Addressing an overflow crowd during a State of the Industry presentation at the symposium, Nat DiBuduo, president and CEO of Allied Grape Growers, said current bearing acreage of 555,000 acres is up 11 percent since 2010, and yields per acre have risen 5 percent to 7.25 tons during the same period.
Those are the production changes, but there are other changes as well, he said, such as a 15 percent increase in wine imports and significant inroads by sales of craft beer and cider. Among customers, there are fewer baby boomers and more millennials, and everyone is enjoying the recovery from the recession, which is indicated by the 25 percent increase in the strength of the dollar since 2010, he said.
DiBuduo was one of three presenters at the session, joined by Steve Fredricks, president of Turrentine Brokerage, and Jon Fredrickson of Gomberg, Fredrickson & Associates.
All three presenters noted a shift in wine purchases toward premium brands of $10 and higher per bottle.
Vineyard removals continue in the San Joaquin Valley, DiBuduo said, with 21,000 winegrape acres removed between the 2014 and 2015 harvests, and another 20,000 acres removed since the 2015 harvest. Many of those vineyards have been replaced by tree crops such as pistachios and almonds.
“These removals will likely continue at the current pace through the spring,” he said. “Based on current shipment trends and grape buying activity, these removals are necessary. We aren’t pulling the fire alarm; we are being realistic about what needs to be coming out and why.”
DiBuduo said most of the vineyard removals in the valley have affected older vines with declining yields and varieties that have little demand from wineries.
Fredricks provided a global picture of the wine business, describing the situation in Europe, South America and Australia.
Looking at trends in California wine, he described the market shift that improved as inventory carryover was mostly worked through by mid-2015.
“In the first half of 2015, there was an inventory hangover because of two years in a row of good crops, greatly in excess of what people were planning for growth,” he said, adding that a shorter 2015 crop brought the wine sector closer to balance in the third and fourth quarters of the year.
Fredricks also described the difference in bulk wine prices in different growing regions. The bulk price for cabernet sauvignon, for example, ranges from $35-45 for Napa Valley grapes, $25-30 for Sonoma, $15-17 for North Coast, $18-20 for Central Coast and $7-8 for San Joaquin Valley.
In his presentation, Fredrikson described the U.S. wine business as “a tale of two wine markets and the widening gap between the two.”
“Everyday wines from around the world are priced up to $9 at retail and make up the lion’s share of wine volume—about 75 percent,” he said. “Premium wines, priced at $9 and up, make up roughly 25 percent of the wine volume, but 50 percent of wine revenues.”
Fredrikson said the recent declines in everyday wines represents a concern, because they are the foundation for the U.S. wine market. The decline can be traced to several factors, not the least of which is the rapidly increasing demand for craft beers.
“The current surge in demand for craft correlates with the rising number of millennials reaching legal drinking age,” he said. “Craft beers cost a little more, but they are affordable luxuries that reflect this generation’s idea of sophistication and education.”
Fredrikson explained that millennials of legal drinking age represent about 25 percent of consumers over age 21, but account for 35 percent of beer consumption, 32 percent of spirits, but only 20 percent of wine.
The Unified Wine and Grape Symposium, held in Sacramento, attracted total attendance of 13,800. Considered the largest event of its kind in the Western Hemisphere, the symposium gave attendees an opportunity to hear from experts on a wide range of emerging wine, grape and marketing issues. It also featured more than 650 exhibitors spread across 170,000 square feet of trade show floor.
This year marked the 22nd symposium, which is sponsored by the American Society for Enology and Viticulture and the California Association of Winegrape Growers.
CAWG President John Aguirre said the symposium has become “the single most important yearly gathering of wine industry leaders and decision makers.”
Though the event focuses primarily on American winemaking and winegrape production, more than 30 countries were represented among the guests and exhibitors.
The 2017 Unified will again be held at the Sacramento Convention Center and is slated for Jan. 24-26.
Steve Adler is associate editor of Ag Alert. He may be contacted at firstname.lastname@example.org. Permission for use is granted by the California Farm Bureau Federation.