When Jim Spaulding started Stonegate Winery in this Napa Valley village 12 years ago, his main problem was getting enough grapes to make all the wine he could sell.
Today, with U.S. wine consumption stagnant for three years in a row, bargain-priced imports capturing an ever larger share of the American market, and boutique wineries like Stonegate still proliferating, Spaulding has a new problem: selling all the wine he makes.
"We make a lot better wine than we used to, but there are a lot more wineries making good wine," he says. "Never again will we think we can sit back and the product will sell itself."
To help Stonegate stand out from the crowd, including such similarly named competitors as Stony Hill Vineyard in St. Helena, Stoney Creek Vineyards in Somerset and Stoneridge Winery in Sutter Creek, Jim Spaulding, his former wife Barbara, their son David and his wife Kathleen have opened their family-operated winery to tourists, started selling Stonegate wine glasses, aprons and T-shirts, and finally built an ornamental stone arch in front of the winery to match the drawing on their wine labels.
For the Record
Los Angeles Times Sunday March 10, 1985 Home Edition Business Part 5 Page 2 Column 1 Financial Desk 3 inches; 97 words Type of Material: Correction
Due to an editing error in last Sunday's story on the California wine industry, the full name and title of one of the sources cited was inadvertently omitted. He is Richard E. Moyer, vice president-marketing, ISC Wines of California Inc. In addition, a chart accompanying the article was incorrect. It indicated that the data were in "millions of gallons," but should have read, "share of shipments." The following table shows the actual percentage figures, correctly labeled. Yearly totals may vary from 100% due to rounding.
How the U. S. Wine Market Has Changed Wine shipments to and within the United States:
Share of Shipments From all From other California states Imports 1974 70.6% 14.6% 14.7% '75 73.4 13.2 13.4 '76 71.6 12.8 15.7 '77 71.0 11.8 17.3 '78 68.5 10.5 21.6 '79 69.4 9.9 20.7 '80 68.9 9.8 21.4 '81 68.6 8.7 22.7 '82 68.0 8.2 23.8 '83 67.2 8.0 24.9 '84* 66.1 8.0 25.9
Source: Wine Institute
Sends Out Newsletters
The Spauldings are also getting out and calling on wholesalers and retailers in key cities, sending out newsletters to customers and prospects, and, most significantly, lowering their prices. Stonegate Chardonnay, once $10 a 750-milliliter bottle, now goes for $9. Sauvignon Blanc has dropped from $8.50 to $7.
As Stonegate goes, so goes the California wine industry. Producers from the smallest to the largest find themselves scrapping harder for slices of a market that stopped growing in 1982, when the nation's 15-year boom in wine drinking fizzled out.
Shipments from California vintners rose a scant 0.1% in that year, 1.5% in 1983 and 2.6% in 1984. All the growth in 1983 and 1984 came from wine coolers, those punch-like mixtures of wine, carbonated water, sweeteners and fruit flavors that have caught on with young consumers. With coolers factored out, wine sales have remained flat for three straight years.
The precarious health of the California wine industry has statewide significance: Wine grapes are among the state's most valuable crops. California's 600-odd wineries ship about $2.5 billion worth of wine a year, for which consumers pay about $5 billion at retail. And an estimated 60,000 Californians work full-time or part-time at some level of the wine business.
An industry that large is far from monolithic, and at the other end of the spectrum from Stonegate are the large wineries that mass-produce low-priced jug and bulk wine. Among these, E. & J. Gallo Winery stands out as the largest producer, with 38.5% of all California wine shipments last year, according to San Francisco wine consultants Louis R. Gomberg and Jon A. Fredrikson. The second largest producer, Seagram Co., with 10.1% of the shipments, is the most diversified. Unlike Gallo, which concentrates on lower priced brands such as Gallo and Carlo Rossi, Seagram spans the market.
Its Sterling Vineyards winery in Calistoga produces premium wines. Monterey Vineyard at Gonzales in the Salinas Valley and Paul Masson Vineyards wineries at Madera and Soledad produce mid-priced brands. Taylor California Cellars at Gonzales concentrates on lower priced wine. In addition, Seagram markets wine made by half a dozen independent Napa Valley producers, owns a winery in New York State and imports a number of foreign brands.
Far From Pleased
Overseeing U.S. operations as president of Seagram Wine Co. is Richard L. Maher, whose previous jobs include stints in marketing management at Gallo and Heublein, Inc.'s United Vintners and eight years as president of Beringer Vineyards. The 51-year-old Maher shuttles between Seagram headquarters in New York and Seagram's plants in California two or three times a month. He has an ideal vantage point from which to assess the industry, and he is far from pleased.
"This is the most intense competition I've seen in the wine business," he says. "Everyone is getting squeezed all along the line."
The root cause of the squeeze, of course, is the tapering off of wine consumption, which Maher and other experts attribute largely to Americans' growing health, fitness and nutrition consciousness, and also to the growing grass roots movement against alcohol abuse and drunk driving. Like wine, beer sales are flat, and hard liquor is in decline. Just as white wine replaced the martini at many business lunches and before dinner in the 1970s, many wine drinkers are switching to bottled water, or nothing, in the 1980s.
With inventories of unsold California wine equivalent to 20 months' shipments, many wineries are cutting back production to bring it more in line with sales. But winery construction continues. After averaging 30 new wineries a year between 1970 and 1980, California added 70 wineries in 1981, 51 in 1982 and 48 in 1983. Start-ups in 1984 haven't been officially tallied, but are believed to total several dozen.
Grape Growers Hurt