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Will California Wine Prices Increase Due to Drought?

Withered grapes

By Jonathan Newman

The following article appears in the current issue of Beverage Dynamicswww.beveragedynamics.comand is reprinted with permission.

January 8, 2015 — The 2015 vintage on California’s North Coast (which includes Napa and Sonoma Valleys) is quite beautiful, but extremely tiny. And what was so surprising about the crop is that it caught most winemakers off guard — the yield came in smaller than nearly everyone predicted.

Some growers in the Valley with low elevations had an average size yield, but most had a devastatingly low crop, with some down 70% in certain mountainside vineyards.  This tiny crop will hurt winery profits and devastate wine labels that survive on the bulk market to grow their brand.  It will also hit retail price points.

We all understand that drought conditions persist in California.  Napa Valley was not hit quite as hard as points further south, as it had about 75% of its normal precipitation.  But Mother Nature soon threw new curveballs to complicate this most curious vintage.  There was a dry and warm winter, which resulted in small clusters.  The cool spring then led to an uneven fruit set.  And then multiple summer heat spikes wreaked havoc.

Winemakers Express Concern

I have been visiting wine country in Northern California for about two decades. This year, the vineyards were looking normal until about July, when it became clear there was a lot of grape shatter and tiny berries.  Bryan Davidsen, the winemaker of Sonoma’s Michel-Schlumberger Winery, said his Dry Creek crop was 30% lower than normal, with Pinot Noir down a whopping 50%.

“I kept thinking the clusters would fill out in the late spring and early summer, but it became apparent that the sets just weren’t good and the grapes never filled out,” he says.  Davidsen noted that ultimately the grapes ripened with superior quality but a lot less weight than anybody expected.

Michael Scholz, the winemaker for Napa’s St. Supery Winery, had similar comments. His Sauvignon Blanc crop was down substantially, with other varietals also experiencing significant and unexpected declines.

Scholz says, “While there were early season concerns, the real culprit that reduced volume so significantly was the dramatic warm spells in August and September.”

St. Supery, a well-regarded producer for its Napa Sauvignon Blanc from their Estate, will have that much less to sell since it can’t buy grapes on the bulk market to fill in production.

Many wineries in Napa’s famous Mountain sub-appellations were particularly hard hit and will have much less of their signature Cabernets to sell when the 2015 crop is released.  In mountainside vineyards with high elevations, the smaller berries and low water availability were exacerbated by the climatic conditions.

Virtual wineries that have no Estate vineyards, relying on the bulk market, are going to be hit hard.  If a winery has been predictably buying grapes to grow their brand over the past three years and has enjoyed the bumper crops of 2012, ‘13 and ‘14, there is now cause for concern.

How do you realistically buy enough grapes at the right price and quality on the bulk market to hit the pricing necessary to maintain price points in retail distribution channels?  This will certainly be a challenge, and ultimately these wineries will have to lower production or take price increases if they want to maintain quality.

Wineries have certainly overcome these challenges before, when the small 2010 and 2011 crops were followed by three sizable crops of good quality.  While we know it’s hard to predict with certainty, at least the early signs are that this 2015 vintage appears to be of excellent quality, albeit a very small crop.

Jonathan Newman is widely recognized as a leader in the wine industry. As chairman of the Pennsylvania Liquor Control Board, he was the nation’s largest wine buyer and brought a number of popular innovations to bear, including the Chairman’s Selection program and opening of local stores for Sunday sales. Jonathan has received significant industry accolades during his career. Follow him on Twitter at @NewmanWine and visit his website: www.newmanwine.com.

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