Tag Archives: grape glut

Yes, there is a grape glut

woman looking at ocean
“Sigh. What will the world do with all those extra grapes?”

So what happens next? Your guess is as good as mine

The long forecast grape glut has officially been acknowledged. On Sept. 8, noted wine critic John Mariani wrote on a Forbes website: “there is an astoundingly large wine glut in the world. …” On Sept. 12, Mike Veseth, the Wine Economist, wrote: “The world is awash with wine. …”

This comes on top of a freelance piece I wrote last week for Meininger’s, the wine trade magazine: “As US demand drops, California worries about an excess of grapes.”

Which leaves us with two questions: Why is there a glut and what will happen to prices?

Who knows? This is the wine business, after all, whose behavior has been so irrational for so long that even the experts are baffled.

One thing most agree on: The glut has been caused by a drop in demand, and not from an excess of supply from too many big harvests, as is usually the case. In fact, this supply situation is quite unusual; the last time it happened in the U.S. was 30 years go.

The drop in demand is true not only in the U.S. but around the world. In Australia, Veseth reports, the excess is being measured in the number of Olympic-size swimming pools. Consumers everywhere are buying less wine, so more wine is stacking up on retail shelves, in wholesaler warehouses, in winery storerooms, and at bulk suppliers.

What’s less certain is why the drop in demand. Most of the wine industry people I talked to suggested the usual reasons: the Neo-Prohibitionists and less interest in wine among younger consumers, who have so much more booze to choose from. Interestingly, most discounted the effect of premiumization and higher prices, which really didn’t surprise me. Wine has gleefully yoked its future to higher prices, so how could that be the problem?

Mariani cites the the generation gap, as well as political complications in China and Russia. Veseth, who shoots a couple of holes in the generation gap theory, isn’t so sure: “I would be more satisfied if there were an economic theory to explain the economic fact of wine’s over-supply.”

There is, Prof. Veseth. It’s called too high prices. Explanations don’t get more economic than that, though there is still no guarantee that the glut will drop prices. Because, of course, wine.

Also worth noting: In the 1990s, the last time we saw less demand create an oversupply like this, some very smart people at Bronco Wine Co. worked with Trader Joe’s and invented the Charles Shaw wines – the legendary Two-buck Chuck. Hopefully, there are still some very smart people in the wine business who can figure something like that this time.

Photo: Bango via Morguefile.com

 

The WC Wine Business Index: Four more signs the wine glut is upon us

grape glutThe grape glut means there’s lots of cheap wine on the market, from Aldi to Costco to Albertson’s

This is the first of two parts looking at the conundrum that is wine pricing today – we’re awash in cheap, often crummy. wine, while the prices of the world’s great wines are at all-time highs. Today, part I: The grape glut, and what it means for consumers. Part II: How we got to the point where no one but the ultra rich can afford the world’s great wines.

How do we know the wine glut is upon us? Because the Wine Curmudgeon’s Wine Business Index tells us so. How about $2 wine in many of Albertson’s California stores? An Aldi chardonnay where the bottle probably cost more than the wine inside it? Or a constant flow of samples this fall of cheap wine that I’ve near heard of before?

In other words, there are lots and lots of grapes in California, and neither the Trump tariff or increased on-line sales have done anything to fix it. And why do we care about a grape glut? Because if there are too many grapes, we’re going to see cheaper wine prices, thanks to the law of supply and demand. This doesn’t necessarily mean we’ll see lower prices on established wines; rather, what I’m hearing is that producers are “inventing” cheap wine brands or making private label wine to soak up excess grapes.

First, though, what you need to know about the WC Wine Business Index. It’s my attempt to overcome the contradictions, inaccuracies, and confusion that are inherent in most wine statistics. I interview retailers, producers, and marketers from around the country to see if I can outline where the wine business is and what it means for consumers.

Alive and well

And from what I’ve found, the glut is alive and well:

• Consider Albertson’s Sea Ridge wines, which have been marked down to $2.21 from $3.49 in many of the chain’s West Coast stores. At that price, the supermarket is more or less selling the wine at cost. (And a tip o’ the WC’s fedora to blog regular Nick Angel for sending this my way.)

• Aldi’s $8 Exquisite California chardonnay. It comes in a heavy bottle (about 21 ½ ounces) with a deep punt and a heavy foil cap. This is could well be a “shiner,” said one long-time Sonoma winemaker. That means the wine was bottled by another producer, but sold to Aldi at a discount. “I haven’t tasted it,” said the winemaker, “but it would have been produced by someone who thought they would sell it for $30-plus a bottle, but it became ‘albatross inventory’ and got sold real cheap.”

• Costco’s Kirkland Sonoma chardonnay, which has sold for $7 or $8 for the past couple of vintages That’s an almost unheard of price, even for a deep discounter like Costco. It works out to about $3 a bottle for the wine (allowing for $2,400 a ton for chardonnay and 756 bottles to a ton). So, somehow, the cost of production and any profit has to come out of the other $4 or $5. (Another tip o’ the WC’s fedora to blog regular Walter Blood for sending this my way.)

• Sample after sample of wine costing $15 and less from producers I’ve never heard of. Typically, this only happens when there are excess grapes and chance to make a wine at high margins even at lower prices.

Having said all of this, one Napa winemaker told me she doesn’t expect the glut to last much after the 2020 vintage. This year’s harvest almost certainly won’t be as big as 2019’s, which will limit production. So the future for prices as we go into 2021 remains uncertain.

Winebits 645: California grape glut, grape DNA, Pennsylvania liquor board

grape glutThis week’s wine news: The California grape glut, especially for high end cabernet sauvignon, continues worse. Plus, the Aussies misidentify a grape, and more fun from the Pennsylvania liquor control board

• California grape glut: How much excess is there in the California grape supply chain? There “is still more bulk wine available than there are buyers for it, and that makes bottle price increases difficult to foresee, even as wine consumption has risen sharply. It also means you might get better wine for the same money,” reports Wine-Searcher.com after a wine business symposium last week. In addition, there is apparently more bulk cabernet for sale today than at any time in the state’s history. The kicker? Much of the excess is in high-end caberent sauvignon, so we’re “going to see some grapes meant for the higher-end market coming into the middle range,” says Mark Couchman, managing partner of Vintage Supply Partners – and that’s good news for wine drinkers.

• Whoops: Identifying grape varieties without benefit of DNA testing is difficult; for decades, Chilean producers thought the carmenere grape was merlot. A mixup has happened again, this time in Australia, where wines labeled with the petit manseng grape were actually made with the gros manseng grape. The mix-up has been going on for almost 40 years, when the misidentified grapes were purchased from France. The seller, too, didn’t know what variety the grapes actually were.

• Only in Pennsylvania: The Pennsylvania Liquor Control Board, much beloved by the blog’s readers, has decided that closing all of the state’s liquor stores in the wake of the coronavirus pandemic may not have been such a good idea after all. It has reopened about 15 percent of the some 600 stores in the state-run system. But those lucky enough to have a newly re-opened store near them will have to drink what they buy. No returns are allowed.

Winebits 631: Costco wine, grape glut, Picard vineyard

costco wine
Annette Alvarez-Peters

This week’s wine news: Costco wine’s Annette Alvarez-Peters, often called the most important person in the U.S. wine business, retired quietly at the end of last year. Plus, the California grape glut does in Treasury Wine Estate’s stock and CBS fudges on Capt. Picard’s vineyard

• Costco wine: Annette Alvarez-Peters, who oversaw Costco’s massive success in wine (as well beer and spirits), retired at the end of last year and without any fanfare. Which, given her annual ranking as one of the two or three most important people in the U.S. wine business, is amazing. As one wine marketer told me: “Potentially tectonic news.” Since 2010, Costco’s alcohol revenues almost doubled to $4.4 billion annually. She will be succeeded by Chad Sokol, who had been an assistant general merchandise manager.

• Grape glut: Sinking U.S. wine prices, brought on the the California grape glut, sunk Treasury Wine Estate’s stock price last week. Its share price has fallen 18 percent on its home Australian stock market on news that too much wine in the U.S. forced it to “walk away” from around 500,000 cases of wine in this country. Or, in Wine Curmudgeon-speak, Treasury had to discount heavily to get rid of the wine. The story in the link says Aussie investors want the company to dump its U.S. producers, which include Beringer, BV, and Sterling.

• Where is it? In Star Trek: Next Generation, Jean-Luc Picard’s family winery was in the Franche-Comte region of France, near the Swiss border. It makes high-quality red wine from the trousseau grape. Flash forward to the new Star Trek: Picard, and the winery has moved to the more popular and upscale Burgundy. The story in the link isn’t quite clear how the family winery moved, but as I noted when I wrote about wine and the movies in 2011, accuracy has never been high on the list production requirements.

Winebits 621: 1 Wine Dude rant, grape glut, Robert Parker

1 wine dude
Joe Roberts: “Some of us have been sounding warnings for almost an entire decade.”

This week’s wine news: 1 Wine Dude’s Joe Roberts takes on premiumization, plus the grape glut worsens and the Wine Advocate is sold

• “Impending hangover?” Joe Roberts, who writes the 1 Dude Blog, doesn’t mince words: “It seems that, in focusing on selling higher and higher priced wine to a dwindling set of older consumers, the U.S. wine business has painted [itself] into a corner. …” I asked Joe about the piece, which rips the wine business as few others have, and he pointed out he has been warning the wine business about its follies for as long as I have. Maybe we can beat this premiumization thing after all.

• “A steep decline?” California’s grape glut continues to get, well, gluttier. The Napa Valley Register, the industry’s hometown newspaper, reports that “2019 has been a year where it’s tough to sell grapes and bulk wine.” In fact, even Napa Valley cabernet sauvignon – the epicenter of premiumization – has plummeted in price. Quality cabernet, says one broker, has been selling for one-quarter to one-third the price of past years. This almost certainly points to lower wine California wine prices – if not in the next six to eight months, then by the end of next year.

• So much for that strategy: In 2012, Robert Parker sold the Wine Advocate to a group of Singapore inventors. The goal, the company said at the time, was to expand the reach of perhaps the most influential magazine in the history of wine to China. So the news that France’s Michelin Guide has bought the 60 percent that it didn’t buy in 2017 probably speaks to the end of the strategy. The story in the link is mostly a puff piece that really doesn’t explain what’s going on, but there’s a sense that Michelin’s need to expand its food and wine review business trumped whatever plans an independent Advocate had or could afford.

Winebits 617: Blind tasting, campaign cash, grape glut

This week’s wine news: The perils of blind tasting – even for experts. Plus cash and the three-tier system and too many grapes to harvest

• Whoops! What happens when a high-end sommelier does a blind tasting for an audience? Check it out in the video at the top of this post, part of an advertising campaign on the 750 Daily website. Let’s just say it was not pretty – identifying a 2018 Italian pinot grigio as a high end white Rhone blend. The Wine Curmudgeon, who is one of the worst blind tasters he knows, has much sympathy for the sommelier.

• Follow the money: What happened after the Pennsylvania legislature voted to allow limited supermarket wine sales in 2016? Several legislators who played a key role in the bill’s passage went to Europe, courtesy of “campaign donations.” The story, reported by three Pennsylvania newspapers as part of a year-long investigation, shows just how prevalent cash is in oiling the three-tier system and why reforming it is so difficult. The donations paid for “overseas and cross-country travel, sports tickets, limos, dinners, cuff links and country club memberships. Among the hidden spending, however, the European trip stood out.” Best yet, the trips and money may not have been illegal.

• Too many grapes: What should do California grape growers do when they can’t get a fair price for their grapes? Leave them on the vine to rot. That’s the advice from two University of California viticulture experts. In other words, the predicted California grape glut seems to be underway. Western Farm Press reports that the extension agents say “in this market, the prices offered are likely to be less than the cost of production. Allowing unsold fruit to remain on the vines may seem unthinkable, yet with no income from those blocks, it makes sense. This means not dropping clusters by hand and not running a harvester in the vineyard to get the berries off.”

Winebits 231: Grape glut edition

Because, for whatever reason, the Wine Curmudgeon can ?t stop writing about the world ?s grape supply and how that will affect wine prices:

? The wine grape bubble: That ?s the take from Lew Perdue at Wine Industry Insight, who has seen more than a few crop forecasts in his time. [W]e don ?t know where the grape market is headed because the California wine industry operates on pretty poor advice and a lack of full, complete and unbiased facts. ? He compares the hysteria around this year ?s news to previous shortages that weren ?t necessarily shortages, and finds several similarities. Also, he throws in a good anecdote about the late 1990s Internet bubble.

? Australia ?s never ending grape supply: Remember how the Aussies were working out their grape problems? Not necessarily. ?The report by the Australian Bureau of Agricultural and Resource Economics and Sciences predicts 5 per cent more grapes will be produced next season and another slight increase in the following vintage. ? Which, given that many Australian wineries are selling grapes below cost, and others are going out of business because of low prices, is not the news its industry wants to hear.

? Lakes of European wine: Or so says a report from something called the Independent Investor, which is taking a contrarian position about investing in wine. Like, ?Don ?t. ? It notes the difference between the fine wine market and its hype, as well as putting overall worldwide wine production in perspective: ?The wine lake refers to the continuing supply surplus of wine (supply glut) produced in the European Union. A major contributor to that glut is the Languedoc-Roussillon, which produces over one-third of the grapes grown in France. ?