Wineries in Modesto area join shift to higher-priced bottles

The average price for a bottle of wine reached $10 in U.S. markets for the first time in 2016 — news of note to the Modesto area’s producers.

The market has shifted somewhat from the lower-priced wines that for decades have been the main business at E.&J. Gallo Winery and nearby outfits. But they are by no means being squeezed out, thanks to their own investments in premium grapes.

And other wineries, such as McManis Family Vineyards near Ripon, already specialized in $10-and-up bottles. Its output has grown to about 400,000 cases a year under that label, and it sells four times as much bulk wine to other companies

The keys to success? “You need healthy soils, motivated employees and overall knowledge of the vineyards,” Dirk Heuvel, vineyard manager at McManis, said during a recent visit by The Modesto Bee.

Wineries employ several thousand people in the Northern San Joaquin Valley, long the nation’s leader in volume. Gallo is the world’s largest. The Wine Group, another giant, has the Franzia plant near Ripon among its holdings. Bronco Wine Co. does heavy volume south of Ceres. Delicato Family Vineyards does the same near Manteca.

“Consumer preferences are changing, and people are drinking more expensive wines that are higher quality,” Chris Indelicato, president and CEO at Delicato, said in a phone interview. It long has aimed at the $10-and-up market, with products from Lodi, Napa and other noted areas among the 9.2 million cases shipped last year.

The crossing of the $10 threshold was reported by Wine Business Monthly, based on data from the Nielsen market research firm. This is for a 750-milliliter bottle, the most common kind, but wine also sells in larger bottles and boxes.

Nielsen reported that overall wine sales in the United States grew 4.3 percent in the 52 weeks ending Dec. 3, 2016. A more detailed breakdown shows how the business is changing:

▪  Wines priced under $3 dropped 2.5 percent.

▪  Those between $3 and $6 rose just 0.9 percent.

▪  Wines from $6 to $9 fell 2.3 percent.

▪  The $9 to $12 segment gained 6.7 percent.

▪  Those from $12 to $15 grew 9.5 percent.

▪  Wines above $15 had even larger increases, though they are a tiny part of the total volume.

Americans get most of their wine from California; the rest comes from other states and nations. The U.S. market has taken off thanks to a generally healthy economy, an increasing number of drinkers and a willingness to explore beyond the cheap stuff.

QUALITY STEPS

Modesto-area wineries have enhanced grape quality through measures such as plant breeding, well-timed irrigation and pruning to concentrate the fruit flavor. They combine that with careful fermentation and aging and skillful marketing of the finished product.

Gallo still does plenty of volume at the lower end, but it bottles several mid-priced brands in Modesto and started branching into coastal regions in the 1980s.

“This price point allows for growers, wineries and retailers to be profitable, while still providing innovative and unique wines to consumers,” said an email from Roger Nabedian, senior vice president and general manager for Gallo’s premium wines.

The family-owned Gallo does not disclose annual case volume, but Wine Business Monthly estimated 75 million cases in the U.S. market last year.

The Wine Group, second at 57 million cases, serves the lower end with its Franzia and Almaden brands but has moved upward as well. It is based at the historic Concannon winery in the Livermore Valley and has products from Sonoma and other premium regions.

Bronco, at an estimated 10 million cases, has long been a low-priced source but also bottles wine in Napa. It purchased several premium brands last year from Treasury Wine Estates, another major player.

“SECRET OF THE VINES”

McManis grows most of its grapes in the Lodi area but also has vineyards in Stanislaus and southern San Joaquin counties and the Clarksburg area in Yolo County.

The company is part of another industry trend — sustainability. It aims to make a profit while paying heed to water and energy conservation, soil fertility, worker well-being and other goals.

McManis employs 26 people full-time and peaks at about 50 during the growing season. Jose Godinez was one them for about 40 years and now oversees crews through his wife’s labor-contracting business.

He stood one recent day in a chardonnay vineyard, southwest of Ripon, where workers had just pruned excessive growth to prepare for the 2017 crop. They tied remaining shoots to the trellises in a way that would assure the right amount of sunlight.

“That’s the secret of the vines,” Godinez said. “If you don’t take care of them, they don’t take care of you.”

This story was originally published March 25, 2017 at 1:41 PM with the headline "Wineries in Modesto area join shift to higher-priced bottles."