Bulk-wine inventory hits 12-year low

SANTA ROSA -- The tightest inventory of top varieties of wine available for purchase in bulk in a dozen years and a dwindling supply of those winegrapes could extend the rise in pricing for those fine-wine components into this year, but wineries are hard-pressed to pass those cost increases to consumers who are continuing to look for discounts, according to experts at a major local wine industry seminar this morning.

The volume of wine California vintners were trying to sell to other vintners in bulk reached peaks of 15 million to 25 million gallons since 2000, according to presentations by Brian Clements and Marc Cuneo of Novato-based Turrentine Brokerage at the 21st annual Sonoma County Winegrape Commission Dollars & Sense seminar. Yet wineries' aggressive efforts to reduce inventory since 2008 together with three lighter-than-normal harvests have siphoned the bulk-wine inventory down to 4 million gallons now.

"This is the first time I've been involved in a market flip that was not about sales," Mr. Clements said to the audience of a few hundred. "This flip has been about inventory."Supply shrinks for top winegrapes as bulk wine[poll id="8"]

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The biggest supply squeeze is on cabernet sauvignon, the brokers said. Acreage waiting to come into production in the North Coast has been below the typical annual rate of replacement since 2007, Mr. Clements said. This has been reflected in the weighted-average price per ton for Sonoma County cab not in long-term contracts rebounding from $1,155 in 2009, $1,232 in 2010 and $1,811 last year nearly back to $1,861 in 2008, per Turrentine figures.

"If wine sales continue as they have, we can look for a very deep shortage of cab in the North Coast," he said. Mr. Clements warned of this coming shortage in Business Journal columns in March, July and December.

This shortage is reflected in the dramatic drop in available bulk cab wine for sale to 400,000 gallons for all the state -- much less is available from the North Coast -- from 5 million gallons in 2007, according to Mr. Cuneo. A shortage of grapes for sale is bringing wine buyers out a few months earlier in the season.

Another variety with pressure on supply is chardonnay. In Sonoma County, where chardonnay is the top winegrape crop, little new acreage is coming online because of little planting in the past several years, Mr. Clements said at the winegrape commission seminar. Accordingly, the weighted-average price for grapes without long-term contracts, like for cab, rebounded to $1,558 a ton last year from $1,361 a year before. Spot-market prices matched county average prices for the variety, much of which is under multiyear contracts, in 2005 and 2008 and are heading back up.

"We've never had a structural excess of chardonnay," he said.

And in the past year, demand for chardonnay as bulk wine has slurped up what was left over from the 2009 harvest, and the reduced tonnage from 2011 led to even less being available for bulk purchases, Mr. Cuneo said. That has sent average prices for bulk Sonoma County chardonnay from $8.63 a gallon at the end of 2010 to $12.41 at the end of last year, and average prices this year are even higher.

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