Grape Market Insights: Games people play

I enjoyed the Games of the XXX Olympiad. You’ve got to love Michael Phelps with his lifetime record of 22 Olympic medals, including four gold and two silver in London. I keep thinking that could have been me with "The Star-Spangled Banner" playing and all the world applauding -- if only I had learned to swim! Really though, all of the athletes from all over the world inspire me. I thrive on the intense competition, the superb performances, the joy of victory and even the agony of defeat.

It reminds me, of course, of the grape business. Every year, grape growers compete in a race to ripeness against a fickle Mother Nature: now hot, now cold, now dry, now wet. There is also the hurdle race to quality, a difficult race in which the finish line, (i.e., the parameters of quality), are nebulous. And we cannot forget the most urgent game of all, the race, often a marathon, to profitability. In the end, income must break the tape before expenses, and do so by enough margin to make a decent return on investment.

What makes the Grape Games interesting is that growers must engage in all three of these races at the same time. It would be like asking some brave soul in London to compete in swimming, archery and weightlifting all at once. Try doing that bench press with your right hand while you’re dog paddling with your legs and shooting an arrow with your left hand.

Winery grape buyers get their own exciting events. In years of serious excess, however, they find themselves in the uncomfortable position of competing right along with their own growers as they are ordered to sell off excess fruit from winery-owned-or-contracted vineyards. In better times, and 2012 is definitely looking like better times for the wine business, grape buyers compete mostly with each other to sign up an ample quantity of high-quality fruit at prices that work for their programs. A piece of cake, except that there is not enough fruit to go around and, in the asking price competitions, growers have been specializing in the high jump -- and even the pole vault.

When the Olympics are over, there is a spectacular closing ceremony and everyone goes home. In the Grape Games, however, the games never end. And, in the middle of all of the competition, you must constantly build cooperative relationships. Growers need good relationships with their winery clients, who set standards and write big checks. Wineries need good relationships with their growers -- their growers determine how much fruit they are going to get and how good that fruit will be. A lot of my job is helping growers and wineries sort out what they should be doing, how they are going to win and how are they going to win in a way that is fair to other parties and facilitates appropriate long-term cooperation. We call it win/win/win. It’s the ultimate gold in the Grape Games.

An often under-appreciated key to victory in the Grape Games is access to the best information about long-term trends and current market conditions. Let’s take Sonoma County Pinot Noir, for example.

Sonoma County Pinot Noir was hit with a double blow the last few years. First, a strong Pinot Noir market (stimulated by the 2005 movie, Sideways), encouraged some new planting. Second, as those new vines started coming into production, the recession reduced high-end demand. The graph above shows the resulting back-up of inventory on the bulk wine market, which indicates that the high-end casegood market was also stalling. A little lighter crop in 2011 plus improving sales, especially sales below $25 per bottle, has now drained the excess, although much of the sales growth would seem to be at price points unsubstainably low for Sonoma County growers and wineries.

No one knows what the remainder of the season will bring but, so far, Ma Nature has been playing nice in 2012. The crop load seems about average (i.e., two clusters per shoot) and ripening is proceeding in a timely fashion. Nearly all 2012 spot market Sonoma County Pinot Noir grapes have been sold, either for one year or under multi-year agreements. Prices have been mostly above $2,200 per ton for non-Russian River appellations and above $2,500 per ton for Russian River. We have also seen an increase in demand from buyers interested in early harvest Pinot Noir for Champagne. Currently, there is moderate demand for Sonoma County Pinot Noir wine in bulk ranging from $25 to 28 per gallon for appellations outside Russian River and $30 to $32 per gallon for quality Russian River lots....

Brian Clements is vice president and partner of Turrentine Brokerage (, a Novato-based marketer of winegrapes and bulk wine in California and abroad. The company produces proprietary data on global markets, bearing and nonbearing acres, projected tonnage for the next five years, bulk wine inventories, spot market grape prices and collateral value trends.

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