It may take months to know the full impact of this year’s massive wildfires on North Coast wine businesses.
Some of the damage has been plain to see in the gut-wrenching images of the relatively number of wineries and vineyards that went up in flames. But those who provide the industry with capital and find homes for its excess fruit and wine are looking toward impacts that may take a while to uncover. Sonoma State University’s Wine Business Institute last week said it is starting an economic study of the impact of the fires on the industry.
About one-third of Silicon Valley Bank’s North Coast clients located in the path of the flames said they had employees who lost their homes. But impact on winery facilities has been limited overall.
“We didn’t have any clients that lost wineries,” McMillan said.
One lost outbuildings on the property. Another lost its tasting room, which accounts for a quarter of revenue annually for North Coast businesses. So far, none of the clients have sought to tap lines of credit or financing to replace inventory through purchase or sale of wine in bulk, he said.
PICK OR BULK
Some of Silicon Valley Bank’s North Coast grower clients opted to file crop-insurance claims instead of picking their grapes, after testing revealed potential “smoke taint” problems. Research has resulted in tests for grapes and wine by wine-focused laboratories such as ETS and Vinquiry of indicator chemical compounds guaiacol and 4-methylguaiacol.
Among the challenges with detection, according to the labs, are some grape varieties, namely syrah and merlot, naturally have higher concentrations of those compounds; extraction of color and tannin from grape skins also can pull out the compounds; fermentation concentrates the taint indicators; and exposure to toasted barrels can lead to false positives.
But indicators from market activity suggest the tonnage of grapes potentially affected is, while devastating to individual growers, limited in aggregate, according to Brian Clements, partner of Turrentine Brokerage in Novato. “We have a good quantity of Napa cab available for sale in bulk,” Clements said. High secondary-market pricing for excess Napa cab wine over the past couple of years had a growing availability. “Some that was pulled back by wineries, because they don’t yet know what the impact will be.”
Testing of wine made from suspect grapes in 14–16 months may reveal how much of the wine is salable in bulk.
More than 90 percent of the Napa Valley grape crop was harvested when the fires broke out Oct. 8, and 75 percent or more of the county’s king crop, cabernet sauvignon, already was in.
“If the fire happened a month earlier, it would have been a different story,” Clements said.
It may be spring before it’s fully known whether any heat damage from flames will impact the size of next year’s crop, McMillan said. The lender’s grower clients have been out inspecting vines that were near the flames for damage. That can include making cuts into the bark to gauge plant health.
“Everyone I’ve talked to has done cuts on the cambium layer of vines and found them still green and alive,” McMillan said. “There are questions whether heat can impact set for next year, and if the vines had buds whether the heat will kill them.”
Outside of situations where the fires raged through an entire vineyard, the anticipated long-term damage on the vines is expected to be limited, mostly on the edges of vineyards that were closest to the blazes, McMillan said.
While there are some vines and vineyards that will have to be replaced because of the fires, there are many more locations across the North Coast that are being redeveloped as vines reach the end of their commercially viable life, McMillan said. With the vine blight of phylloxera in the early 1990s, many North Coast vineyards were replanted with rootstock deemed resistant. Since then, North Coast viticulture and winemaking have changed, with the surge in high-end cabernet sauvignon since the late 1990s and the more recent trend toward mechanization-friendly vineyards.
Jeff Quackenbush (email@example.com, 707-521-4256) covers the wine business and real estate.