California grapes intended for pricey wines will end up in $20 bottles as high-end producers scale back.
By Corie Brown
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Friday, 30 October 2009 |
09:06
Get ready to pull some corks. Prices on high quality California wines will continue to plummet with the 2009 vintage, setting the stage for what could be a long-term realignment of prices.
California's recent grape harvest was of average quality and quantity -- but it wasn't business as usual. At the last minute, a surprising number of vintners dropped their contracts for grapes intended to go into their higher quality wines fearing that the market for those wines had disappeared. Overall, vintners slashed production of wines priced $30 and higher rather than risk adding to the stockpile of 2006 and 2007 wines still sitting in their warehouses or, worse, continuing the extraordinary discounting that has been the rule for the last year, according to vintners and wine industry representatives.
No worries the fruit is going to waste, however. Opportunistic producers such as Jim Clendenen of Au Bon Climat snapped up all the grapes they could find to expand production of wines priced $20 and under. Clendenen went on a buying spree as soon as he saw there was a surfeit of Pinot Noir grapes on the market. "I'm making more [Santa Barbara County Pinot Noir] in '09 than I did in '08," he said.
Au Bon Climat will make as much as 30 percent more of its $22 Pinot, said Jim Adelman, the winery's general manager. "We could be close to 30,000 cases." The winery produced 20,000 cases last year, three times the 6,900 cases it produced in 2007. [Below, see a video interview with Clendenen where he discusses grape prices and his thoughts on how to improve wine by increasing vineyard yields.]
Over-planting of Pinot Noir -- it's been five years, the time it takes for vines to mature and produce abundant fruit, since the film "Sideways" popularized the varietal -- has added to the market imbalance for that grape. But there is an excess of high-end fruit for many varieties. Grapes that in a normal year would have gone into wines costing $35 to $50 a bottle will end up in $20 bottles from producers throughout California.
There is a risk for vintners who expand production to take advantage of low grape prices, warned Joel Peterson, founding winemaker at Sonoma-based Ravenswood Winery. Flooding stores with better-than-expected, moderately priced wines could finish off the market for that brand's higher-priced bottles. If the brand's $20 wine is off-the-hook delicious, why would anyone pay $40 for its super-premium wine? "It's really tough out there for any wine over $25 to $30 a bottle," Peterson said.
Super-premium wines already are "a dead zone," according to many industry observers. Prices have been falling since January 2008, said James Stewart, who produces the value-oriented Slingshot wines in Napa Valley. "The very high-end market slowed down, then there was a huge drop in prices for wines priced above $40. Now, $16 a bottle is considered a high price," he said.
In Napa Valley, severe fall rains hit while the Cabernet Sauvignon grapes were ripening, potentially lowering the overall quality of the vintage. Wine prices that were already down an average of 15 percent, will fall further, Stewart said. "I think the drop is permanent. There is just too much inventory. Cult wine prices are down as much as 50 percent. Going from $300 a bottle to $150 doesn't make it an affordable wine -- but it is an unbelievable price drop."
Still, for his $20-and-under Slingshot wines, Stewart found the opportunity irresistible. He will release a Russian River Pinot Noir for the first time in the 2009 vintage. "I wouldn't have done it if so much good fruit wasn't available."
The entire wine market is in turmoil, explained Karen Ross, president of the California Association of Wine Grape Growers. For a generation, Baby Boomers consistently traded up to better and better wines. Now, restaurant wine sales are down. Wine club memberships are being canceled. "The economy has forced consumers to trade down," she said. "Wineries are under pressure to get costs down. High-end producers are cutting back."
Still, the overall volume of wines sales is up, primarily due to a boom in sales for under-$10 bottles. "This could lead to a long-term repricing for California wines," Ross said.
Au Bon Climat's Clendenen is betting on an increase in demand by the time this vintage arrives in wine stores in 2011. "The market may never come back for overpriced wines," he said, but he figures there will always be buyers for brands that consistently deliver high quality at a reasonable price. How big is his bet? He didn't stop buying grapes until he ran out of barrels.
Corie Brown, the co-founder and general manager of Zester Daily, is an award-winning food writer at work on a book about climate change and wine.
Photos by Chris Fager
1 of 5
A Refosco vineyard next to the Au Bon Climat Winery near Santa Maria, California.
Just harvested bins of Syrah grapes waiting to be crushed at Au Bon Climat.
A bin of Syrah heading to the crusher.
Syrah grapes being dumped into the crusher.
Oak barrels stacked up outside the winery soon to be filled with the 2009 vintage.
A Refosco vineyard next to the Au Bon Climat Winery near Santa Maria, California.
Just harvested bins of Syrah grapes waiting to be crushed at Au Bon Climat.
A bin of Syrah heading to the crusher.
Syrah grapes being dumped into the crusher.
Oak barrels stacked up outside the winery soon to be filled with the 2009 vintage.
For years, wine prices were simply absurd - a correction was in order - when folks have so much available $ they have trouble finding things to do with it, the "better" wines on the market are not those with better quality, but those with higher prices.
Get ready to pull some corks. Prices on high quality California wines will continue to plummet with the 2009 vintage, setting the stage for what could be a long-term realignment of prices.
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