NAPA -- Brimming winery tanks from the record 2012 crop are moderating pricing surplus winegrape tonnage and excess wine for what is thought to be another sizable crop this year, according to experts at a major annual gathering in Napa on Tuesday of the industry’s financial decision-makers.
[caption id="attachment_80435" align="alignleft" width="300"] The volume of wine available from California producers to purchase in bulk soared after the record-sized 2012 harvest, causing some to worry about the marketability of excess wine if the 2013 is as large as anticipated. (click to enlarge; image source: Glenn Proctor, Ciatti Co.)[/caption]
While this may be a short-term logistical challenge of finding the winery tank space for the fruit needed to support sales, the wine business in California, and particularly in the North Coast, faces longer-term supply constraints as U.S. consumers increasingly add wine as an alcoholic beverage of choice, panelists said to nearly 200 winery, vineyard and finance professionals at the the 22nd annual Wine Industry Financial Symposium.
"We have seen demand come back to balance from where it was a year before," said Glenn Proctor, a partner in San Rafael-based wine and grape brokerage Ciatti Co. and part of a panel on supply issues.
From a five-year low of 6.5 million gallons statewide last September, the supply of wine available for purchase in bulk soared to around 17 million gallons after the 2012 harvest, according to Mr. Proctor.
"There is a concern, if [the] 2013 [crop] comes in as large as many are expecting, what the price will be to move that volume," he said.
After two relatively small harvests, California vintners early in the 2012 grape season were paying handsomely for bulk wine -- reaching highs around $40 a gallon for Napa Valley cabernet sauvignon -- and grapes, even for tonnage over the contracted maximum.
Growing U.S. consumer demand for wine -- up 3.3 percent over a decade and roughly 6 percent in the first six months of this year -- has pushed importing of wine, mostly in bulk for "budget brands," or those retailing for less than $8 a bottle, to around half of California production, noted David Freed, chairman of Napa-based UCC Group, an organizer of the symposium.
Wine has gained more "share of throat" against beer and spirits in the past decade, doubling from 7 percent to 15 percent between 2004 and 2011, according to speaker Vivien Azer, vice president of tobacco and alcoholic beverages for Citi Research. Wine has become more affordable per serving compared to the alternatives, partly thanks to the average serving price of beer doubling from 2004--2011, she said.
While wine has been more innovative in the past four decades than beer or spirits with the promotion of varietal wine, that innovation is a weakness for wine because of consumer confusion and more limited ability to increase pricing, according to Ms. Azer.
That innovative edge is waning, she said. Explosive growth in craft brews -- this is the third year of double-digit growth -- is catching the attention of millennial consumers, who tend to like to be thought leaders in introducing taste discoveries to their friends. Also, flavored vodka and other distilled spirits are filling that thirst for exploration, but that proliferation in products in the adult-beverage aisle also is giving retailers cause to push back against producers and distributors, she said.