Experts: Smaller 2016 crop may increase 'buyer fatigue' from high grape wine prices

Every year in the Wine Country, people try to predict how the wines from the current vintage will ultimately pour. This year, 2016, is no exception. There are so many factors to use to predict how the wines of a given year will hold up, but yield is a big one. So check out this article on how one industry expert sees the upcoming vintage.

Original article found on The Northbay Business Journal on May 25, 2016

Experts: Smaller 2016 crop may increase ‘buyer fatigue’ from high grape, wine prices

BY Jeff Quackenbush
Business Journal Staff Reporter

The consumers’ thirst for better-quality wine continues to deepen, but the diminishing North Coast supply of grapes and wine may mean less of the growth in higher-end brands will be coming from the region, market experts told a gathering of industry professionals in Napa on May 25.

Macroeconomic currents squeezing supply for hot-demand California wines is partly behind the dozens of high-profile sales of North Coast wine brands, wineries and vineyards in the past couple of years, according to speakers at the 21st annual Vineyard Economics Seminar.

“There is a rush to the super-premium end, and the quickest way to do that is acquisition of brands,” said David Freed, chairman of The Silverado Group and a founder of the seminar.

About 160 attended the event, held at the Napa Valley Marriott.

How these acquirers of North Coast-oriented brands were going to fuel their growth amid fewer opportunities to buy grapes and wine in bulk not locked into multiyear contracts was a recurring question during the seminar.


Vineyard acreage in Napa and Sonoma counties has been declining, and planting more has become costly in time needed to clear regulatory hurdles and values for established and potential vineyards, according to speakers Mike Needham and Marc Cuneo of Novato-based Turrentine Brokerage. [PHOTO: Marc Cuneo, bulk-wine broker for Novato-based Turrentine Wine Brokerage, speaks at the 21st Vineyard Economics Seminar at Napa Valley Marriott on May 25, 2016. ]

For example, California largest winegrape variety, chardonnay, took a big hit at the higher-quality end last year, with big declines in tonnage in Sonoma County and the Central Coast. That sent the bulk-wine price of chardonnay soaring to $18–$25 a gallon for choice subappellations such as Russian River Valley.

Cabernet sauvignon is California’s top red wine grape and Napa Valley’s top variety. Strong demand for the varietal wine, particularly at the higher end since 2011, has left little available grapes or wine to buy. Combined with a smaller 2015 Napa Valley crop than the previous three, pricing for what wine is available in bulk has soared to $40–$55 a gallon.

And a similar hit to pinot noir last year has resulted in bulk-wine prices climbing to $25–$30 a gallon, Cuneo said.

Higher cost of goods likely will force some brands to change sourcing from top-end supply markets like Napa and Sonoma counties, Cuneo said.

“It’s going to be a margin battle,” he said. “It’s going out and getting planting contracts. It’s going out and planning for growth in 2017, ’18, ’19, ’20. Understanding your brand strength is really what’s going to let you build the strongest supply network possible. Because if you come into this market and say, ‘Hey, I want to buy something on the spot market, bottle and sell it for $20 a bottle retail,’ right now the inventory, pricing and opportunity is not there.”

For Napa Valley cab, the “seller fatigue” of trying to get $15–$20 a gallon from 2004–2010 may be turning to “buyer fatigue” at current prices, Cuneo said.

“If you’re marketing a program as coming from Napa, it is hard to move the program from Napa if it’s on the label,” he said.

Demand for fruit has accelerated so much since the 2015 harvest, which was significantly short on key winegrape varieties such as chardonnay, cabernet sauvignon and pinot noir, that available fruit expected from the 2016 crop already is mostly under purchase contracts, Needham and Cuneo said.

“What are you doing to prepare for 2017–2018?” Needham asked.

The Wine Ambassador is a wine-oriented community that is always looking for ways to enhance your wine IQ. We hope this article gives you some greater perspective about what we can expect from the 2016 vintages from Napa Valley.