Wine market in 'transition' for growth in 2014, experts say

SACRAMENTO -- California wine producers  shipped an estimated 3.6 percent more wine to U.S. markets last year, and higher-end wines such as those made in the North Coast could benefit from a "transition" in supply and consumer tastes that favor quality and distinctiveness, according to experts at a major wine industry conference Wednesday.

California shipments increased to 216 million 9-liter cases last year from 207.7 million in 2012, while U.S. wine shipments rose 2.7 percent last year to 370 million cases, according to estimates by Gomberg Fredrikson & Associates based on state and federal data through October or November.

"The industry is in a state of transition from a severe shortage to a more balanced market," said industry analyst Jon Fredrikson of the Woodside-based firm to about 1,500 professionals in a Hyatt Regency ballroom during the "State of the Wine Industry" panel presentation Wednesday at the Unified Wine & Grape Symposium. More than 13,000 are expected to attend the gathering this year.

That transition came as a shortage of wine from smaller 2010 and 2011 California vintages, created a surge in grape and wine prices in the past two years, Mr. Fredrikson said.

Last year wasn't great for wine sales, but the industry is positioned for "strong" growth this year, he said, noting that wine shipments increased 50 percent since 2001. Yet alcoholic beverage sales growth slowed overall, he noted. Spirits sales rose 1.3 percent, while beer slipped 1.4 percent, despite growth in "craft" spirits, beer and cider.

Small wineries have been benefitting from more sales directly to consumers, now reaching 40 states nine years after the 2005 U.S. Supreme Court's Granholm decision started to open such access, he noted. Increasing e-commerce by physical and virtual wine shops are providing even more options for producers, while the "flash" sale website phenomenon has been waning as winery inventories dwindled, he said.

The volume of direct sales grew 9.3 percent last year, according to the latest figures from ShipCompliant, a major wine shipping regulatory compliance conduit.

Another important sales channel for high-end producers is the "on premise," or wine consumed in restaurants, airlines, cruise ships and other hospitality venues. Though the National Restaurant Association's Restaurant Performance Index recovered slightly at the end of last year, the on-premise market was "sluggish."

One cause is the number of slots available on wine lists at fine restaurants still haven't rebounded to levels before the recent economic recession.

"There have been complaints about paring of wine lists," Mr. Fredrikson told the Business Journal after his presentation.

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