Ag Alert June 9, 2021

Wine market appears more balanced, analysts say ByDennis Pollock

cord, and the fact that in 2019more than 150,000 tons of grapes went unpicked. In 2020, there was a limited crop of 3.4 million tons, leading to lower inventories in 2021. During 2020, off-premises sales saw a big bump, Proctor said, and on-premises sales encountered challenges. During the year, therewere sharpdeclines inproduc- tion of many varieties and in grape pric- es, as well as impacts of smoke damage in some regions. Across the board, prices were down 18%. Since August, the bulkmarket has seen dramatic activity, he said, with a spike in demand and a shift from oversupply to a more balanced position. Proctor saidgrapeprices continue to in- crease intheCentralValley.OntheCentral Coast, prices have stabilized, but have not kept increasing. “Wecannot affordtorepeat 2020onhow we dealt with smoke,” he said. “Nobody came out of 2020without bruises.” It took six to eight weeks to get back data on the extent of possible damage so that informed decisions about the grapes couldbemade, he said, adding thatwiner- ies, growers and laboratoriesneed towork closer together to deal with smoke issues, data gathering and substantiation. This year, Proctor said, “Pricing insome areasmay be belowwhere growers would

like it, but an improvement from last year. Buyers need supply to reload from2020.” Proctor said removals of older vine- yards need to continue: “Efficiency is the biggest advantage.” During the secondwebinar, Brager said “trading up” on price points accelerated during thepandemic, ledby growth in the $11-plusprice tiers, thoughmostwine still sold at less than $11 a bottle. He said pre- miumization will continue, but “not at a torrid pace; it may slow as COVID-related impacts lessen. We need to not price our categoryout of reachof thoseuponwhom wemust rely for future growth.” Brager saidsomepeoplewhowere“new towineonline”becamepurchasersduring thepandemic.Heexpectsonlinewinebuy- ingtoremainaheadofpre-pandemiclevels. Ready-to-drinkalcohol, orRTDs, is “not a fad; winemust participate,” he said. Bitter said bunch counts this year in- dicate neither a small nor a large crop. He said disease pressures have been low, but there is lots of concern about wa- ter-starvedareas and thepotential impact on crop size. Lowyields in2020, alongwithwildfires, led to the crush being down 600,000 tons, which Bitter said had a “balancing effect in all regions.” Hesaid237,000acresofwinegrapeswere plantedinCalifornia thepast 11years.

“We’ve overplanted by about 20% during this period,” he said. Bitter said he believes acreage will re- main flat the next couple years, but said, “We are still capable of producing over 4 million tons annually.” “The short 2020 crush corrected our oversupply, but if we don’t experience wine shipment growth coming out of the pandemic and/or we don’t reduce our bearing acreage base further beyond 2021, it’s not a matter of ‘if ’ we become oversupplied again, it’s just a matter of ‘when,’” he said. But Bitter said he is “not throwing cold water on the market,” and cited positive signs: briskgrapemarket activity in the in- terior regions and “improved” activity in coastal regions; outside of another smoke event or a bumper crop, it’s unlikely any substantial amount of 2021 grapes will go unharvestedor unsold; andplanting con- tracts are returning. In addition, he said, grape buyers are active to avoid being short on supply; prices have been stabilizing at levels that cover cost of production but don’t nec- essarily provide a return on investment; and the Gallo-Constellation deal closed in January, providing additional stability to themarket. (Denni s Pol lock i s a repor t er in F r e s no . He ma y b e c on t a c t e d a t agcompollock@yahoo.com.)

The market for California winegrapes appears tobe right-sizing, after a2019 sea- son that saw tons of grapes left unharvest- ed, followed in 2020 by a smaller crop and the COVID-19 pandemic. But analysts say the wine market faces threats from inroads by the spirits indus- try. It has seen prices rise in wine bottles priced more than $11 as COVID-19 held sway, but the hold on those rising pric- es appears to be slipping—and the wine business needs to take a good look at in- creased purchases of ready-to-drink al- coholic beverages, frombeer to spirits to wine in cans. Thosewereamongobservations shared by three topwine business analysts at two separate virtual forums. Glenn Proctor, a global wine and grape brokerwiththeCiattiCo., spokeaspart of a weekly viticulture-enology seminar series fromFresno StateUniversity. DannyBrager, abeverage industry con- sultant, and Jeff Bitter, president of Allied GrapeGrowers inFresno, spokeaspartof a seriespresentedby theSan JoaquinValley Winegrowers Association. Proctor is an owner of Puccioni Ranch inHealdsburgandalsochairs theSonoma CountyWinegrape Commission. He cited a 2018 crop of 4.3million tons of winegrapes, California’s largest on re-

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10 Ag Alert June 9, 2021