What’s Up, What’s Going Down

Buyers of moderately priced wines will soon have a pleasant surprise: deep discounts in their favorite brands and a sharp increase in quality.

The reason: greater availability of wine in the U.S. than the still-growing demand for it.

After short harvests in 1994, ’95 and ‘96, 1997 output was massive. According to the California Department of Food and Agriculture, 3.9 million tons of wine grapes were crushed in California last year, up 34% from 1996 and 25% greater than the previous record harvest in 1982.

Analysts anticipate a return to conditions a decade ago when some wines, called Fighting Varietals, sold at two for $7 or three for $10. And more upscale brands that just six months ago sold in the teens will sell for $7 or $8 a bottle. The discounting will even have an effect on important brands such as Robert Mondavi and Beringer.

This doesn’t mean you should expect price breaks on rare, limited-production wines--the Domaine de la Romanee-Conti just released its 1995 Romanee-Conti at $1,000, the first four-digit wine release ever.

And even those small-production California wines that typically sell out at $25 to $30 a bottle, such as the Grgich Hills Chardonnay or Beringer Aluvium Cabernet Sauvignon, should hold their ground. But with many of the more moderate-priced brands, if you don’t like the prices you’re seeing on your favorites, go back later in the spring when the ’97 vintage hits the stores. They may have dropped.

“The discounts have already started,” says San Francisco wine industry consultant Ed Everett. “I anticipate a real softening of prices in Chardonnay and Merlot and very sharp declines in white Zinfandel.”

Everett says a huge crop of Chardonnay and Merlot in California last year (up about 60% over 1996) will allow wineries to drop their prices while improving quality.

“What seems to be happening,” he says, “is that brands known for their price will be enriching their blends with much higher-quality fruit, so we’ll see some very nice Chardonnays and Merlots from rather ordinary labels.”

During the years of shortage, importers weren’t asleep. Dozens of importers from France, Chile, Australia and other wine-savvy nations took advantage of California’s weakness and began filling shelves with lower-priced wines.

And in the last year, wineries that a decade ago were under Communist control have begun to offer wine here at prices so low that consumers for whom price is critical are switching down and buying the $2.99 specials from places like Moldova and Bulgaria, and some are finding the wines quite acceptable.

In addition to imports that weren’t around before the three short crops, major California wineries have another factor to cope with: Gallo. The world’s largest winemaker was only a minor player in the fine-wine game at the start of this decade, but today Gallo represents one of the most powerful forces in the game.

Using some 2,000 acres of vineyards in Sonoma County as a base, Gallo has developed a strong presence with multiple labels at multiple price points, affecting each and every wine producer in the state.

Here is a brief look at some of the better-known California wineries and where they stand. Note how many are creating new labels to protect their existing brands from deep discounting.

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Kendall-Jackson: This highly successful winery recently topped 1 million cases per year of its popular Vintner’s Reserve Chardonnay. The recent shortages prompted the company to aggressively pursue grapes so it wouldn’t run out, and rumors are that the company has a huge reserve of Chardonnay in warehouses all over the state. The suggested retail price for this wine is $13 a bottle, but a number of supermarket and discount operations have it for $7.99.

Beringer: The superb value in the Napa Ridge line of wines, Beringer’s second label, combined with very strong sales of Beringer White Zinfandel have made this Napa Valley-based company so strong it went public recently and acquired Chateau St. Jean along the way. Rumors are, however, that the Napa Ridge line is not where the company intends for its next major growth spurt to be. Industry insiders say Beringer intends for Meridian Chardonnay, made in California’s Central Coast, to triple in production and soon to become a 1-million-case item. Moreover, to keep the prices for its Beringer Napa Valley brand insulated from discounts as much as possible, the company plans to introduce a line of midpriced varietals called Hudson Estate.

Sutter Home: To take advantage of increased amounts of Merlot grapes on the market, this White Zinfandel specialist recently introduced an excellent new wine, a 1997 Merlot Rose. Moreover, a decade ago the closely held family winery made plans to control its own destiny by buying raw land and planting grapes, and today is insulated against the pressures of high grape prices. Soon the company will introduce a line of wines called M. Trinchero, priced at $10 to $12 and made entirely of Napa Valley grapes from its own vineyards.

Robert Mondavi: The huge growth in volume of the Mondavi-Woodbridge line of lower-priced varietals (around $6) from the Lodi area has combined with the recent relaunching of Mondavi’s Vichon brand as Vichon Mediterranean, using wine from the bargain-oriented south of France. Meanwhile, Mondavi’s joint venture with Chilean producer Caliterra is expected to bring 500,000 cases of wine per year under that brand to U.S. shores by next year. Moreover, Mondavi’s joint ventures with Chile’s Chadwick family and with the Frescobaldi family of Italy have produced expensive new brands, Sen~a and Lucente, respectively.

Beaulieu: Since selling off its Inglenook brand and facilities four years ago, IDV (formerly Heublein) has consolidated its Napa Valley-based BV brand and expanded production. Now the company plans to eliminate its moderately priced Beautour line and replace it with a BV Coastal brand, as well as expand production and increase quality.

Gallo: Oh, what a force this company has become! Its Gallo Sonoma line of wines priced at $8 to $10 has grown in stature with retailers for its good value and profitability. Gallo also quickly segmented itself with the launch 18 months ago of numerous new brands including Marcelina (upscale Napa), Zabaco (Sonoma), Indigo Hills (Mendocino), Anapamu (Central Coast) and Ecco Domani (Italy). Rumors say other brands are in the works. Gallo also acquired a huge Russian River-Sonoma ranch once owned by the late actor Fred MacMurray and has added to its Sonoma acreage by planting a large Pinot Noir vineyard. And it added more vineyard land by planting virgin soil in the Santa Rosa suburb of Cotati.

And what of the imports?

Chile: Demand for Chilean wine has risen steadily based on those priced in the $5 range such as Santa Rita, in the $7 range from Carmen and the $10 to $15 range from Casa Lapostolle. Imports from Chile in 1997 rose to 6.1 million cases from 3.5 million cases the year before.

Australia: A major push here by Southcorp, with major brands Penfolds, Lindemans and Seaview, reached 1 million cases in 1997. Rosemount said it expected to sell 700,000 cases of wine in the United States in 1998, compared to slightly more than 400,000 cases in 1997. Now, almost overnight, a dozen importers are bringing in a range of upper-echelon Aussie wines, most in the $12 to $20 price range. Australian wine imports last year climbed to 3.1 million cases from 2.1 million the year before. Moreover, the largest harvest in Australian history has just been reported, more than half of it Chardonnay.

France: Besides the good value wines (under $10) from brands such as Fortant de France, Reserve St. Martin, Les Jamelles, George Duboeuf, Jean-Claude Boisset and others, now larger producers are now leaping into the U.S. market. Within the last few months, Michel Picard, the second-largest producer in Burgundy with 227 acres of vineyards, based at Chagny, began importing large amounts of top-rate varietals to the United States, selling at $10 per bottle. The house of Louis Jadot just spent millions upgrading and expanding its production facility at Beaune. And Richemont wines from the south of France, made by Hugh Ryman, now are being imported in large quantities.

South Africa: Imports from South Africa, which were zero because of trade sanctions until 1993, reached 156,000 cases in 1997, led by brands like Springbok (from the huge cooperative KWV) and The Africa Collection (priced at $6 and targeted toward supermarkets). New lines are coming here all the time. Just last week, a new line called Baobab, imported by Global Vineyard Importers of Campbell, Calif., announced sales here.

Berger is a syndicated wine columnist living in Topanga and Sonoma County. His e-mail address is info@vintageexperiences.com