prices for grapes go up.

“Wine prices drive grape prices,” he said, “and grape prices drive vineyard prices.”

Slaughter said there have been stronger prices for grapes on the Central Coast, and planting in that region has been stepped up. But planting on the Northern Coast has declined as the amount of desirable land declines.

In the Central Valley, prices for open farmland have risen significantly, Slaughter said, at 17 percent annually for 10 years. In 2002, he said, open farmland in the region was selling at an average price of $2,800 an acre, compared to $12,800 in 2012.

He said it remains questionable how sustainable it will be  “to continue to grow $300 (per ton) grapes on $12,000 dirt” and with diesel priced at $4 a gallon.

The investment panel included Mark Couchman, Silverado Premium Properties and Silverado Winegrowers, who said, “The wine market in the United States is healthy” and “there’s continued demand for higher priced wines.”

“The San Joaquin Valley is in a great position,” Couchman said, “and not just for wine grapes. But don’t forget, you’re in a global market.”

Other bits of advice and activities at the forum included these:

“Keep it simple” was the message of at least two of the speakers, Francesca Schuler, head of marketing for retailer Beverages and More, and Claudia Schubert, president of Diageo Chateau and Estate Wines.

Wine competition stiff

Schuler said the wine category continues to grow by 2 percent to 3 percent a year, but competition among retailers is stiff, meaning customers have a lot of options and that brings pricing pressures.

Schuler and Schubert both said those who market wine sometimes simply complicate matters with the descriptions they use and may narrow their aims too much as they reach out to consumers.

Sometimes, Schuler said, the appeal of a particular wine may have to do with the appearance of its label, and it helps “if regions have a story. It’s best to be customer centric, not wine centric,” she said.

Schubert said shoppers often “look for wine as a beverage and don’t want to be burdened by details.

She said her company, Diageo, specializes in heritage wines and lifestyle wines “with approachable packaging and wine styles.” Her company’s wineries include Acacia, Beaulieu, Provenance, Rosenblum, Blossom Hill and Chalone.

Seven of 10 of the fastest growing wines are in the $7 to $10 segment, Schubert said, and three of the 10 are in the $10 to $15 segment. With one million Americans turning 21 every year, she believes prospects are good for growth in wine consumption. “Grocery data shows consumers are willing to spend,” Schubert said.

Among growing categories are blends and wines such as Muscat with “fruit forward” qualities.

But, she adds, the core varietals — Chardonnay, Cabernet Sauvignon and Merlot — “won’t go away.”

Social networking can be used to market wines, to build communities and to address various industry issues, said Adam Rosenberg with Edelman Public Relations in San Francisco.

“Your knowledge is your story,” Rosenberg said, referring to online services such as Yelp and TripAdvisor as ways to drive interest.

Rosenberg said shoppers are 71 percent more likely to make purchases when referred by social media. He said 94 percent of wineries are on Facebook and 73 percent are on Twitter.

By allocating just 30 minutes a week, Rosenberg said, an enterprise can create and maintain a Facebook page, set up online deals, set up paid media advertising and set up accounts on Yelp, Foursquare and TripAdvisor.

Brad Goehring, chair of the state government affairs committee for the California Association of Winegrape Growers, said a Democrat super majority in the California Legislature could pose challenging times for agriculture. He said the state’s governor, who has “vetoed some harmful stuff,” could be “a backstop to union steam rollers.”

Goehring cited Gov. Brown’s actions against a boost in overtime wages, minimum wage adjustments and heat illness legislation. He said those same issues could resurface. The association has put in place a framework to address a problem of growers not getting paid when wineries are in default.

He said the continued need for laborers, in addition to a sense that “Republicans have alienated Latino voters” could set the stage for immigration reform.

The San Joaquin Valley Winegrowers Association presented three lifetime achievement awards, one given posthumously to L. Peter Christensen, statewide viticulture raisin and wine grape specialist on the Department of Viticulture and Enology with UC Davis.

Others honored were Ron Metzler of Fresno, an innovator in wine grape production who has served for decades on various agricultural boards, and Gary Wilson, a third-generation Kern County farmer, an innovator in machine pruning of grapes and brush chipping who also produces almonds, row crops and vegetables.

Bill Peacock, formerly a UC farm advisor for Tulare County, said of the late Mr. Christensen: “His science was spectacular.”

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