Look up the phrase unholy alliance and one example would surely be California wine grape growers and wineries. It is one of the most curious and dysfunctional commodity groups in the state.
Don't get me wrong. The growth California wine sales over the past decade has been nothing short of astounding. I am a wine drinker. I enjoy all California wine. I am often asked which wines I drink, I reply, “I will drink no wine until they get in into the bottle or bag-in-a box.”
There are about 1,500 wineries in California. In reality only three — Gallo, The Wine Group and Constellation — control the industry which means they set prices paid to growers. It is supposed to be supply and demand controlling price, but the Big 3 control wine grape prices by their buying power and sometimes puzzling grape quality standards.
The biggest wine grape/winery event of the year is the Unified Wine and Grape Symposium each January in Sacramento, Calif. It is billed as the event of the year when growers and vintners comes together, lock arms in unity, drink wine and toast the alliance of growers and vintners.
At Unified, vintners herald the grape, saying good wines only come from good grapes. Vintners say without good grape growers there would be no good California wine. What is not talked about is price for the next harvest of good grapes.
It is curious to witness the manifestations of this unholy alliance of growers and vintners. When Allied Grape Grower president Nat DiBuduo walked to the podium to give his presentation on grape supplies, he patted the shoulder of session chairman Tom Smith of Gallo, president of the American Society for Enology and Viticulture and jokingly said growers were at Unified to get Gallo's '05 wine grape prices. DiBuduo smiled. Smith did not.
There always seems to be an issue between vintners and growers. Now there are two; hang time and the percentage of vintage dated wine in bottles. Vintners are asking growers to leave grapes hanging on the vine past when they would normally harvest them, presumably to improve quality. The quality issue of added hang time is subject to ongoing debate and research. What is not up for debate is the fact hang time reduces tonnage and the final price to growers.
Added hang time increases sugar and therefore alcohol content of the crushed product. In most cases that alcohol content must be reduced before the wine is bottled. An animated cartoon at the end of DiBuduo's talk showing a winemaker filling a wine barrel from a garden hose spoke volumes about how growers believe vintners reduce alcohol content. Water is a lot cheaper than wine grapes.
Most of the world uses 85 percent as the standard for vintage dating wine. The U.S. standard is 95 percent. The powerful Wine Institute wants to change that to 85 percent, presumably to improve wine and get wine on the market earlier. Growers see this move as an attempt to manipulate inventories and prices paid to growers.
California wine grape growers and vintners have made great strides forward in spite of their unholy alliance. However, you can only wonder where the industry would be if there had been an alliance like there are in may other California commodities like almonds, citrus, walnuts and table grapes. Exports are pouring into the U.S. wine market and ripping away big chunks of the California wine market. It's there for the taking from a dysfunctional California wine industry.