The sluggish economy and unusually cool weather this season have dramatically tightened the supply of wine grapes, a situation that will likely continue for several years, reports Robert Smiley, dean and professor emeritus at the University of California, Davis, Graduate School of Management.

Smiley presented findings from two recent surveys of wine industry professionals and executives during the 20th annual Wine Industry Financial Symposium at the Napa Valley Marriott Hotel in Napa, Calif.

“Even though we have technically been out of the recession for two years, growers have been reluctant to expand their plantings or replace older vineyards that are moving into declining production,” Smiley said.

“Cooler weather — including a very damaging freeze in the Central Coast — have compounded the problem by significantly reducing this year’s wine grape yield in California,” he added.

Smiley noted that, while growers and producers struggle with the shortage, consumers are likely to find that discounted prices on high-quality wines will continue to be available.

Survey of Wine Executives

Smiley’s 10th annual wine executives survey gathers opinions and projections from the heads of 29 leading wine operations. Most of the respondents represent wine companies, while others are from operations that range from grape growing to wine-distribution firms.

In addition to predicting that wine grape demand will continue to outrun supply for the foreseeable future, most of the responding executives reported that discounts on wine will likely continue because consumers have grown accustomed to finding good buys on quality wines, and retailers are finding the discounted prices to be an effective tool for drawing consumers into their stores.

“Most of the executives seem to feel that discounting is here to stay,” Smiley said.

Many of the respondents also reported that they work with third-party “wine clubs,” which sell wine directly to consumers, usually via the Internet. These wine clubs often sell consumers a series of wines on a monthly or quarterly basis, helping producers reach a broader audience and introducing consumers to new and different wines. The wine producers hope that the consumers will eventually return to their wines as direct-sales customers.

Most of the wine executives reported that they have good relationships with their lenders, but some noted that banks these days are more cautious about lending and require firms to “earn” their loans.

The survey respondents predicted that the hottest issues for the wine industry during the next five to 10 years will include consolidation in the wine industry’s distribution sector; increased government regulations affecting everything from land use to taxation; and environmental issues, especially climate change.

“In addition, these executives foresee an insatiable thirst for wine at home and abroad,” Smiley said. “They are quite optimistic about the growing demand for wine in the United States, particularly among consumers in their mid-20s, as well as internationally, especially in China.”