Is it time for California North Coast wineries to take back the wine shipping discounts?

Local business trends for 2023

The first week of the year, the Business Journal offers insights from local experts on what’s on the horizon for the local economy.

Wineries are smarting from rising costs for shipping cases or smaller boxes of wine to consumers, and some are wondering whether they have to keep shouldering the cost.

“We have to claw back some of these giveaways, we have to start slivering, charging more for shipping because it's just crazy,” said Prema Behan, co-founder and general manager of Three Sticks Wines and Head High Wines, Sonoma County ventures of longtime industry investor Bill Price III. “We deepened our shipping discounts during the pandemic just out of fear.”

Far Niente Family of Wineries & Vineyards similarly struggled over its shipping deals.

“We were generous with our shipping deals during COVID defensively, and I think that worked for us OK during the COVID,” Chief Financial Officer Dana Vivier said at WBM Events’ Wine Industry Financial Symposium. “And it's been a little bit scary to try and pull those shipping deals back.”

That’s because just as shipping costs are soaring for the winery, they would be also biting for the consumer, she said.

“We asked ourselves, ‘At what point is the consumer just going to go to the grocery store on the corner and buy their wine — even if it's a different wine? So what's going to keep them from wanting to buy our wine (direct to consumer)?’” Vivier said.

That’s where the Napa Valley-based producer of brands such as Far Niente, Nickel & Nickel and Bella Union has worked to consider the perceived value of its direct-to-consumer experience — like exclusive wines and events.

“We're really trying to be creative to meet the consumers and just keep them engaged, keep the benefits to being a wine club member, so that they do want to pay for shipping,” Vivier said. “Shipping and labor are definitely our biggest (budget) line items for (direct to consumer).”

Demand for North Coast chardonnay

The outlook for North Coast wine grapes is upward movement in prices for one of the region’s biggest varieties, according to market experts.

Demand for chardonnay suffered after a huge 2018 crop, leading to vineyards being pulled out around California, but then came the “pantry stuffing” consumer buying trend in the early weeks of the pandemic in March and April 2020, according to Christian Klier, North Coast grape broker for Novato-based Turrentine Brokerage.

On top of that rise in demand has come a decline in supply, exasperated by three straight years of drought and the less large-scale replacement of older, less-productive vines because of rising farming costs, Klier said.

“There have been no new plantings really to speak of with chardonnay in all the North Coast, and that has led to a more balanced market, with high competition for the fruit that is available,” Klier said.

With deal-making in progress after harvest this year, it suggests that the weighted-average price for Sonoma County chardonnay has been going up this year, and that will continue into early 2023, Klier said. The county average for 2021 was $2,277 a ton, according to the U.S. Department of Agriculture’s California Grape Crush Report.

That’s being reflected in the market for wine sold by vintners in bulk, according to Turrentine broker Marc Cuneo. The company had just 50,000 gallons of bulk 2021 Sonoma County chardonnay available to sell, way down from what was on the market in 2019 and 2020. And the price has rallied from a low of $5 a gallon in 2020 to the mid-$20 range by late 2022.

Jeff Quackenbush covers wine, construction and real estate. Before coming to the Business Journal in 1999, he wrote for Bay City News Service in San Francisco. Reach him at jquackenbush@busjrnl.com or 707-521-4256.

Local business trends for 2023

The first week of the year, the Business Journal offers insights from local experts on what’s on the horizon for the local economy.

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