Subscriber login Close [x]
remember me
You are not logged in.

As good as it gets

Published:  23 July, 2008

The California wine grape harvest for 2005 was mind boggling. A record 3.8 million tonnes of wine grapes were crushed, up almost a million tonnes from the 2.81 million tonne crush of 2004. There were rumblings of a large crop as the harvest extended into mid-November, but the final numbers were completely unexpected. It's as if enough grapes had been added to the state's production to create a winery the size of E&J Gallo. Every grape-growing region reported higher tonnage, from premium North Coast vineyards to the Central Valley.

Several factors came together to create the huge harvest. First, it was a textbook-perfect growing season: an abundance of winter rains to get the young vines off to a good start, followed by a long, moderate growing season, which allowed the vines to set large bunches and mature slowly, setting a large crop.

Vineyard technology also contributed to the size of the harvest. Vineyards planted in the mid- and late 1990s made use of state-of-the-art trellis and irrigation systems as well as virus-free and super-productive new clones and rootstocks.

Now that the shock of the numbers has had time to sink in, what does it mean for the California wine business? Obviously, there is a lot of wine in tanks. What will happen to it? Is it a complete disaster, the beginning of another massive glut like the one that hit California in 2000 and 2001?

Most experts answer with a highly qualified no. First, it followed two years of below-average harvests, so the wine pipeline was dry. Bulk wine from the 2004 harvest was still finding buyers well into December, even after it was apparent that the 2005 harvest was going to be of mind-boggling proportions.

Even given the vast increase - some estimate it as the equivalent of 67 million cases of wine - no one is in a panic. However, there is general agreement that if the 2006 harvest is also a whopper, all bets are off.

The official line is: stay calm and sell wine. It is true that market conditions are, except for a few glitches, very good. Wine market analyst Jon Fredrikson, publisher of the Gomberg, Fredrikson Report, estimated that about 300 million cases

of wine, domestic and imported, were sold in the US in 2005 - a record. However, while that sounds good, it is far short

of the 35% increase in the 2005 wine grape crush.

Sales of California wine rose by an estimated 6.5 million cases in 2005, a 4% gain. Let's say that sales continue to rise in 2006 up 7 million cases. That is still a far cry from the extra 67 million cases of wine gained in the 2005 harvest. Another glitch: imported wine sales were up 8.4 million cases, an 11% gain. Imports now hold about 28% of the American wine market, and import sales are growing at a faster pace than California sales.

Looking on the bright side, Fredrikson said American wine consumers have never had it so good: It's a dream market.' He agreed that it was a lot of wine for the industry to digest. We will be seeing some aggressive marketing and a very competitive bottom line. There will most likely be an increase in the extreme-value varietals, like Bronco's Two-Buck Chuck.' That wine, under Bronco's Charles Shaw brand, helped drain the wine lake of 2001 and 2002. It will take an entire convoy of Two-Buck Chucks to lap up those 67 million cases.

The flood of wine will also have an impact on imports. Margins will have to be cut to match the lower prices that will be coming, for sure, from California brands. It could be a tough 12-18 months for importers, but the US market is so attractive that it is hard to imagine importers - especially the New World brands - throwing in the towel.

For now, everyone involved, from growers to retailers, is keeping their fingers crossed until this year's harvest.

If the crop level returns to anything like normal, somewhere between 3 million and 3.35 million tons, the 2005 harvest will turn out to be a short-term headache. A harvest of 3.56 million tons or higher next autumn could be a disaster for California, with the shockwaves felt around the world.