As North Coast vintners move through ample wine supply, Napa County adjusts rules for small vintners
The slackened thirst for purchases of excess North Coast grapes and wine is expected to extend into 2020, as vintners move the bounty of the 2018 harvest through sales channels that aren’t growing as fast as the influx.
And Napa County is expected to further gel in the new year its policies for dealing with winery permits.
“The 2018 crop was an anomaly,” said beverage industry analyst Jon Moramarco, managing partner of Santa Rosa-based BW 166. “2019 looks like it’s a more normal crop. But people are still going to be sitting on more inventory than they actually need. It’s going to be a year or two before people get everything balanced out.”
Last year was big for one of the North Coast’s biggest wine grape varieties. Tonnage overall for the region in 2018 was nearly 589,000 tons, up 18% over the five-year average and almost 26% from 2017, according to the latest crop report. For cabernet sauvignon, Napa County’s king grape and a pricing-growth standout at the high end, tonnage grew by one-third to a record 89,000 tons, up 28% from the average.
Napa cab wines often are aged at least two years before release, so production from the big 2018 crop won’t hit shelves for more than a year. While the official tally of the 2019 crop won’t be available until at least February, estimates from trade groups put the volume at about average to slightly above. The U.S. Department of Agriculture estimate for the California wine grape crop in August was 4.2 million tons, down 2% from 2018 but up nearly 8% from average.
That affected interest in purchases of Napa cab and other key varietal grapes leading up to harvest, shifting the grape seller’s market of the past few years into a buyer’s market, according to Brian Clements, partner of Novato-based Turrentine Brokerage.
“It’s more of a perfect storm situation, where we have a big crop last year, an average to above-average crop this year, and (winery) sales that didn’t meet projections. And so, therefore, it has an effect on (winery tank) capacity,” Clements said.
The incoming fruit has been coming at a time when the sales throughput out the other side of the winery is 3%-6%, depending on the winery and particularly true for vintners making wine for over $9 or $20 a bottle at retail, according to Moramarco. The latter is the market North Coast producers predominantly target.
U.S. wine sales overall last year were 407 million 9-liter cases, only up about 1% from 2017, according to Moramarco. And the projection of sales this year is for 411 million cases, another 1% growth year, he said.
“I will caution that with the tariffs with France and a few other countries, that could come down a bit, just because if they reduce their shipments in the U.S., that will have an impact on total shipments,” he said.
Vintners of wines at the higher and lower end in past business cycles have employed multiple avenues toward the rebalancing supply with demand, Moramarco said. Those include introducing new wines or secondary labels and selling wine in bulk at a discount to be blended into lower-priced wines. Other methods of moving inventory quickly during times of excess supply have included selling bottled wine as labelless “shiners” to be marketed under in a closeout venue and “flash” sale websites.