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.Grape market
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.
[caption id="attachment_96722" align="alignright" width="360"] Hot demand for cabernet sauvignon wine from Napa and Sonoma counties has drained local bulk inventory available for sale, while bulk-wine stocks are declining throughout the state as the possibly sizable 2014 winegrape harvest begins.[/caption]