California Wine Industry Toasts 1999 as Record Year; Sales Up 9%

California’s booming wine industry celebrated its best year ever in 1999, as millennium celebrations and a continued strong economy helped boost sales 9% to a record $5.4 billion, according to the annual survey by San Francisco wine research firm Gomberg Fredrikson & Associates.

“I see this market as the finest we’ve had in California,” said analyst Jon Fredrikson of Gomberg Fredrikson, which presented its survey at the 2000 Unified Symposium this week in Sacramento.

However, not all wineries shared in the robust growth. Sales of wines under $7 a bottle remained relatively flat, and jug wine sales declined 2%, while sales of premium wines rose 13%. Indeed, premium wines, which account for 25% of California’s total wine production, now account for 54% of total revenue.

“It’s a quest for quality,” Fredrikson said. “People are moving upscale and fueling a boom at the high end.”

However, the luxury niche also is getting more crowded, winery operators say, making it harder for individual wineries to boost their share of the business. The number of wineries operating in California has almost doubled in the last decade to 847, according to an economic impact report issued recently by the Wine Institute.

California’s total wine shipments rose 3% in 1999 to 442 million gallons, or 148 million cases, capping a decade of growth after a relatively flat period in the 1980s.

“There’s more competition out there” said Tom Selfridge, chief executive of publicly traded Chalone Wine Group in Napa. “But all of our wines are selling well. I don’t see why this year shouldn’t be as good as last year.”

Although export growth slowed in 1999, industry analysts and vintners expect sales to the foreign market to continue to pick up steam, more than doubling to $1 billion by 2005.

“Things California are still very prized in Asia,” said John De Luca, president of the Wine Institute. He said California wineries also made bigger inroads into some European markets.

By variety, the biggest sales gains were in the red wine category. While sales of the once ubiquitous white zinfandel dropped 2% in supermarkets nationwide, sales of cabernet sauvignon climbed 9% and sales of merlot surged 25%, according to the report.

Robert Mondavi Winery posted the biggest increase in sales revenue of all California wineries last year. Surging sales of Mondavi Woodbridge and Mondavi Coastal pushed sales up $32 million, or 26%, the report said.

Sales of California sparkling wines also spiked, ending a 15-year decline, as people kicked off the millennium with lavish parties. Total sparkling wine sales in California, including imports, climbed 25% to 15 million cases.

Steve Wallace, owner of retailer Wally’s in Westwood, said higher champagne sales boosted his bottom line 5% in 1999. ‘The guy who would normally buy a $20 bottle of champagne bought a $50 bottle and the $50 guy went to $100,” Wallace said. “People are definitely moving up and spending more money on wine.”

California wineries enjoyed a particularly lucrative year in 1999 as the 1997 vintage--made from the largest grape crops in the state’s history--arrived on the market. The huge harvest, which ended three years of scarce supplies, pushed grape prices down, widening margins for producers.

Although prices for many varieties of wine in great supply such as chardonnay will probably remain the same, winery operators and retailers say a smaller crop should push up the price consumers can expect to pay for most fine wines.