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Back in December I applied for the UC Davis Extension Winemaking Certificate Program. I was accepted, and am currently taking Introduction to Winemaking. Some of it is redundant, as I currentlywork in wine production, but it's helping to fill in the gaps.
I actually should try to get a lecture in before dinner, so I will leave you with this interesting article from The Cellarist from The San Francisco Chronicle about the current price and consumption trends of CA wine. Enjoy!
Why California wines aren't selling
Brant Ward/The Chronicle, 2007
More deals can be found on Bay Area shelves.
California wineries got a jolt of reality this week when industry analyst Jon Fredrikson delivered some shocking numbers at the Unified Wine & Grape Symposium in Sacramento.
While overall U.S. consumption of wine was up slightly, 2.1 percent to 323 million cases, California wine shipments were down around 1.6 percent, to 236 million cases. It was the first drop in 16 years for the California numbers, which have been drumbeat-steady in their growth.
The shift caught a lot of attention, but behind the numbers is a more complicated story. I called to get a bit more insight from Fredrikson, president of research firm Gomberg, Fredrikson & Associates, which produces widely used industry reports.
So what's up? People want to drink, but anything that smacks of luxury is not moving.
"It's not an oversupply, its an under-demand. We went through a financial heart attack," Fredrikson told me. "We pushed the reset button in demand. People just scaled down buying patterns. They're still buying wine. We're not like General Motors."
The biggest shift, which he and other analysts have repeatedly described in the past year, is the near-complete stagnation of wine priced more than $20. Fredrikson's data shows that buyers who once spent $20 to $30 have moved lower. The $3-to-$6 category and the $9-to-$12 category have seen the strongest growth. On balance, that rewards the larger California producers and brands — Fredrikson mentioned brands like Sterling, Cupcake and Edna Valley — while smaller labels have more likely been caught in the worst of the downturn. Clearly there's a price sensitivity that wineries will have to adapt to.
"I've never seen it before, how people moved down to much lower price points," he said.
There's more. One major holdup has been the middle part of the three-tier system. As retail sales slowed, distributors started to shrink inventories and require tighter credit. Wine that might have been moved out the winery door probably wasn't making it to the warehouse. And though the very top allocated wines, which occupy a tiny sliver of the market, almost never disclose sales figures, anecdotal stories have been emerging in the past year that indicate virtually no expensive brand has been immune.
At the same time, the industry has been trying to figure out how to discount wine to reduce inventory. Suddenly, top-flight wines are being offered to restaurants to serve by the glass, or sold at lower wholesale prices to provide a higher margin — anything to try and avoid lowering the actual retail price. But that's now happening too, and retailers have started to pass along those discounts. (Of course, it's not unreasonable to believe that some expensive wines needed a price correction.) The alternative, as Fredrikson pointed out, is that spendy wines would get sent off to closeout at sites like Tilsoldout.com. If your local retailer has had an abundance of deals lately, this is probably why.
"There are purists who say you can never discount your brand," Fredrikson said. "That's not realistic in this market."
A couple other points:
California's dropping numbers are a bit more complicated than they seem. According to Fredrikson, total shipments from California wine companies were up, mostly because some large companies are buying more bulk imported wine to bottle here. It's the California-grown wines themselves that have been down. If you didn't think global sourcing was a reality, here's a wake-up call.
Much of the drop in California wine was overseas. Shipments to the U.S. of California wine were barely down — though in a constantly growing market, that's still grim news — but of the 4 million fewer cases being shipped, 3.2 million were in exports.
Fredrikson's conclusion? It's a very good time to be a wine buyer. The excellent 2007 vintage is coming onto the market, and with the pressure to sell wine and price aggressively, we're going to be able to enjoy ever better prices. We're still drinking plenty; we just don't want to pay as much.
