After a dozen years of winegrape excess statewide, the California wine business is headed into several years of tighter supply to slake growing global demand while competition and costs of production are rising, according to experts at the Business Journal's 2012 Wine Industry Conference in Santa Rosa on Wednesday.
Building on his historical overview of the current winegrape shortage published in the Business Journal ["Winegrape shortage could last six to eight years", April 9], Zepponi & Company principal and four-decade wine and grape broker Joe Ciatti told the audience of about 500 that the state needs new vineyard acreage to get the 10 percent to 20 percent increase in tonnage needed to meet demand.
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"It's going to take new planting," he said. "We're not going to get there with existing acres."
Expensive development costs and restrictions likely will lead to mostly replanting of vineyards for higher yields per acre and new technology, but premium outlying wine regions in the state such as Mendocino and Lake counties likely will be targets for new vines, according to Mr. Ciatti. In the meantime, grape buyers and growers should be careful in planning new acreage that prices don't bury producers or contribute to another surplus in several years.
However, vine nurseries are sold out for the 2012 season, short for 2013 and are gearing up to supply vines for 2014, he said.
During his keynote talk on the industry marketing opportunity of being on the "Undercover Boss" show and the management transition at Jackson Family Wines, President Rick Tigner said the company is planting about 700 acres of vines throughout California and actively pursuing two vineyards in Sonoma County. The company owns 30,000 acres in the state, 10,500 of which are already in vines and three-quarters on hillsides.
Silverado Premium Properties has been planting vines for the past three years, the company already has commitments for 90 percent of the expected yield this year, according to President Mark Couchman.
Though there are similarities in wine industry supply and demand between 2012 and 1992, there's more competition from consumer tastes for wines from around the world and new technology that allows wine to be moved to the U.S. in bulk and bottled locally, according to Steve Smit of Constellation Wines U.S. Wineries have moved through inventory to the point that inventory of wine is relatively balanced, but there's pressure to keep prices flat or slowly move them down further wines vying for the mass market.
"In 1992 when there was a huge run up in wine sales, we could take price (up), but now we can't because of competition," he said.
Statewide, winegrape production has averaged nearly 3.8 million tons a year, or about 205 million 9-liter cases of wine. Yet California shipments of wine have grown 13.5 percent in the past four years to 231 million cases' worth, the equivalent to 3.83 million tons of grapes, according to Jeff O'Neill of O’Neill Vintners & Distillers. Really, the industry needs California to harvest 3.9 million tons to meet wine sales growth of 3.5 percent, equivalent to needing 130,000 tons of grapes, or 15,000 more tons a year, he added.
"We're clearly not keeping up with demand from California," he said.
The three largest wine companies in California -- Wine Group, Gallo Family Vineyards and Sutter Home -- are actively planting and increasing yields from existing vines in interior winegrowing regions, Mr. O'Neill noted.