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Wine Business

California Crushed It in 2012

2012 was a record year for California's wine grape business, according to the just-released Preliminary Grape Crush Report from the California Department of Food and Agriculture. Coming off a very diffcult 2011, growers achieved all-time highs in both total crush volume and price per ton.

The total grape crush in 2012 was 4.383 million tons. That was a 13% increase from the previous year and 1% better than the previous record year, 2005. Total crush includes both raisin and table grapes though. The 2012 California wine grape crush was 4.014 million tons, 7% greater than the wine grape crush in 2005 and 20% greater than in 2011.

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The tonnage of the 2012 California wine grape crush was greater than that of 41 Nimitz-class aircraft carriers. Infographic: Fred Swan

Wine grape prices increased dramatically in 2011, due to both shortage and the depletion of previous wine inventories. The average price for wine grapes was $637 per ton, 4% higher than in 2009 (the previous record year) and 11% greater than in 2010. Despite record high volumes, prices didn't just rise again in 2012. They skyrocketed to $769 per ton, eclipsing 2011's all-time high by almost 21%.

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Clearly, the increase in both tonnage and price will help growers recover some of their losses from the previous two years. But the higher grape cost will also put price pressure on the finished product. Will the 2012 vintage be introduced at markedly higher wholesale and retail prices? Or will the high volume combined with consumer price sensitivity and foreign competitors limit hikes at the cash register and squeeze wine producer profit margins? Some wineries locked in supply contracts with growers this year. Those contracts could be extremely burdensome in future years if retail prices don't rise.

Which were the leading grape varieties in the 2012 harvest? By ton, the answer isn't surprising: Chardonnay, Cabernet Sauvignon, Zinfandel and Merlot.

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What were the most expensive grapes? The numbers are misleading if you don't consider the effect of high-volume plantings in low-price regions. For example, the most expensive grapes overall per ton were varieties such as Beclan, Picpoul Blanc, Early Burgundy, Ribolla Gialla, Meunier and Charbono. But these are very low-volume, boutique varieties grown in relatively high-dollar regions. The 3 total tons of Beclan sold for $2,700 each. That's twice the average price per ton for Cabernet Sauvignon which is ery expensive in places such as Napa and Sonoma but much less so in the high-volume Central Valley. Cabernet Sauvignon average $5,098 per ton in Napa County. The (very extreme) peak price there was $50,000 per ton from one grower who produced 5.2 tons of fruit.

 

Follow NorCalWine on Twitter for breaking wine news, information on events and more. Become a fan and join the NorCal Wine community on Facebook. Also check out our comprehensive Northern California winery listings. They are very useful for planning a tasting trip or just getting in touch with a winery.

This article is original to NorCalWine.com. Copyright 2013 NorCal Wine. All rights reserved.

See the Latest in Winery Management Software at the Wine Industry Technology Symposium

We often hear that great wine is made in the vineyard. There is a lot of truth in that. But that doesn’t mean it’s simple to carry the excellence of a vineyard all the way through to the wine. Nor is it easy to get that wine, profitably, into the hands of consumers who will love it. The locavore notwithstanding, we no longer live in a world where wine is made in rustic conditions and consumed within a mile or two of the winery.

The wine business is large, global and extremely competitive. Increasingly wineries are turning to technology to optimize their business. Technology is used to measure and control conditions in the vineyard and in fermentation tanks. It tracks inventory and sales, smooths the logistics of transport and ensures that wine club reps know customers’ preferences when they call.

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The Wine Industry Technology Symposium (WITS) is a two-day conference that helps winery management learn about the latest developments in information technology and how they might best apply it. This year, WITS takes place on July 10 - 11 at the Napa Valley Marriott. Workshop topics will include Customer Relationship Management (CRM), managing transportation networks, winery value analysis, tracking direct-to-consumer sales and new vineyard technologies. There will also be sessions on social media, brand building, cloud payment technologies and more. A technology showcase will let winery management connect directly with the providers of products and services. There will also be plenty of opportunity for the person-to-person to kind of networking.

J. Smoke Wallin is one of the founders and a co-chairman of the Wine Industry Technology Symposium. While a vendor of software aimed at the drinks business, he found no conferences in the industry with a software focus. He contacted organizers of existing, general conferences and none wanted to increase their focus on technology. So, he banded together with other software companies and they created WITS. This will be the eight annual symposium.

The event has always been held in Napa and draws 300 - 400 attendees each year. Between all of those attendees and the many showcase exhibits, the Napa Marriott is the only event space in Napa Valley large enough to host WITS.

One way to measure the value of an event is by the percentage of people that attend more than once. According to Smoke Wallin, quite a few wineries have attended every one of the conferences and around 50% of the individuals in any given year have attended previously. To me, that means the content is compelling and fresh, but there are also enough new attendees to make networking interesting.

The content of WITS is driven by wineries themselves, especially through the advisory board which includes representatives from eight wineries. The symposium is intended to address the interests of major beverage companies such as Constellation and Gallo but also medium-sized family wineries. Attendees come from many different winery departments, including ownership and executive management, managers of IT, sales and marketing, winemakers and vineyard managers. Some distributors and retailers attend as well. Most attendees are from the North Coast, but others come from the Central Coast, the East Coast and even overseas.

More details and registration for the Wine Industry Technology Symposium can be found at their website.

 

Follow NorCalWine on Twitter for breaking wine news, information on events and more. Become a fan and join the NorCal Wine community on FacebookAlso check out our comprehensive Northern California winery listings. They are very useful for planning a tasting trip or just getting in touch with a winery.

This article is original to NorCalWine.com. Copyright 2012 NorCal Wine. The WITS logo is the property of the Wine Industry Technology Symposium. All rights reserved.

Learn Wine Business Management Online

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Sonoma State University offers a 28-week series of online classes leading to a Certificate in Wine Business Management. The program serves people looking to make a career change into the wine industry as well as those already in the business who want to better position themselves for advancement. Classes are taught by Sonoma State faculty.

The program is divided into three sequential sections: Foundation, Intermediate and Advanced which are priced separately. Foundation provides an overview of wine production, marketing and sales. The Intermediate level builds on that knowledge, going into depth with global wine statistics, key aspects of wine sales and marketing and also business issues related to viticulture and wine production. The Advanced level consists of two focused courses, Strategic Wine Marketing plus Production and Quality in the Wine Supply Chain. Students who pass all three levels are eligible to take the certification test.

Sonoma State also offers an accredited MBA in Wine Business. Students who receive the Certificate in Wine Business Management satisfy for the wine industry experience prerequisite for admission to the MBA program.

The next Wine Business Management Certification series begins on September 10. The deadline for enrollment is September 5. Click here for more information or to enroll.

Follow NorCalWine on Twitter for breaking wine news, information on events and more. Become a fan and join the NorCal Wine community on FacebookAlso check out our comprehensive Northern California winery listings. They are very useful for planning a tasting trip or just getting in touch with a winery.

This article is original to NorCalWine.com. Copyright 2012 NorCal Wine. SSU sign photo courtesy of SSU. All rights reserved.

Will Tiny Bottles Bring Big Benefits?

According to Trefethen Family Vineyards, I was among the first to receive their brand new wine samplers. The wine came in teeny-weeny little bottles. Each bottle holds 50ml, that’s 1/15 of a standard bottle. They are closed with a Lilliiputian screw cap which is in turn sealed with a plastic wrapper. Trefethen wisely shipped two of the baby bottles for each wine.

The reason for downsizing the samples is, to be blunt, money. While some might see it as cheap, I’m looking at it as responsibly frugal. If all goes well, it should be a win, win, win, win, win, win, win scenario. Trefethen, and other wineries who take the same approach, win because they save money. They win again if, instead of saving every penny, they take the opportunity to send more samples to more writers. The earth wins because less glass is used and less mass is shipped so less carbon will get pumped into the atmosphere. I win because I may get a wider range of samples. I win again because I don’t have to feel guilty about having to dump, or make vinegar out of, all of the wine that’s left over when I’ve finished my blind tastings. You win, because there will be more wine reviews for you to consider when deciding what to buy. And you win again, because wineries may be able to keep their retail prices down and/or stay in business a while longer.

see a few downsides with respect to the new samplers. There isn’t enough wine there for me to evaluate the samples immediately after opening and then again after decanting. There certainly isn’t enough for me to do a panel tasting. Another drawback is that the packaging is not retail packaging. Publishing photos of the wee bottles in a review won’t do the reader any good. Nor can I see what closure is used on the retail bottle. If wineries adopt this type of sample, they need to provide full info about the wine, including digital photos, either included with the package or posted someplace online that they clearly identify in the mailing.

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IAnother obvious concern about new packaging like this is sample quality. Trefethen is using “T.A.S.T.E. technology.” This technology, offered by a company called Tasting Room, Inc., is intended to ensure that the wine in the sampler is identical to the retail product. The acronym stands for Total Anaerobic Sample Transfer Environment. That is I’m-desperate-for-a-catchy-acronym-speak for moving something from one place to another without exposing it to oxygen.

Tasting Room, Inc. essentially has created an environment that allows them to open and pour a retail bottle of wine into a beaker, transfer that liquid into a whole bunch of munchkin bottles, and then seal those bottles – all in the absence of oxygen. I don’t know how they do it. Maybe they’ve got one of those clear boxes with the rubber gloves sticking into it like they used in Andromeda Strain. Or maybe they’ve hired a bunch of space aliens that breathe argon. Whatever their method, Tasting Room, Inc. says the that resulting samplers are representative of the real deal. Presumably Trefethen has tested them to their own satisfaction.

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Other wineries are doing the same, or similar, things. Shana Ray blogged about Seghesio’s 6-bottle sampler. That one uses the same technology but is sold to consumers via the Seghesio website. This gives you the opportunity to try the wine at home before you buy a bottle online. Or, you can buy a whole bunch and start an airline.

Crushpad is offering a similar Tiny Bottles service through a company called Brixr. Brixr? Anyway, Crushpad does the bottling and Brixr works with the wineries and can, if the winery likes, also sell the samples to end-users.

I'll review the Trefethen samples soon and let you know how T.A.S.T.E. wines taste.

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Follow NorCalWine on Twitter for breaking wine news, information on events and more. Become a fan and join the NorCal Wine community on FacebookAlso check out our comprehensive Northern California winery listings. They are very useful for planning a tasting trip or just getting in touch with a winery.

This article is original to NorCalWine.com. Copyright 2010 NorCal Wine. All rights reserved. Glove Box photo by Argonne National Laboratory.

Way Too Much Wine

With the state of the economy today, there are a lot of businesses sitting on excess inventory. Some companies have limited production to avoid adding to the problem. Many have also dropped prices and/or offered sweet financing deals.

The wine business has been about as badly affected as any. It has seen plenty of discounting too, in all tiers of the market. In some places, consumers can buy wine for less than even off-brand bottled water. These price moves have lowered profit margins, or increased losses. As Xavier de Eizaguirre, chairman of Vinexpo, has said about the UK market, “retailers are the only ones making money.” Yet, despite the deep discounting, consumption hasn’t increased dramatically.

Nor has global wine production has declined substantially. Grapes grow every year. You can pull up vines, which costs money and limits future income. Or, growers can let the grapes fall to the ground, but they have little motivation to do so when someone is willing to pay them for the fruit. Frankly, production was at excessive levels in some regions even before the financial crisis. While business boomed for most of California’s grape growers and wineries, cheap wine from places like southern France, Bordeaux and Australia was starting to pile up.

Chris Losh, with the beverage industry analysts just-drinks, recently wrote about a newly released study done for Vinexpo by IWSR. He quotes the study as saying “between 2005 and 2009 the world’s average annual production was 3bn nine-litre cases.” Losh estimates average consumption during that period as 2.4bn cases. This doesn’t sound like a big delta, because the digits are small. What it really indicates, though, is an average excess of 1.45 billion US gallons. Every year. And now wine production in China is increasing rapidly.

Now that sounds like a lot of wine. But how much is it really? Well, the largest oil supertanker in the world holds 172 million gallons. It would take nine of those ships to hold a single year's excess wine. If all you have is a regular (huge) supertanker, you’ll need twenty.

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The Knock Nevis, aka Jahre Viking, is the world's largest supertanker.
Photo: Auke Visser's International Super Tankers

Supertankers are hard to relate to though. You don’t see them on the street every day. So let’s use the streets you do see every day as a reference. If you dumped all the excess wine from one of those years on the streets of Manhattan, it would cover the entire island to a depth of 3.5 inches. Splash all five years worth of leftovers out and the Big Apple’s citizens would be wading knee-deep in vin ordinaire.

The problem isn’t just excess inventory though. It’s also a tremendous waste of resources. Making a ton of wine bottles requires 1.2 tons of raw materials and 185 kWh of electricity. Of course much, perhaps most, of the excess wine never gets as far as a bottle. But production of grapes and wine is very energy intensive too; there’s diesel for the farm equipment, air conditioning for the wineries and warehouses, etc. Transporting the wine consumes a lot of fuel, generating carbon emissions in the process. And, in areas such as Australia where irrigation is required, a massive amount of increasingly scarce water is essentially being wasted.

Excess wine can be made into vinegar or used to produce other types of drinking alcohol. It can also be sold to producers of denatured alcohol or absolute ethanol. The latter can used as  industrial solvent, fuel, etc. But conversion from table wine isn’t necessarily the most efficient or cost-effective way to produce those substances. It would be better to decrease the overages by reducing grape and wine production.

That’s easier said than done. Growers won’t pull up their vines unless a governmental organization pays them to do so or it becomes consistently impossible to sell the grapes profitably. Now that governments are suffering from severe financial issues of their own, it seems unlikely that paying farmers not to grow things will be a popular expenditure. In the short run, the biggest decreases in production may come as a result of grower and winery bankruptcies and the elimination of unprofitable wine brands by the multinational drinks companies. Or these companies will act on the notion that they can be more profitable by making less wine but selling it at a higher price. We can hope.

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Follow NorCalWine on Twitter for breaking wine news, information on events and more. Become a fan and join the NorCal Wine community on FacebookAlso check out our comprehensive Northern California winery listings. They are very useful for planning a tasting trip or just getting in touch with a winery.

This article is original to NorCalWine.com. Copyright 2010 NorCal Wine. All rights reserved.