It started with Yellow Tail, the Australian wine with a kangaroo on the label that has bounded off American wine shelves by the millions of cases. It even spawned a new wine category: “critter wines.”

Like a herd of sheep, wineries in the United States, as well as Australia and elsewhere, chased the original critter with their own horses, wallabies, fish, ducks, penguins, goats and other things warm and fuzzy.

ACNielsen reports that of the 438 new table wine brands with sustained consumer sales introduced in the past three years, 77 (18 percent) featured a “critter” on the label. Combined with existing critter labels, sales of critter-branded wine have reached more than $600 million.

However, foreign critter wines, primarily from Australia, have become like gerbils to California wine grape growers. They have multiplied into a burgeoning horde that has growers reaching for their shotguns.

Bottled critter wine from Australia has cut into bottled California wine sales. Now, apparently surplus critter wines from Australia are being shipped to California in bulk to be blended with California wines and carry an American appellation.

Consumers may not recognize the difference, but California grape growers do because this has been a major factor in the dearth of winery buyers for 2006 California wine grapes.

For example, there is a Franzia Bag-in-a Box White Zinfandel being sold in supermarkets that looks like a California product. However, there is no California appellation to be found anywhere on it. The appellation says “American.” The reason is that as much as 25 percent of the White Zinfandel in the bag-in-a-box is wine imported bulk to the United States, likely from Australia, and bottled by the second largest winery group in the United States, Constellation Brands.

Bulk wine imports and exports are nothing new. A significant gallonage of Pinot Noir is imported into the United States to make up for shortages of the U.S. varietal wine. This proliferation of imported critter wine from Australia and other countries would not be so onerous if it did not come at a time when California wine grape growers are experiencing another miserable year.

Wineries have not answered the phone from growers with 2006 wine grapes to sell; grape loads moving across crushers were rejected by inconsistent grading; California wineries waited late in the season to make purchases, reducing tonnages via dehydration and wineries are forcing growers to custom crush grapes in hopes that wineries will buy juice when they would not buy the grapes.

This was not supposed to be the turnaround year growers have been awaiting due to the record 4.32 ton crush last year that filled winery tanks brim full. They were expecting a “hangover.”

What they did not expect was boatloads of bulk wine taking away a significant part of what little market they expected this season.

“Let's say '06 was very problematic,” said Allied Grape Growers President Nat DiBuduo. “There was an extreme lack of buyers for all price points from the Southern San Joaquin Valley to the North Coast.”

DiBuduo admits he was surprised by the lack of buyers and the sharp increase in bulk wine imports, but primarily from Australia where growers planted many new vineyards to capitalize on the king of critter wines in the United States, Yellow Tail. Overall, Australian wine sales have faltered, and the result is a large surplus of Australian wine.

According to the Gomberg-Fredrikson Report, California exports shipments jumped 19 percent in July on strong bulk gains (up 45 percent). Bottled exports rose 7 percent, but remained down 3 percent for the first seven months of the year.

Total wine imports jumped 17 percent in July as bulk wines surged six-fold to nearly 900,000 case equivalents. Four-fifths of was from Australia, according to Gomberg-Fredrikson.

According to DiBuduo, the increase represented the “replacement of 43,000 tons of grapes — just the increase alone.”

Bulk wines from Australia (2.3 million-case equivalent) and Argentina (637,000 cases) are apparently used for blending under the American appellation, according to Gomberg-Fredrikson.

At the current rate of imports, the respected wine reporting group said total wine imports are on track to capture about 30 percent of the total U.S. wine market by the end of the year.

Eileen Fredrikson said that while wine imports have long been a factor in the U.S. wine market, “the current impact is probably more pervasive than it has been in two decades” in the California Association of Winegrape Growers newsletter, The Crush. “Finite retail shelf space plus a huge increase in countries with wine quality of international standards is exerting downward pressure on wine grape prices.”

For grape growers struggling unsuccessfully to find a home for their grapes, the huge increase in imports is like rubbing salt in the wound, since U.S. wine sales are up 2 percent to 5 percent, yet California growers are not benefiting.

“It really concerns me to see California wineries importing wine in a year where so many gapes are available for sale in the state,” said San Miguel, Calif., grape grower Tony Domingos, in a recent edition of the CAWG newsletter.

“I can understand the reduction in grape purchase due to the 2005 surplus, but to see new records of bulk wine imports when we have plenty of high quality grapes at reasonable prices is alarming.”

“We need to create consumer demand for California wines and take back our market share from the imports,” added the San Luis Obispo County grape grower.

Many of those imports are being brought into the state by either California wineries with interest in Australian wineries or buying surplus bulk wine imports cheap.

“This is really disheartening because we know wine sales are doing well,” said DiBuduo. “People are buying California wine all over the world. The added challenge that I have is explaining this tight market to growers wondering why I'm not selling their grapes.

“The simple fact is that we cannot create a market if we don't have viable buyers who are willing to buy grapes.”

There are more than 1,000 California wineries, but the top 30 wine companies represent more than 90 percent of the U.S. wine market. The top four: E&J Gallo, Constellation Brands, The Wine Group and Bronco sold more than 170 million cases of the 223 million cases marketed by U.S. wineries last year.

“What we are seeing is consolidation within the industry,” said St. Helena wine expert George Schofield in the CAWG newsletter. “Where we used to see five to 10 buyers competing in the marketplace, now we are seeing large corporate conglomerates with one buyer coordinating all their activities. I think that this has really had an impact on the market. We are seeing a lot less competition on the demand side than we ever saw before. And that has had a real impact on keeping a lid on prices.

“Those buyers are saying, ‘We don't have to buy grapes this year and the heck with it; for one year we will just take a pass,'” Schofield said.

Along with a lack of buyers, were issues at the crushers.

“There were a lot of discrepancies in the third party grading at various wineries. Issues like sugar levels and MOG (material other than grapes) put a lot of strain on grower-winery relationships. There was a lot of dissatisfaction among growers,” DiBuduo said. Any deduct for sugar or MOG is lost grower income.

The president of 600-member Allied pledged to pursue re-evaluation of current grading standards.

“Hang time got us again this year,” DiBuduo said. Several years ago wineries asked growers to let grapes hang on the vine longer than normal under what many growers called a pretense of improving wine quality without compensating growers for lost tonnage. This is a controversial practice growers contend is only a ploy to reduce tonnage.

DiBuduo also said many grapes were bought late by wineries. They were dehydrated and had lost weight by the time they were picked.

Increasingly more coastal growers who cannot find a home for their grapes are custom crushing their grapes and then trying to sell the must to wineries.

Imported bulk wines did not have as much impact on coastal grape sales. DiBuduo said there it was the huge '05 crush hanging over the market that sent wineries into hiding.

DiBuduo expects more Central Valley vineyards to come out this winter. Over the past five years, 100,000 acres of vines have been removed. “I know of 1,000 acres that have already come out in the Central Valley and I think you are going to see a lot more.”

Ironically, vineyard prices remain strong due to the demand for land for new plantings of almonds, pistachios and pomegranates.

DiBuduo and Schofield are still optimistic the economy will turn for growers as wine sales continue to increase.

“I see demand growing at 2 percent to 5 percent a year, depending on how the economy is going,” Schofield said. “With no increase in supply (in California), this thing is bound to balance out. I don't have concern about mid- to long-term. But if we have another year in 2007 like we had last year, we are going to be in the soup. The odds are that it will be a pretty normal year or maybe a short year. I'm confident the industry is in pretty good shape.”

So is DuBuduo, although he plans to check his eyesight because every time he sees what he believes is a light at the end of the tunnel, it is another freight train like 2006.

For seven years, DuBuduo has worked to “try and bring the pendulum close to the center having wineries and growers working closer together.

“I am still optimistic balance is coming and this year was a blip on the radar screen, but I admit I did not see this one coming,” he added.

“However, after a year like this one I don't think growers can wait their turn any longer. Growers are still struggling.”