The old adage "we will sell no wine before it’s time" may have sounded good for an advertising campaign at one time. Yet conventional thinking and cautious patience will not propel organizations like the Fresno, Calif.-based Allied Grape Growers (AGG) and its 600 wine grape cooperative members towards more profitability.
Luckily for the members, they know this already.
Embracing change is not merely inevitable, but necessary for positive growth. Nat DiBuduo, AGG president and CEO, told members as much while highlighting some recent grape industry changes which are as good industry wide as for the co-op members.
For example, vineyard property values continue to rise. In some areas, values have more than doubled since 2000. Some prime Napa Valley vineyards now sell for $300,000 an acre while vineyards in the San Joaquin Valley (SJV) can sell for more than $20,000 an acre.
Even other crops, including almonds and pistachios which some grape growers also harvest as part of the agricultural portfolio, have increased two-to-three times in value during the same period.
“These are the kind of changes we like to hear about,” DiBuduo told nearly 300 cooperative members and industry representatives at a luncheon in Fresno in July.
Also noteworthy for the cooperative in the 13 years DiBuduo has been at the AGG helm:
- Membership is up 20 percent to more than 600;
- Total member acreage is up 80 percent to 45,000 acres;
- Harvested grape volumes are up more than 66 percent to 250,000 tons; and
- Overall value is up 208 percent to $105 million today.
Higher profitability in the grape industry has boosted plantings in recent years leading to record grape crushes. This has not always been the case for the California grape industry.
Since 1998, DiBuduo says roughly 180,000 acres of wine and table grapes were pulled from the ground due to poor economic conditions. Much of the acreage was converted to other permanent crops including almonds and pistachios, due to higher prices in recent years.
In the past three years, vineyards have returned, DiBuduo says, as prices have increased for quality grapes. Wine grape varieties including Rubired and Muscat Alexander have seen the greatest price returns to SJV growers, according to DiBuduo.
Much of this success is due in large part to changes made by wine makers over recent years that are attracting more wine consumers. Certainly, the availability and choices related to wine has improved for consumers in recent years, as evidenced by increasing shelf space in grocery stores and elsewhere for inexpensive and moderately-priced wines.
This will become important in the long-term as the U.S. is currently the largest wine consumer in the world. Key to this statistic, DiBuduo says, is America is increasing the number of wine consumers, rather than per-capita consumption.
Driving consumption are improvements in wine flavors.
“We’re seeing a lot of more consumer-friendly wines than we did in the past,” said DiBuduo. “They’re still making wines that the wine makers like, but not so much at the expense of the consumer.”
Sweeter Muscat wines and blends using Muscat Alexander grapes have benefitted greatly from increased acreages in the SJV, according to DiBuduo.
Tim Hanni, Sonoma State University master of wine and faculty member, echoed the notion that consumers prefer sweeter wines.
Hanni discussed with the AGG crowd the kinds of changes the grape and wine industries must employ in today’s fast-moving global economy.
Part of Hanni’s philosophy is borne from a quarter-century of exploring wine myths, stories, and legends. His goal is to steer the wine industry into new opportunities by collapsing bad information “that constantly gets us in trouble and keeps our businesses smaller and less profitable.”
For DiBuduo, short-term ideas including locking in long-term contracts and pricing issues are important to Allied’s organizational success. But it is not the only thing on his radar as a blast of intense summer heat in California appears to be pushing harvest ahead of typical schedule.
“The earlier harvest may mean the crop won’t be as big as first thought,” DiBuduo said. “Still, growers appear to have good quality but smaller bunches.”
According to DiBuduo, a current debate within the wine grape industry centers on the idea that there could be too few acres of grapes planted for the marketplace. While growers argue that the industry is at "market equilibrium," meaning prices paid to growers are sufficient to maintain economic sustainability. Buyers argue the industry is too short on grapes.
Such trending is important for growers and AGG, said Jeff Bitter, the organization’s vice-president.
“From a growers’ perspective, we’re trying to maintain an important supply and demand balance,” Bitter said. “We’re also trying, as Tim Hanni pointed out, to address some of the assumptions and myths within the industry.”
One such assumption is that higher yields always lead to lower quality grapes.
“We’re trying to solve this issue too,” Bitter said.
Much of Hanni’s work centers on gathering information from consumers and meeting those demands, versus what Hanni calls the “wine snob approach.” This is simply telling consumers which wines scored well among a collective group of wine experts and pressuring or embarrassing consumers into trying wines they do not like.
Important in this debate is to crush the preconceived notion (Hanni calls this a “collective delusion”) that certain wines must be paired with select food items.
“Wine and food pairing is a collective delusion,” Hanni said. “We’ve lost every sense of hospitality and the notion of ‘how may I serve you’.”
DiBuduo says the millennial generation of Americans, born between 1983-2001, will be the next great marketing opportunity for the wine industry.
Hanni believes this generation will not accept the old “collective delusions” and suggests the wine industry needs to change its tone to gain this population as consumers.
“We must demand that wine professionals speak to consumers on their terms,” Hanni said. “We have no allowance for the arrogance, misinformation, and ignorance that we are perpetuating.”
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