Imports, Declining Demand Cited : Wine Industry Slump Hitting East Hardest
The nation’s wine industry, which grew by leaps and bounds in the 1970s, has been clobbered in the 1980s by a flattening of consumer demand and by competition from foreign imports made bargains by the high-flying dollar.
Like American corn and wheat farmers, grape growers in the United States have watched their costs rise as demand--and profits--have remained flat or fallen since 1980.
California is the nation’s leading wine state, and, until a decade or so ago, No. 2 New York was the only significant producer of wine grapes in the East.
The soaring of demand in the 1970s, however, brought new grape growers in Maryland, Virginia and Pennsylvania, adding to the competition faced by growers in upper New York state.
With virtually no demand for some grape varieties and drastically reduced prices being offered for others, New York’s upstate Finger Lakes wine region has found itself struggling.
Bankruptcies are “happening in spades,” said James Trezise, president of the New York Wine Council, which represents growers and wine producers throughout the state. “A large sector of the grape industry is teetering on the edge or going.”
Hard figures on bankruptcies are difficult to find, but Kenny Barber, president of the Seneca Lake Grape Growers’ Cooperative, estimated that “there have probably been about 10% of the vineyards this past year that have either been abandoned or are in the process.”
This year’s crop “is probably the lightest I can remember in 27 years,” he said, with vines yielding 35% to 40% of what they did in 1984, because of an early freeze last October and the summer drought.
Drastic Price Cuts
This comes after Hammondsport-based Taylor Wine Co. announced drastic cutbacks in prices that it is willing pay for grapes and the amounts that it plans to buy this fall.
Of New York’s 2,000 growers, a bit more than 300 were counting on selling to Taylor, Taylor President Michael Doyle said.
For decades, Taylor has been to New York what Gallo has been to California--the major buyer of grapes in the region.
“It was a parent-child relationship,” Barber said. “Their job was to market the wine; our job was to grow the grapes.”
Local farmers traditionally depended on the family-owned company to buy all of their grapes, no matter what the market conditions. But Taylor’s policy started getting tougher after it was bought by Coca-Cola Co. in 1977 and by Joseph E. Seagram & Sons in 1983.
Its inventories were swollen, mainly with wines made from the native and French hybrid grapes that have been regionally popular but that are often shunned by lovers of the European-style wines made from vinifera grapes in Europe and California.
Doyle said that, after four years of buying more grapes than it needed, the company had to reduce its inventories.
As a result, the New York State Wine Growers Assn. estimates that 15,000 tons of grapes will go unsold at a loss of up to $5 million.
Doyle, however, said he expects that “there will be a home for most everything out there, because they’ll be gobbled up at low prices and because the crop is short.”
$445 Per Acre
Barber estimated the average grower is “looking at receiving one-quarter what he got last year per ton.” In a best-case example of aurore grapes, he calculated that a farmer might expect to take home $445 for a one-acre harvest, compared to $1,575 last year.
That $445 “doesn’t even cover the grower’s cash cost to harvest,” he said.
“In 10 years’ time, our costs have more than doubled,” Barber said. “Nobody can survive this for very long.”
The fallout from Taylor’s action is spilling over into nearby Pennsylvania, growers there said.
Prices for wine grapes are down by 30% this year, while volume is up by 20%, Dick Naylor, owner of Naylor Wine Cellars in Stewartsville and head of the Pennsylvania Wine Assn., estimated.
43 Wineries in State
Of total grape production, about 90% are concords, sold for juice and jelly, and the rest goes to the state’s 43 wineries, said Doug Moorhead, a grape farmer and owner of Presque Isle Wine Cellars.
“Up to now there have been very very few bankruptcies. . . . In the 1970s, when we were getting pretty decent prices, growers were able to build up their equity. Now, some are showing negative values. If we have a severe frost or winter damage in 1986, I think a number will go belly-up,” he said. “I look to 1987 for much of that to happen--at least a 20% to 25% reduction.”
In Virginia, “the market has held its own this year, as it has the last two years,” said Doug Flemmer, president of the Virginia Wineries Assn.
Since 1979, the number of farm wineries--which must grow 51% of their own grapes--has grown from six to 29 this year, while acreage has grown from 286 to 1,405, according to the state Agriculture and Consumer Services Department.
“Because we’re working with more vinifera, we don’t have that concord stigma that is affecting New York,” Flemmer said. “We also don’t have a Taylor that controls so much that as they go, so the growers go.
“The vineyards listed are very small, most under five acres,” he added. “Most started with a connection to a winery and most this year are finding a market for their fruit.”
The situation is similar in Maryland, where prices are “holding their own,” said Robert Deford, president of Boordy Vineyards in Hydes and of the Assn. of Maryland Wineries. The state has about 20 vineyards, most under five acres, and nine wineries, he said.
“I think those (growers) who have financial relationships with wineries are doing fine. Those who don’t are casting about for a market--and they’re too late,” Deford said.