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A Bummer Crop

November 02, 1995|DAN BERGER

If you like California wines, especially those selling for $6 to $8 a bottle, be prepared to start paying more.

Two things are forcing this: a short harvest and the financial effect of phylloxera, the devastating root louse that has attacked Napa Valley and other regions in the last 10 years.

Phylloxera became a hot topic in the Napa Valley about 1990; since then about 10% of the valley's vines have been ripped out and replanted with roots that resist the pest. But this replanting costs between $15,000 and $30,000 per acre, and now the costs are being ratcheted up through the marketing system to the consumer.

Worse news is the size of the 1995 grape harvest. It's terrible, the smallest in years. The harvest is nearly complete, and reports about quality are optimistic. There was no rain and grapes generally were picked in perfect condition. Flavors were extraordinary and there are hopes for great wines from most varieties.

But the amount of fruit is way down. Poor springtime weather left most vines shy of fruit, and at last count California's North Coast region, including Napa and Sonoma, was off an estimated 20% from last year--and last year was well below expectations.

In California's vast Central Coast, the story was even worse: Crop levels were only 65% of normal in many areas, and some Chardonnay and Pinot Noir crops came in at only half of normal.

The shortfall comes just when California's premium wine is selling faster than at any time in the last decade. Wineries are even releasing new wines before they're ready, believing they can't afford to have a vacant spot on the retail shelf. Having no wine in the stores for even a month is considered a marketing disaster.

"This [shortfall] couldn't have come at a worse time," says Rick Theis, executive director of the Sonoma County Wine Growers."[Robert] Mondavi is on allocation for all his wines, we've got a number of wineries out of stock on Chardonnay and Sauvignon Blanc and they needed a bumper crop to even be a player in this market. What they got was worse than anyone expected.

"There's no question that we'll see more [California] wineries put wines on allocation. Prices will go up, and there will be a big surge in imports, just to fill the void."

Most wineries will allocate certain wines in some markets. One Sonoma County wine marketing executive said some brands will support restaurants at the expense of retail sales.

"Look at Jordan," he says. "Jordan is strong in restaurants, so he's going to protect the restaurateur; that's his bread and butter and it's great positioning. It ensures that the wine is always sold at a premium price, which is good for the image, and the wine is always served with food."

Other brands that rely on volume, like Sutter Home, Glen Ellen, Mondavi-Woodbridge and Kendall-Jackson, will probably protect their retail sales, say analysts, and try to keep price increases as modest as they can.

Today's big question: Which brands will survive the coming shake-out?

One wine country insider believes that wineries that own much of their own vineyard land (like Gallo, Kendall-Jackson, Beringer, Fetzer and Sutter Home) are in better shape than wineries that rely on long-term contracts on vineyards.

"I think Canandaigua [whose labels include Inglenook, Almaden, Mateus, Manischewitz and Paul Masson], Sebastiani and Heublein [with its Glen Ellen and Blossom Hill brands] are facing significantly higher grape costs this year," he says.

Bill Turrentine, a wholesale wine broker, says the shortfall of grapes, especially in Santa Barbara and Monterey counties, is prompting some of his customers to ask about imported wine.

They want to know how much it would cost to import bulk supplies of wine from Chile and southern France, he says.

"We are exploring it," says Turrentine. "There seems to be a pretty good level of interest in it. The last time I had any inquiries was the last time we had a short market, 1986 through 1988, and we sold some [imported bulk wine] to wineries that were 'fighting varietal' producers." Fighting varietals are Chardonnays and Cabernet Sauvignons that sell for around $5.

Asked what sort of price increase he expects from the shortfall of 1995, Turrentine says, "I don't think I can reasonably give a figure for it. But the short supply and very strong demand are going to have an upward push.

"On the other hand, the wineries know that the consumer is very price-conscious. So although they are under a lot of pressure and they can't absorb all the added costs they are facing, they have to try to keep any increases as modest as they can."

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