Also interest in Russian River pinot, Sonoma chardonnay
When the economy stalls, economists theorize and politicians pontificate, but real entrepreneurs take action.
You know the old story, of course. The family is watching a movie at home when a brick comes crashing through the living room window. Secured around the brick with a rubber band is a flyer for Fast Willie’s Window Repair: “25 percent off emergency glass replacements with this flyer. (P.S. Please feel free to dispose of the brick by throwing it through your neighbor’s window and take advantage of our good neighbor discount plan.)”
Someone should sling a brick or two in the California wine business. Potential bulk-wine buyers already have a lot of inventory after two big harvests. Their needs are not urgent, and they figure that with harvest upon us, prices are more likely to go down than up.
Potential sellers, however, are not eager to sell, especially to their competitors, at prices below the seller’s average cost of goods. And what if casegood sales continue to grow and the drought gets worse, forcing them in 2015 to replace, at higher prices, inventory they sold at a loss in 2014?
They — and their lenders — would very much like to move their current excess supply in bulk or as 2014 grapes. And winemakers are getting nervous about tank space for harvest. But owners and financial folk are not at all happy with the kinds of offers, when there are offers, in the current market.
This leaves us, the brokers, with the challenging job of putting deals together between lackadaisical buyers and reluctant — not to say cranky — sellers. The grape market labors under a similar divergence of seller and buyer expectations.
Bulk wine market
There is a positive trend from the seller’s point of view: Total gallons of almost all varieties listed for sale in bulk has declined as harvest gets underway.
Unfortunately, much of the decrease is due to sellers withdrawing from the market wine that was not selling in bulk, often to store it in little tanks made of glass and holding 750 milliliters each. As one winemaker said recently, “Our favorite tanks are bottles.”
The great exception to the market doldrums is Napa and Sonoma cabernet sauvignon. We are still closing deals pretty much every day for 2012 and 2013 cabernet sauvignon from Napa Valley and Sonoma County.
Sonoma County cabernet sauvignon bulk inventory is now almost nonexistent, and the inventory from Napa Valley is down to about 18 lots. There has also been some renewed interest in Paso Robles cabernet sauvignon, although the spread between asking price and offers is still hard to bridge.
The supply of Sonoma County pinot noir remains ample, with about 50 lots of 2013 wine actively for sale. Buyers are most interested in 2013 Russian River Valley pinot noir, yet 2013 Sonoma Coast chardonnay is also surprisingly active.
The North Coast crop is running about a week ahead of last year, and veraison — changing of color during grape maturity — is almost complete for the later-ripening reds, according to Mike Needham, our grape broker for the region. Vine foliage canopies look good so far, and most drought concerns are focused on future years, rather than the 2014 crop.
Regarding market activity, we are closing deals like clockwork on Napa Valley cabernet sauvignon grapes. We have multiple buyers for any Sonoma County cabernet sauvignon grapes. We are also making deals on other North Coast cabernet sauvignon.
For everything else from the region, the market remains quiet as clients wait to gauge berry sizing, calculate how much room they will have and, of course, watch what everyone else is doing.
In the Central Valley, the season started a week or so earlier than last year. The first fields picked in the Southern Interior have been lighter than projected, but that is typical of first fields picked. Drought has been a pressing concern all year. Growers have been working hard at irrigation management, and canopies are holding up so far.
Further north in the state’s interior, there is less immediate concern about water for the 2014 crop. Most buyers and sellers seem to feel yields per acre will be down from the last two years, but there will still be plenty of grapes. Most of the tonnage was already under multiple-year contracts.
The demand, however, for the relatively small quantity of uncommitted tons has been soft. Late-season grape-buying will be determined by:
- Demand for each specific variety.
- Tank space available, as determined by the size and pace of harvest.
- Quality of the grapes.
Our Central Coast grape brokers report that overall ripening is still a few weeks earlier than last year. The pinot noir crop in Monterey appears average, while chardonnay is average at best. The latest-ripening reds have almost completed veraison.
There are some fields in the Paso Robles area affected by problems with water quality, but for the most part canopies look OK across the Central Coast. Most grapes are already under contract, but we do have fruit of every variety listed for sale.
Economists theorize. Politicians pontificate. Real grape and wine brokers hustle to make deals, even through the market doldrums.
Brian Clements is a partner and vice president with Novato-based Turrentine Brokerage (turrentinebrokerage.com), a 40-year-old business-to-business marketer of winegrapes and wine in bulk and bottles.
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