California North Coast vintners see visitors, restaurant sales return

What a difference it is in the North Coast from a year ago, when local wineries and restaurants were starting to reopen from the first shelter-at-home order that went into effect statewide in mid-March.

That was reversed in early July 2020, less than a month later, followed by the color-coded tier system in late August that limited patron capacity based on county case metrics.

Napa County on Wednesday moved into the least-restrictive, yellow tier. Wineries, restaurants, breweries and distilleries can expand indoor capacity to the lesser of 50% or 200 people. Outdoor activities had already been gaining momentum, as Memorial Day visitor counts paralleled pre-pandemic levels, according to news reports.

“There's definitely a lot of life in the valley right now — a lot of guests enjoying themselves,” Trefethen Winery President Jon Ruel told the Business Journal.

Demand for wine in kegs recovers

One proverbial canary in the mine that Ruel has been watching is Trefethen’s keg business, which is a small subset of the vintner’s wine that goes to restaurants. Because the kegs go directly to restaurants, it’s a quicker gauge of demand from restaurants than depletion of cases stored at distributors’ warehouses, he said.

“Our keg orders picked up faster and stronger than I was expecting in February and March,” Ruel said. “And then as we get into April and May, I could see they were going not just to our accounts in Florida and Texas, where I would expect, but also to accounts in California.”

Sonoma-based Free Flow Wines got a one-two punch from the shutdowns of restaurants, bars, large events and other on-premises consumption venues in the pandemic, according to Heather Clauss, chief commercial officer. The Sonoma-based company serves the on-premises market with kegs and cans of wine.

An oxygen-free process transfers fine wine into 19.5-liter “bullet kegs,” equivalent to 26 standard 750-milliliter bottles, destined for on-premises venues for by-the-glass programs. That nearly came to a half in the early months of the pandemic, as distributors sold through existing inventory to support the few venues that were open, Clauss told the Business Journal.

“When we initially forecasted 2021 kegging, we expected a slow recovery building from 35% of 'normal' volumes in (January) to 75% by year end,” Clauss wrote in an email, noting that the company considers 2019 to be a “normal” year for sales volume. “We've been pleasantly surprised however to see a much quicker recovery than expected….”

Requests to fill kegs surged in April and May to 85% of 2019 levels, and June and July volumes now approaching pre-pandemic levels.

“Keg shipments are trailing similarly,” she wrote.

A major market for wine in aluminum single-serving cans is event concessions and other on-premises venues, and Free Flow Wines say a fall-off in filling jobs in mid-2020 as orders from concessions at events and other on-premises venues dried up, Clauss said. But demand for canned wine has recovered, and the company is seeing “strong demand” for jobs in the third and fourth quarters of this year.

“In sum, we feel hopeful the on-premise recovery will be better than expected, as there were fewer permanent closures than initially anticipated and consumer enthusiasm to go out and drink is strong,“ Clauss said.

Florida and Texas, which are among the key states for fine-wine consumption, started relaxing pandemic restrictions on indoor dining months ago. Most California locales were barred from indoor dining for a third time from late November through the first two and a half months of this year.

Wholesale orders bounce back

At Schramsberg Vineyards on Diamond Mountain in Napa Valley, proprietor Hugh Davies has been watching wholesale depletions for on-premises accounts bounce back from pandemic lows.

In January–April 2020, which includes a month and a half of shutdowns of restaurants largely nationwide, distributors delivered 4,426 cases of Schramsberg portfolio wines to restaurants, including a “shockingly low number” of just 155 that April. In the same four months of this year, including the closure of California restaurants in January, 5,614 cases were depleted from wholesalers, with 1,920 in April alone.

He’s eager to see what May depletions look like, because more restaurants were opening at higher capacity.

“It is so exciting to see the on-premise (market) grow, because for a while there the only thing you really could do through the wholesalers was sell more retail,” Davies said.

Jim Pedroncelli, proprietor of Pedroncelli Winery in Sonoma County’s Dry Creek Valley, is eager to get his wine back into restaurants again.

“Generally speaking, it's still more off-sale than on-sale,” Pedroncelli said, referring to off- and on-premises-consumption accounts, in other words, retailers and restaurants. “As far as the restaurants go, that hasn’t caught back up for us anyway.”

But good news for North Coast vintners is that the economic pain on restaurants — key buyers of their wines — may end up being less than anticipated even six months ago. The National Restaurant Association’s latest survey of operators, conducted in mid-April and released last month, found that 90,000 restaurants across the country have closed permanently or long term, or under 14% of total restaurants, down from the December estimate of 110,000, or 17% of establishments, Bloomberg reported.

Winery events return as restrictions ease

At Barra of Mendocino, events are a key source of revenue, according to proprietor Martha Barra. The 20,000-case-a-year winery in 2019 hosted 63 events, about one-third of which were for nonprofits, at the Redwood Valley property north of Ukiah. But none were held between mid-March 2020 and when Mendocino County entered the yellow tier in late April of this year.

“We had a couple of very small events out in the garden, but nothing inside, but now that's changing,” she said.

Since events resumed at the property in late May, the summer schedule for the outdoor grounds and garden is starting to fill up with weddings and quinceanera events.

At Schramsberg, Davies is happy to see visitors to the winery again, because in the past 14 months, the number of visitors has averaged 40% below typical seasonal trends for the winery.

“Between fires, COVID, power outages, they didn't make it easy,” Davies said.

Jeff Quackenbush covers wine, construction and real estate. Before the Business Journal, he wrote for Bay City News Service in San Francisco. He has a degree from Walla Walla University. Reach him at jquackenbush@busjrnl.com or 707-521-4256.