[1]

Wow, it's amazing to me how some within the industry seem to do their best to find a negative spin. There are always challenges, there are always opportunities... For the record T-Vine has had the best Jan/Feb in our 17 year history and I’m incredibly grateful and pleased to spread some good news. It seems we're addicted to the negative and believe me I’m a realist but I also believe in manifestation and focus. So give me the positive, celebrate our accomplishments, rejoice in the fact we're in such an amazing industry where if all else fails we can consume our art and slow down our lives a bit.

Peace,

Greg Brown, T-Vine Cellars

[2]

Dan:

A well-thought out piece; and probably good to have a dose of realism against the over-enthusiastic mood that dominated the Symposium.


One point that you make is that Ciatti says that the bulk market for wine is improving - brisker sales at higher dollar prices. This IS reason for real optimism among grape growers. There were plenty of growers who have had no choice but to sell their bulk wines at a loss, or leave grapes on the vines after the monumental 2005 vintage overloaded the bulk market. Now that wineries have built programs to utilize those supplies, buyers are back in the market, shopping for wines, lifting the prices to at least marginally sustainable levels - as the supply dwindles, these wineries will be shopping for grapes, setting up new contracts that growers depend upon to continue farming. This is good news.


Regarding Italy and Spain - these have been hot areas to source bulk wines and fruit - but even this past year a large Italian cooperative stopped selling their grower's Pinot Grigio to a large US company, in order to start bottling and shipping their own wine mostly within Europe. Wines that were imported into the market last year, with a lower Euro, will likely have to raise their prices (at least in dollars, landed in the US) drastically - I think that the $6 Italian wine will soon be an $8-9 wine here, and these lower price points are very sensitive to increase. That could have enormous effect, creating opportunities for US companies. For the same reason, Spain will probably continue to figure in the US market, and even gain share, but it will be for quality wines from the enormous stock of old-vines; Spain probably cannot become the 'New Australia' as some have suggested it might.



I am not surprised at the 30% market share of foreign wines in the US, and even as a domestic wine producer, I welcome it. The wine drinker in the United States is incredibly promiscuous; it drives wine marketing people crazy! There is a level of curiosity and sense of adventure here that drives demand for wines (and all other consumer products) from all over the world. People want to learn about wines, taste wines from places that they have visited, and try the 'hot new thing.' European consumers in very general terms, see wine as simply a beverage, and are incredibly price-conscious (although that is starting to change). I believe that with such a curious, engaged consumer base right here in our back yard; with the US really starting to show signs of making wine a part of their every-day life; with the elevated Euro making visits to Napa, Oregon, and the Central Coast much more viable than Tuscany; there are a lot of opportunities for domestic wine companies that are willing to present their customers with value, quality, and authentic products. I am overall pretty optimistic about the near future - we can compete on quality with anyone in the world, and United States consumers are as interested in quality and authenticity as their counterparts anywhere else in the world.

[3]

Dan Berger, as he usually does, provides a different and unique perspective of the changing wine market; from the Regional Diversity of the traditional market to the Global Mediocrity of cheap but non-distinctive yet drinkable modern wine that is now available. Ten years ago I was hard put to find a wine that I could drink, let alone enjoy, from many of these new players. Now with the advent of the "Scientific Winemaker" and the application of modern winemaking techniques they are suddenly "drinkable" and thanks to the ethanol "buzzable" quaffs. But will the world turn their back on traditionally made wines from areas of Regional Diversity? I don't think so. The small and unique producers who make a wine that's mainly about the varietal and the geography in which it is planted can sit on the sidelines and watch the "Wooly Mastodons" battle to their inevitable extinction and still remain viable producers of their unique products based upon the thousands of years of evolution of the traditional winemaking philosophy. Bonaparte knew what he was doing when selecting the Chambertin with yellow seal to drink alongside his Bouillabaisse. I still make the same selection.



Thanks to Dan for his insights into the changing marketplace of the Global Wine Industry.

[4]

Dan:

Thanks for the enlightening article. We often get the question from our students or tourists at the winery I work at (Newport Vineyards): ”How come these foreign wines are so much cheaper than the local or California wines?” We explain that the major cost of a finished bottle is the land and labor, which gives other countries the advantage over the US, with the one exception being the Central Valley in CA.

[5]

Interesting article, I appreciate your effort.

[6]

Sorry Dan, I think that your glass is half empty and mine is half full! The global wine industry is indeed complex; yes, two experts (particularly economists) side-by-side will argue on what is wrong and what is good in this business. If we have flaws and fissures in California, don't you think that the rest of the world has them too?

[7]

Dan,

The 'report of my death' is greatly exaggerated. California growers and wineries do not have a 'wine industry' any more than restaurants have a 'dining industry'. Certainly there are factors that have broad consequences for either (or both) of these so-called industries (i.e. the economy). But most participants in both of these businesses continue to operate successfully. This is true in spite of well-deserved negative criticism of marginal players in both of these business categories. Spot market sales and bulk wine sales are not the majority of business transactions in our grape-wine world. There are certainly more long-term relationships and contracts that reflect a win-win approach where growers and wineries cooperate to take advantage of the opportunities in the market. We also suffer from the same weak moments. I am concerned when we talk about the weak segments or situations in our business as if they were typical that we will initiate a 'self-fulfilling-prophesy' that tells consumers and industry growers and vintners what they should think, instead of what they could think. If as a result we successfully diminish the enthusiastic planting of appropriate grapes in appropriate areas, then we will definitely have to have more imports to fill the increasing demand by the American public for new and interesting and affordable products. Read between the lines. As John Fredrickson said in Sacramento, "there is an explosion of wine sales". The California industry can celebrate right along side of our foreign competitors (who are substantially our American/multi-national corporations filling as many niches as they can). Things can always be better, but we have to do our part to prepare for any future success. I am preparing!

~ Rich

[8]

Hey Dan!

Isn't it wonderful how competition concentrates the mind? And as your article points out, now we can all get thinking... Your writing begs the question: Who are we? Who am I? And how can I make a buck being me, doing what I love to do? I hope everyone wraps their mind around that one and not the 'numbers'. I have thought about the question, and I went from making 4 million cases 15 years ago to making 10 barrels. Both things were/are exciting, but the 10 barrels I really know. And I meet people all the time that want to know them too. The most significant trend afoot is that people really want to know. The statement "that imports are here to stay" is wonderful news for small US producers. Why? Because the imports are increasing most where there are distinctive wines being made. This is solid cause for optimism. So how do you make a buck? Be you, be distinctive, but don't believe your own B.S. Believe what the eyebrows of your customers tell you. If they pull together, you are in a blind alley. If they go up, you can too.

I send a bunch of my best,

Bruce H. Rector,

Ahh Winery

[9]

Great article Dan,

Having been in the Californian wine industry on and off for the past 3 years I am not surprised that my home country [Australia] has done so well in the US, when you factor together low unit cost supported by relatively favorable exchange rates, fruit oversupply irrespective of what the 2024 report stated, and federal and industry investment into technical (AWRI) and export (AWBC, AWEC) bureaus some 30 years ago - paid for by crush levies from the industry for the industry. Along with this add the magnificent appointments of extraordinary export promotional staff (Jan Stuebing in US and Hazel Murphy in the UK to name a few), plus the Australian Government’s Export Market Development Grant scheme, and you have the recipe for a unified "Brand Australia" invasion. I am constantly amazed at the industry fragmentation that exists within the US market, reminiscent of structures in a similar country like South Africa. For such an intellectually advanced consumer country it is fascinating how slow industry reaction is to changing trends both nationally and internationally. But all the same, I still love the "can do" environment that exists in this country when compared to other international producers.

[10]

While I have been something of a Cassandra here for a couple of years now and certainly agree with the tenor of Dan's report, the Central Valley / Coastal comparison may be a bit specious in that acreage is being compared rather than the overall yields from that acreage.

[11]

Dan, I'm not surprised you were confounded by the industry data. Who isn't? The "wine industry" isn't monolithic. It is so many different things to so many people, that gauging its health (whatever that is - sales? profits? wine quality? acres? people employed?) seems a job for Hercules, M.D. As is implied in some of the responses, success and failure, profit and loss, happiness and disappointment, exist in a sort of equilibrium within the "wine industry". The part of it that is on parade at the Unified Symposium is pretty much the Big Biz ambitious guys-and-dolls-in-suits-and-nice-shoes show, with a few pony tails, organic hemp skirts, Hawaiian shirts and sandals thrown in, because this is wine, and we can. That wine industry may well be looking into a rose-colored mirror. But then, many of those people's jobs depend on their ability to do just that, and then sell that story to their Board of Directators. I don't think this part of the biz is bad. I am, however, personally familiar with the phenomenon of a "successful" wine company that looks great on a pie chart while it "markets" inferior wine, closes wineries, and lays off people like me. I applaud your occasional sortie to stick your literary lance in their marketing windmill. If the big international companies who are selling us tank-aged, sawdust-flavored wine, grown by disposable farmers and made by disposable workers, at great cost to our environment, lose some market share to an Italian or Argentinean who makes better wine for less money, I can live with that.

One of the great things about the wine biz is its variety. From the small grower/producer of unique local wines, to the V.P. of Sales for Behemoth, Inc., to the opinionated wineseller, to the iconoclastic winewriter, just about anybody can find a niche somewhere in this "industry". The healthier the world economy, the healthier the wine biz, all facets of it.

Sadly, there are bigger problems facing us than gluts and French Presidents. While we fiddle about with P&L statements, margins, market share and Ozziephobia, Rome burns. Climate change is happening. The ice is melting. The oceans are home to fewer species, and fewer, smaller members of those (except for some unpleasant stinging algae, destructive blanketing seaweed, deadly bacteria and oozing slimes, which are thriving). The rivers our industry has helped compromise host fewer and fewer salmon and steelhead, among other things.

Perhaps the next Unified Symposium, when considering the health of the industry, should take that literally, should discuss how we can grow wine in a less destructive fashion, and how the "industry" can adapt to the changes already taking place. I can tell you first-hand that the grapes, and wines, we all take for granted, don't do well outside a very narrow range of weather conditions. These conditions have already started to change. Do you think it mattered much what the state of the French wine business was, right before phylloxera devastated it? Maybe, less wine is a good thing. Maybe, San Diego Riesling, or a great Rutherford Norton, are nearer than you think. Bordeaux? Cabernet? Those might become answers to a trick question on a future Master of Wine exam.

[12]

A brilliant commentary. The most important statistics seem to be:

1.) Domestic consumption remains at 2.5 gallons annually.

2.) Imports account for 31% of sales.

3.) Exports over the last year are up by just 2%, while imports are up by 9%.


You should send this to the governor.

[13]

We will all do well to remember that the venerable Mr. Berger's business is one of selling words, and rosey pictures don't sell newspapers or news letters. A more balanced (and less moribund) report may have included information on the over 30% growth increases in the sales of better California wines in the over $12 range. Sorry, old friend, that dog just don't hunt. Check some of the positive stats at: http://www.svb.com/email/wine_business_conditions_results_2008.xls

[14]

This article bothered me when I [first] read it, as it doesn't jibe with the feeling I get in the market. But, I left it aside for a while until I was reminded of it recently after seeing production and consumption estimates for the next five years. The American market is growing fast, and poised to be the largest in the world in five years.



American production is growing, but much more slowly than consumption. Over the next five years, American consumption is estimated to grow by 52 million cases. American production will grow by about 14 million cases. That consumption growth is enough to absorb all the new wine American wineries will produce and still take in half the combined increased productions of Argentina, Germany, South Africa, Australia and Chile.



You can see the projected consumption and production figures, and read my complete analysis, on the Tablas Creek blog.