The floundering economy is putting the high-end wine market at risk.
“With today’s economy and the situation we’re seeing on a national and global scale, the high-end of the market is probably more at risk than the mid-range and value sectors of the market with regard to wine shipments, sales and overall movement,” says Jeff Bitter, vice president, Allied Grape Growers, Fresno, Calif. “If it weren’t for the economy I would say that all three sectors have a lot of potential to be sustainable and profitable going into the immediate future because we’ve shifted our supply in balance with demand. We’ve not had that situation in close to a decade.”
That balance between supply and demand is a result of export growth and increased domestic and global demand, according to Bitter. “Every year the demand for wine has grown at fairly steady pace — about 3 percent per year,” he says. “It’s not that we’re producing less, but demand has increased. Our normal crush is now slightly over 3 million tons. Our average crush during the 1990s was much less than 3 million tons.”
Pinot Noir and Pinot Grigio have been the major market movers over the past three to four years and will likely continue, according to Bitter.
“Bearing acreage of those varieties will continue to increase because they’ve been planted in force through this winter,” he says. “We’re going to see increases in supply in those varieties for at least another five years.”
Even the more traditional varieties such as Cabernet Sauvignon, Chardonnay and Merlot which were overplanted in recent years are short now as the industry looks forward.
“Wine grapes relative to other crops are starting to look good again especially in the Central Valley,” Bitter says. “You couldn’t compare a wine grape to a walnut or pistachio in the past few years and make it look like a good deal. That situation has changed.”
However, experts continue to warn widespread planting of grapes without contracts is still not a good idea.
“This is a long term business and to tell growers to plant something on speculation without any kind of contract is a bit dangerous,” Bitter says. “Wineries are starting to offer more multi-year contracts to shore up supply. There are still a fair amount of grapes that are sold on the spot market, but it’s generally not more than half now.”
Other than the water situation, everything is looking fairly positive for the coming season.