The New Norm in grape growing; wine making.

The wine industry, like many others, has been forced to adapt during the recession of 2008.  There are many moving parts that can be adjusted when needed; restaurants can lower the price point of their menus and wine list, and distributors can shift their inventory so that they carry less expensive wines while trying to run lean on inventory.  Wineries can also adjust the price of the wines that they produce by making less of their higher priced wines and reducing overall production.  These are all responses that can happen over a very short term; menu's change overnight, and a winery can decide to put the last 10 barrels of reserve wine into a lower bottling.  As well, these are all calculated adjustments with consequences, but they enable the companies to stay operational.

So what do grape growers do when people won't pay as much as it costs to farm their vineyards?

Wine growers have costs that are essentially fixed.  They may owe money on the property or development of the vineyard, which is debt that has to be serviced-but that isn't unique; most wineries have debt as well.  Growers that produce high quality grapes depend on the quality of their product to ensure future sales.  With this in mind, they are forced to continue to hire crews to hand work the vineyards.  Vineyard managers can try to reduce the amount of work that gets done, but there are many corners that simply can't be cut.  At the end of the day, you need people to prune, and pick grapes by hand.

The most common metric for the grape market is the price for a ton of grapes.  For high quality grapes it is common for the farming costs to range between $1,000 and $2,000 per ton.  The grape market is dominated by large corporate producers (like Kendall-Jackson, Constellation, Diageo, etc.)  Over the last couple years, many of the larger buyers have changed gears; most have decided that their input costs are too high and that they can make good wine by paying $700 a ton instead of $2000. Obviously, they are sourcing fruit from the central valley that isn't the same caliber.

This is where the story gets interesting.  How do growers in places like Sonoma and Napa cope with this type of price shock?  They make wine.

When faced with a market that won't cover the cost of growing grapes, growers are taking on the added burden of producing wine.  There are numerous crush facilities that are partnering with growers and taking a shared ownership of the juice that is produced.  The wine is produced with the sole intention of selling it into the bulk market.  When the grape growers sell the juice into the bulk market, they split the proceeds with the winery that made the wine for them.  Ironically, they will most likely sell it to the same people that refused to pay for the grapes.

As the larger wine producers come up with new ways to reduce their overhead and generate profitable financial statements, the surrounding industry partners are figuring out how to survive and thrive.

Overall, if the larger corporations are able to force production expenses and risk onto grape growers and custom crush facilities, there is no long term benefit to the consumer.  Traditionally, these facilities exist to make smaller and more interesting wines.  What they are doing now is producing wine that deliberately lacks uniqueness, so that it can be blended into a larger lot of juice without changing the lot's flavor profile.  My hope is that the trend will end up enticing worthy growers into producing their own wines - under their own label - so that us consumers can enjoy something new and interesting.

One Response to “The New Norm in grape growing; wine making.”

  • My first try at a cab was a disaster (I think I ended up with some cleaning solution/acid in my batch). Since that first attempt, I have found that it is both a science, and an art! My second batch was a success, and a good one if I don't say so myself. I did find a website that helped a ton though (broke down and paid, but well worth it) at http://www.how-to-make-wine.com I am sure there are others too. Cheers!

May 2011
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