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Napa, Sonoma cabernet sauvignon winegrape pricing pushes North Coast to new record

JEFF QUACKENBUSH

NORTH BAY BUSINESS JOURNAL | February 10, 2017

While North Coast winegrape tonnage last year came in slightly below average, the value of the region’s 2016 crop hit a new record of $1.45 billion, getting a big boost from double-digit price increases in cabernet sauvignon grapes from Napa and Sonoma counties, according to figures released Friday.

Tons crushed from Sonoma, Napa, Mendocino and Lake counties last year were nearly 491,000 tons, up 21.9 percent from 2015 but down nearly 4 percent from the five-year average, according to Business Journal analysis of data from the California Grape Crush Report from the U.S. Department of Agriculture. That’s the equivalent of 6 million more standard 9-liter cases of wine, at 165 gallons of wine per ton and 2.4 gallons per case.

It was the fourth-largest winegrape crop for the region in more than a decade, behind those of 2012–2014. The previous North Coast record for winegrape crop value was $1.42 billion in 2014, which it was propelled by a 531,000-ton crush. The value of the crop in Napa County increased 28 percent last year to $685.6 million; in Sonoma, 28.9 percent to $566.9 million; in Mendocino, 35.9 percent, to $117.1 million; and in Lake, 23.0 percent to $75.8 million.

The annual crush report is the first official look at the scale and value of last year’s crop and is closely watched in the wine business as a benchmark for grape and bulk-wine sales. And what it has to say about supply and pricing is startling, market watchers said.

The California winegrape crush last year weighed in at 4.00 million tons, making it the state’s third-largest behind the 4.02 million tons of 2012 and 4.25 million of 2013. The statewide weighted-average price per ton reached a record $789, up 14.0 percent from 2015 and 4.2 percent above the five-year average.

NORTH COAST IS ‘SUPPLY-CONSTRAINED’

Put simply, it’s a seller’s market in the North Coast. Demand for many of the high-end grapes grown in the North Coast and other prime winegrowing regions along the California coast is higher than what has come off the vines in the past two years, and maybe even if there’s a good-sized crop this coming harvest, said Brian Clements, vice president and partner for Novato-based Turrentine Brokerage, which matches sellers and buyers of grapes and bulk wine.

“The North Coast is very much supply-constrained,” Clements said. “There are not as many grapes available as one would think, and the price is high.”

NEW HIGHS FOR NORTH COAST PRICING

Average prices for all winegrape varieties Napa and Sonoma counties jumped by 8.5 percent and 6.2 percent last year to new highs of $4,678 and $2,561 a ton, respectively. Napa and Sonoma prices were nearly 17 percent and over 10 percent higher than the counties’ five-year averages.

The average pricing for Mendocino and Lake county grapes last year rose 4.5 percent and 1.2 percent to $1,660 and $1,517 a ton. And those prices are 3.6 percent and 9.8 percent above the county five-year averages.

Sonoma and Napa counties tonnage weighed in at 221,400 and 146,600 tons, respectively, up 21.4 percent and 18.0 percent from 2015, when weather dampened tonnage by more than a quarter from the bumper crops of 2012–2014. Yet Sonoma and Napa tonnage last year still was 7.5 percent and 8.8 percent below their five-year averages.

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But coming in above average in tonnage were Mendocino and Lake counties. Respective tons crushed of 77,200 and 45,700 were 13.3 percent and 11.6 percent above average. Lake County was the only part of the North Coast that didn’t take a tonnage hit between the 2014 and 2015 crops.

HUGE JUMPS FOR CABERNET SAUVIGNON

Cabernet sauvignon is at the pinnacle of U.S. winegrape pricing, Clements said.

The Napa County average cab price last year had its biggest jump since the much-smaller-than-expected 2011 crop sent vintners scrambling for grapes. The average county price for the red grape last year rose 10.5 percent to just shy of $7,000 a ton.

“It was the fifth consecutive year of record prices for Napa cab,” Clements said.

To put the 2016 Napa cab average-price increase in perspective, the $659-a-ton leap to $6,943 was nearly equal to the whole California average 2016 winegrape price of $789. And the Napa cab average price was nearly 18 percent above the county’s five-year average.

Looking at it another way, $7,000 a ton could require the resulting wine to sell for $70 a bottle to cover all the costs to get it to the consumer, based on the oft-cited rule of thumb from North Coast viticultural icon Andy Beckstoffer. That’s up $20 a bottle from just five years ago.

“If wineries weren’t selling cases and didn’t need it, they wouldn’t be paying it,” Clements said. “There is buyer fatigue and buyer frustration, but there is confidence among wineries they can sell the wine. People remain excited in the luxury side of business about selling it.”

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This cabernet sauvignon grape-pricing growth is tracking with nationwide trends toward strong sales growth for higher-priced red wines, particularly cabernet sauvignon and blends of red wine.

Cab from Sonoma County enjoyed an even bigger percentage pricing bump last year than Napa’s, rising 12.1 percent to a new record price of nearly $3,000 a ton. At $2,954, the price was 15.2 percent above Sonoma cab’s five-year average.

Lake and Mendocino average cabernet sauvignon pricing rose 8.8 percent and 8.5 percent last year to $2,100 and $2,331 a ton, respectively. Reflecting demand for cab grapes to fill shortages in Napa and Sonoma counties as well as the California Central Coast, Lake and Mendocino cab pricing is 19.0 percent and 14.4 percent above their five-year averages.

CHARDONNAY PRICING RISES MODERATELY

The top two North Coast winegrapes by tonnage are cab and chardonnay, each weighing in last year at 131,000 tons, for by 24 percent from 2015 but down 2.0 percent from the five-year average. But chardonnay grapes from the North Coast provided the equivalent of 1.76 million more cases of wine to 1.49 million more for the region’s cab.

Sonoma chardonnay led the way with 73,400 tons, up 14.3 percent over 2015 but down nearly 7 percent from average. County average pricing for the variety was $2,140 a ton, up 3.4 percent for the year but 7.2 percent from the five-year average.

Mendocino may be known for its Anderson Valley pinot noir, but the county’s chardonnay crop topped Napa’s in tonnage last year for the first time. The 30,000-ton Mendocino chardonnay crop was a whopping 64 percent larger than in 2015 and 23 percent above average. But Mendocino chardonnay pricing was among the few major North Coast varieties to have flat grape-price growth last year, off just $6 a ton to $1,261.

At 25,000 tons, the Napa chardonnay bounced back 19 percent from 2015 but was almost 11 percent below average. Pricing growth last year and compared to the five-year average, however, matched Sonoma’s, coming in at $2,617 a ton.

MENDOCINO PINOT PRICING COOLS

Pinot noir, the prized yet fickle red grape grown mainly in cool coastal climes of Sonoma and Mendocino counties, bounced back in tonnage last year, jumping by one-third and tying with the 58,000 tons of 2006 for fourth-largest crop for the variety in the North Coast.

Sonoma pinot noir pricing rose 3.4 percent to $3,657 a ton, up 10.8 percent from the five-year average. Tonnage for the variety in the county increased 31.5 percent from 2015 to 40,400 but was almost 11 percent below average.

Napa pinot pricing grew 3.4 percent to $2,737 a ton, 7.2 percent above average. That was about equal to Mendocino’s $2,727 a ton.

However, Mendocino’s pinot price slipped 6.0 percent from 2015 as tonnage soared 45 percent to 9,420 tons. That was the largest crop for the variety in the county since 2006.

The North Coast winegrape appellation also includes western Solano, whose winegrapes aren’t separated in official figures from lower-priced grapes in the eastern part of the county.

Jeff Quackenbush (jquackenbush@busjrnl.com, 707-521-4256) covers construction, commercial real estate and wine.