A dramatic turnaround in the wine market is sharply increasing prices for grapes, bolstering the spirits and optimism of growers beaten down over the last several years by sluggish demand, low prices and hellish weather during harvest.
The optimism and high spirits were almost palpable at the 21st annual Dollars & $ense Seminar, held Jan. 19 at the Wells Fargo Center for the Arts, where a record crowd of more than 550 people, mostly grape growers, vineyard managers and viticulture industry vendors, cheered the positive news of the rapidly changing market for Sonoma County grapes.
Sonoma County Winegrape Commission sponsors the annual Dollars & $ense Seminar, which serves as a sort of ‘State of the Wine Grape” address for the year ahead. The theme of this year’s seminar was “Preparing for Tomorrow.” The market outlook presented atthe seminar has been gloomy the previous two years but this year it was extremely positive and encouragingly upbeat. The turnaround has suddenly created a seller’s market for growers as wineries rush to secure grapes from this year’s harvest and beyond.
“We are at a point where there is a sense of optimism for the wine grape market,” said Steve Sangiacomo, a Sonoma Valley grower who is chairman of the Sonoma County Winegrape Commission. “Supply and demand is closer that it has been for some time for wine grapes.”
Brian Clements and Marc Cuneo, both executives with Turrentine Brokerage, a Novato wine and grape broker, said the light harvests over the last several years have reduced bulk wine supplies to the lowest level in 11 years. Wineries have been draining the bulk wine supply to meet the shortfall from the poor harvests but the shrinking supplies are forcing them to again contract for wine grapes to meet their needs.
Many growers are being offered multiyear contracts from wineries to secure grapes from this year’s harvest and in the future. The strong activity on the part of wineries is putting growers back in the driver’s seat and many growers are holding off signing contracts while negotiating the best deal possible. A number of growers have lost money in recent years so are looking at the higher prices to restore financial stability to their farming operations.
“Growers are slow to move on signing contracts at this time,” said Clements.
The current trend is in sharp contrast to the last several years when wineries, finding themselves in a buyer’s market, were not signing grape contracts and cutting prices on the grapes they did purchase. Today, some wineries are even offering planting contracts for new vineyards, something not seen in years because of the burgeoning wine supply.
Currently there are 4 million gallons of bulk wine on the market, down from about 25 million gallons in 2002.
Clements said what worries him is that the change in the market is driven by the shrinking wine supply following poor harvests and not a big surge in wine sales. So, he said, it’s unclear how long the high demand and increasing prices for grapes will last. He said a bumper crop this fall could change things again.
”This is the first time I have been involved in a flip in the market that isn’t about sales,” Clements said. “This flip is about inventory. Mother Nature flipped this market and that makes me a little nervous.”
Clements said bulk wine supplies of most leading varietals have leveled off significantly, particularly, cabernet sauvignon, which is considered the king of red grapes and a perennial consumer favorite.
“If sales continue we are looking at a big shortage of cabernet sauvignon in Sonoma County and the North Coast,” said Clements.
Increases in wine sales have been achieved through discounting by wineries and by new wine drinkers who are buying moscato, sweet wines, red blends and unoaked chardonnay, said Mike Colicchio of the Nielsen Beverage Alcohol Team. He said the good news is that there has been a resurgence of consumer confidence even though most consumers still believe the country is in a recession.
Colicchio said more consumer are starting to drink wine and the core consumers, those buying most of the wine, represent a demographic that has enjoyed low rates of unemployment, which has allowed them to continue buying wine. Still, they are seeking value in the wines they buy.
The second half of the Dollars & $ense Seminar kicked off with Trini Amador of BHC Consulting, a brand strategy firm based in Duncans Mills, presenting an update on the Sonoma County Winegrape Commission’s ambitious project to develop a recognizable brand for Sonoma County wines. Amador said 50 Sonoma County wine industry leaders worked together in 2011 to determine the essence of Sonoma County and to identify the target audience for the campaign to brand Sonoma County wine.
The group selected three words to define Sonoma County’s character: genuine, independent and adventurous. Amador said those traits translate into consumers defined as “experience seekers,” people who enjoy travel and dining out.
The advertising campaign that will encompass Amador’s branding strategy will be rolled out during the first quarter of 2012 with the campaign to be fully implemented by end of the year.
Nick Frey, president of the Sonoma County Winegrape Commission, and Honore Comfort, executive director of the Sonoma County Vintners, presented research and a timeline for the Winegrape Commission’s Community Relations Program. This program will work to enhance the image of wineries and vineyards by showcasing the value of Sonoma County’s world-class industry in terms of the economy, quality of life, open space and community support.
Frey said the program will offer immediate response to one-sided or inaccurate assertions made by wine industry critics including those who say there are too many vineyards in Sonoma County that wine grapes are using all the water.
Ginger Baker, a staff member at the Winegrape Commission, talked about the opportunities available for selling grapes through the Winegrape Commission’s resourceful Grape Marketplace. The Grape Marketplace is a free online service for grape growers to list their grapes for sale and for grape buyers to list grapes wanted, The site allows users to sort through available grapes by various options such as appellation, varietal, topography, etc.
The seminar included a trade show. Fifty-five Sonoma County Winegrape Commission sponsors showcased an array of products and services and shared their knowledge with growers and wineries. To view a list of SCWC sponsors, please visit www.sonomawinegrape.org/sponsors.