California grape shortage: a crisis for 2012?

Wineries in California are scrambling for grapes and wine, entering into long term contracts so they are assured of supply for the next several years.

There are some people who believe the crisis is overstated, and there are those running around declaring that the sky is falling. The drinks business spoke with some of those close to the issue in California.

Andy Beckstoffer is a renowned Napa Valley grape grower whose 40 year old company, Beckstoffer Vineyards, cultivates over 3,600 acres in Northern California.

Beckstoffer confirmed that wineries are desperately seeking grapes and wine, “Activity is pretty feverish” he says. “Totally picked up from last year. It has turned out to be a seller’s market.”

“Wineries are interested in long and short term contracts,” Beckstoffer explained. “Some wineries want to see how it goes. For average grapes [not those sold to cult wineries], wineries are a bit in denial – they think the shortage will not happen.”

John Wilkinson is on the board of directors for the Napa Valley Grapegrowers, an association serving 590 grape growers and related businesses.

He is also managing partner of the custom crush business Bin to Bottle, which produces 300,000 bottles of wine a year for 75 wineries. From the buyer’s camp, Wilkinson confirmed, “No question, everyone is out buying. Everyone needs fruit.

“It is not, however, a crisis”, Wilkinson stated. “We are making wine after all. I would reserve the word crisis for plane crashes and such. The wine industry is in a strong position. Wineries are selling wine and growers are having a lot of success.”

John Gillespie of research firm Wine Opinions looks at the issue from a different perspective, observing “we’ve been through this before, and the recent cry [of a shortage] is terribly short sighted”.

Gillespie explained that with the global market today, “there is enough wine”. Wine can be bought from numerous countries. A shortage in California does not mean winemakers cannot get wine. Gillespie is worried that winemakers will repeat errors of the past and rush out to plant more vines.

Regarding the higher prices that inevitably come with increased demand, Gillespie said: “California grape growers raising prices is shortsighted – not warranted – if you think globally.”

Beckstoffer confirmed though, for the California grape market, prices have gone up dramatically already. “Prices can only go so high – there is no point in putting wineries out of business,” he argued.

As a result, Gillespie believes a bigger crop this year would help – or until wineries can raise prices of their wines.

If so, and “if things continue as they are”, said Beckstoffer, “it looks like things will be good for the grape grower and the winery.”

On harvest 2012, Beckstoffer added: “We need a bigger crop. We won’t get a big bunch count [this year] but [Napa Valley] could have an above average crop – but not a bumper crop.”

The good news for consumers is that higher prices are not yet reflected at the retail level. California wine merchant K&L’s customer service manager in San Francisco, Joel Nicholas, and Beverages & More’s cellar master, Wilfred Wong, each responded that their impressions were that prices have not yet increased at their stores.

This issue is sure to heat back up considerably closer to harvest.