Glut Puts Squeeze on Wine
Glut, what glut?
Wine analysts, growers and brokers at the nation’s largest wine trade show here spent much of Wednesday trying to convince themselves that the oversupply of grapes that has plagued California’s wine industry for the last two years hasn’t reached a crisis level.
“I’m absolutely not going to say the ‘G-word,’ ” Barry Bedwell of wine brokerage Joseph W. Ciatti Co. told the thousands gathered at the Unified Wine & Grape Symposium. There’s simply “insufficient demand for the existing supply.”
Yet no matter how they choose to rationalize it, the surfeit of grapes here and abroad is weighing heavily on California’s wine industry -- and looks like it will continue to do so in the years ahead.
Too much California wine is making it hard for vintners to raise prices. At the same time, a flood of inexpensive, decent-quality bottles from Australia, Italy and elsewhere are finding their way into the U.S. market.
About a quarter of all wines sold in U.S. supermarkets are now imports, up from 15% in the early 1990s. In certain price categories -- such as the $7-to-$8-per-bottle segment -- imports account for about 40% of sales.
“Wholesalers lost interest in many California labels last year,” said wine consultant Jon Fredrikson, whose firm, Gomberg Fredrikson & Associates, tracked the data.
Australian vintners gave California labels the biggest competition, funneling 51% more wine into the U.S. in 2002 than during the previous year.
And that trend is only going to accelerate, analysts say, as more Australian companies merge with California wineries or enter joint ventures with U.S. producers and distributors.
Overall, the volume of California wine sold in the U.S. in 2002 increased just 2% to 458 million gallons from 449 million gallons the previous year, according to data released Wednesday by Fredrikson.
Exacerbating the industry’s troubles is excessive planting by California grape growers. About 240,000 acres in the state have been turned to vineyards since the late 1990s, and many thousands of acres of grapes have yet to mature.
When they do, the wine supply will increase even further, keeping downward pressure on prices.
We’re “awash in Cabernet Sauvignon,” said Bedwell, pointing to a 40% rise in the amount of Cabernet sold on the grape market last year, as well as upsurges in Syrah and Pinot Noir.
The grape glut has its subtleties. Bedwell and Fredrikson noted that the oversupply problem is mainly bedeviling certain types of grapes in certain regions, such as the San Joaquin Valley and Central Coast.
“There are some wineries that had excellent years last year,” Fredrikson said. “And a number didn’t.”
Steve Schafer, a Madera grower and chairman of the California Assn. of Winegrape Growers, said he had to pull 95 acres of grapes last year as prices plunged.
“It was not a profitable year,” he said. “Pricing was dismal.”
Indeed, a sign of the times was the Winery of the Year award, presented Wednesday to the vintner with the biggest jump in sales. Typically given to a premium wine producer, this year’s award went to Bronco Wine Co., the privately held Ceres, Calif.-based maker of $1.99 Charles Shaw wine, now known as “two buck Chuck.”
