Grape Market Insights: Flagging down a cab challenges North Coast vintners
Monday, July 25, 2011, 5:05 am
Categories: Agriculture, Columnists, Commentary, Industry News, Wine Industry | No Comments
When you don’t need a cab, they are all over the place. But, when do you need a cab, they disappear — or they are all committed. I am not talking here about yellow cars in the city but about cabernet sauvignon vineyards in the North Coast.
The supply side of the wine business is cyclical. Sometimes it whacks you on one side of the head — excess — and sometimes on the other side — shortage. This produces a kind of balance but there really must be a better way. We figure that it now takes about 14 years to complete a cycle, with roughly seven years of excess and seven years of shortage. Of course, consumer trends and economic factors on a global basis can make parts of the cycle longer or shorter.
Our company has been informing our clients about these cycles for many years, because playing the cycles well is critical to wine business success. Of course, every cycle is different and each variety is in a slightly different position. The biggest challenge is that it is very hard for people to believe, when supply has been short, that it will become long again and, when the market is long, that it will ever be short again. The “flip” can occur quickly and violently and can hurt those who have not planned for it.
The market for cabernet sauvignon in the North Coast, especially in Napa and Sonoma counties, was on the verge of flipping in 2008, but the worsening recession intervened and moved the market in the opposite direction. Over the next couple of years, consumers increased total wine consumption slightly but traded down in price point, or the bottle price they were willing to pay. Winery sales to restaurants declined due to both fewer consumer purchases and to depletion of restaurant inventories and reduction of the number of wines on the list. Wholesalers also reduced inventories.
Because of these trends, wineries had to reduce casegood inventories. Some very strong brands were able to do this mostly by opening up new channels. Others were forced to discount casegood prices and sell off grapes and wines in bulk, usually at prices below cost.
This caused the luxury markets to become temporarily oversupplied, and prices for grapes and bulk wine dropped dramatically. However, this oversupply was due to a vigorous response to the recession and not to overplanting. In fact, in the last few years, there has been very little planting even though sales increased.
Although the economy remains weak, premium wine sales at retail have slowly improved, and the 2011 crop appears to be down from 2010 for almost all varieties. Bulk market supplies of cabernet sauvignon, especially, have been mostly snapped up. Buyers late to the grape and bulk wine markets are left with limited selection and higher prices. Crop size will, of course, affect the market each year, but as long as consumer sales continue to grow, the “flip” to relative shortage is likely to persist until enough new acres are planted and come into production.
Of course, it has not been an ideal situation for growers either. Mother Nature has been playing hardball with rain at harvest last year and rain during bloom this year. Grapevines are self-pollinating — bees aren’t required — so wind and rain during bloom hinders pollination and reduces crop size.
Most of the growers I have spoken with agree the 2011 North Coast cab crop is down at least 15 percent.
Put it all together — few new plantings, growing sales, a supply chain that needs to be replenished and light crop expected in 2011 — and it is no wonder that flagging down a cab in the North Coast has become a tough job.
The Ranch Winery Expands to Meet Shifting Needs of Industry
Innovative Custom Crush Operation Offers Flexible, State-of-the-Art Solutions for Modern Wine Industry
Saint Helena, CA — (June 22, 2010) The Ranch Winery announces the next phase of development, offering an expanded hospitality footprint and additional crush pad and bulk storage cooperage; making them arguably the most flexible custom crush option in Northern California, and a sophisticated and cost sensitive solution for vintners seeking a home for wine production, bottling and storage.
“By expanding our facilities we are able to offer an even broader range of options to meet the needs of clients both large and small,” says Bob McCaffrey, General Manager. “Growing tank space and barrel storage, as well as enhanced certification and hospitality options can benefit our existing clients and are certainly a draw to producers looking for production space that can grow as they grow. It’s an incredibly flexible and cost effective solution for many people seeking to make and store wine without building or expanding a winery.”
Joel Gott, who originally helped to develop and concept The Ranch notes, ”The economic downturn has created a situation where some labels have opted to delay investments in infrastructure — making The Ranch a very sensible production choice. Ironically, this same financial climate has created enormous demand for value brands, and with newly expanded capacity of more than 800,000 gallons of tank storage, The Ranch is uniquely equipped to service these needs as well.”
For the 2010 harvest, The Ranch Winery can accommodate large bin processing and is seeking to increase grower programs. The full-service facility offers both production and brokerage services for bulk wine, and the expanded storage capacity includes a variety of flexible tank options ranging from 300 to 100,000 gallons, as well as a temperature and humidity controlled barrel storage facility. This allows The Ranch Winery to offer scalable storage solutions to meet any project need. The Ranch is CCOF certified, and is completing the HACCP and ISO-9001 certification process
In addition to offering the widest range of secure, temperature controlled tank and storage options of any custom crush facility in the Napa Valley, The Ranch Winery also features state of the art bottling lines supported by an experienced production team. The veteran in-house crew collaborates with visiting wine makers to support their wine making activities, meeting the highest standards for crush services, wine storage, treatments, and bottling needs.
The Ranch Winery was developed in 2006 by industry innovator Joel Gott to provide an unparalleled production complex offering creative and flexible solutions for an ever evolving industry. For more information, please visit http://www.ranchwinery.com or call Gretchen Brakesman at 707-286-2690.
I have been wondering what makes a company leave one custom crush and move to another. From what I have heard it is either equipment or customer service issues. What does a CC facility have to do to keep a client? You work out special pricing, ,make sure that the communication is in place and that the execution of the work orders happen on time. What else do clients want? What are the true expectations? I hope to find out in coming months.
My how the year has already flown by. I can’t believe that harvest is around the corner and there is still too much to do. I think this year is going to be just like 2007. Steady , nice yields and great quality. I am looking forward to TRW’s 3rd harvest. Should be our best yet.