While Napa cabernet grapes still in demand, sales stall elsewhere in California North Coast

Midway through spring, grape grower Andy Beckstoffer's crews are on the watch for frost among the 4,000-plus acres of vineyards his company farms across Napa, Lake and Mendocino counties.

In 2008, his workers fought to stave off potential damage from low temperatures. Today, Beckstoffer is no stranger to chilly markets for grapes over his five decades in viticulture.

Industries cycle between boom and contraction, and the wine business is no different, he observed. A common illustration of this is Turrentine Wine Brokerage's 'wheel,' showing trends as undersupply becomes oversupply after increased planting then back to not enough grapes and wine.

'Now we're probably in the bottom or maybe coming out a little bit at the bottom of a down cycle, but we'll come out in the next year,' Beckstoffer said. 'If we have a short harvest in 2020, we will come out of this in 2021, but if it is bigger, then we won't be out until 2022.'

That's because the record size of the 2018 North Coast crop (588,864 tons) and subsequent large harvest in 2019 have left the market overall with an ample supply of grapes and now excess wine. The 2019 harvest across the region weighed in almost 17% lighter than the record 2018 crop, according to the annual grape crush report.

North Coast tonnage brought into wineries last fall totaled almost 491,000 tons, making it the sixth largest for the region but on par with the five-year average. The 2018 crop was 18.0% above average.

Beckstoffer Vineyards farms about 1,000 acres in Napa Valley, 1,300 in Mendocino County and 1,800 in Lake County, where the company has been planting about 200 acres annually for the past five years in the Red Hills appellation.

There continues to be interest in one-year grape contracts, but how strong the grape market depends on the location of the vineyard, Beckstoffer said.

'The easiest piece is selling grapes - really premium grapes here in Napa,' he said. 'There's plenty of demand. And the pricing doesn't seem to be any different.'

It's a different story in Lake and Mendocino counties, Beckstoffer said. Cabernet sauvignon is a lot of what the company grows in those counties.

'There's just not many buyers at all,' he said. 'Because of the big 2018 harvest and the situation in Lake County where we got so big, so quick, we've got lots of gallons of bulk wine to sell. And (bulk sales have) picked up now.'

That's partly because of demand for bulk wine to backfill depletions from a surge in sales of popular premium-tier wines during 'pantry stuffing' purchases at grocery stores in the first weeks of the shelter-at-home public health orders to slow the coronavirus pandemic. But taking a big hit in the shelter order lockdowns of 'unessential' operations such as dining rooms at fine restaurants, a major market for high-end cabernet wines from the North Coast.

The price of that bulk wine is about half of what it was two years ago, though it is covering farming costs. Not counted in that pricing are some Lake County gallons produced after the 2018 wildfires there and became tainted with smoke.

Similar drops in pricing for bulk wine has been seen in Napa and Sonoma counties in recent months. In December 2018, excess Napa Valley cabernet sauvignon wine was selling in bulk for $25–$40 a gallon, with wine from the best appellations priced at the top end of that range, but in February 2020 it was selling for $18–$25, according to Turrentine Brokerage. Pinot noir from the choice Sonoma Coast and Russian River Valley regions was selling for $12–$14 a gallon at the end of 2018, with top-end vintage 2017 pinot fetching $2 more a gallon, and is now going for $7–$9. And chardonnay from those Sonoma County subappellations went from $12–$15 to $7–$9.

'If you're the cabernet business, you'd like to sell grapes this year,' Beckstoffer said. 'But if you can't, you can make bulk wine, then you got a year and a half to 2 years to sell it. But we're not afraid to go in the bulk wine business.'

But a few years ago, Beckstoffer embarked on an interesting marketing campaign to create a higher-end market for the Red Hills cab, which has been a supplement for Napa Valley fruit in times of undersupply. He worked with Napa Valley vintners who make wines retailing for $150 a bottle or more to make wines with the same techniques but using Red Hills grapes.

'I think we've shown what you can do with that fruit,' Beckstoffer said. 'And so when we come out of this time, whether it's coronavirus or this down market, we're very enthusiastic about where Lake County grapes can go.'