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With glut gone, wine prices could rise

SACRAMENTO -- A few years ago, a glut of grapes brought rough times for California growers and bargains for consumers on some fairly nice wines.

The glut is gone, experts said this week at the annual Unified Wine & Grape Symposium.

That could mean higher prices for growers as wineries try to avert a grape shortage. And it could mean fewer bargains on the shelves, though the experts noted that many drinkers are moving to higher price brackets anyway.

Overall, they said, the state's wine industry is healthy, despite challenges from imports and a possible recession.

"Basically, things are looking good, but there are also things to be wary about," said Jon Fredrikson, an industry consultant based in the San Mateo County community of Woodside.

The 13th annual symposium drew about 11,000 growers, winemakers and other industry people to the Sacramento Convention Center over three days this week. It was a place to check out the latest in equipment while hearing about the state of the wine world.

The grape surplus emerged early in the decade, as increased vineyard acreage and yields outstripped wine demand. The resulting low prices led to the bulldozing of substantial acreage in the San Joaquin Valley, which leads the state in grape volume, though mainly of lower quality.

Grape supplies now are close to demand, and they even could fall short by 2009, said Nat DiBuduo, president of Fresno-based Allied Grape Growers.

"The pendulum has swung," he said.

DiBuduo urged wineries to pay good prices to keep the grapes coming.

"If we can't cover the cost, we're going to pull out the vines and plant almonds, plant pistachios, plant something that gives us a return on the dollar," he said.

Australian drought cited

Grape supplies have declined around the world, said Glenn Proctor, a partner in San Rafael-based wine brokerage Ciatti Co.

He cited the drought in Australia, which had been the toughest U.S. competitor in low-priced wines, and the reduction of government subsidies to European growers, which has led to the removal of inefficient vineyards.

"Supply is tighter," Proctor said. "We're moving into a more balanced market across the globe."

Some winemakers took advantage of the glut to produce cork-capped varietals at unusually low prices. Most famous is the $1.99 Charles Shaw line -- better known as Two Buck Chuck -- from Bronco Wine Co. of Ceres.

That category, known as extreme-value, rose to 4 percent of total California shipments after it emerged in 2002, Fredrikson said. Since then, it has had little growth, and the same goes for jug wines and other products under $7, many of them made in or near Stanislaus County.

Above that level, the market is taking off, said Ted Baseler, president and chief executive officer at Ste. Michelle Wine Estates, a premium producer in California and Washington state.

"In 2007, it increased 12 percent, which is as robust as any category in supermarkets today," he said.

Bee staff writer John Holland can be reached at jholland@modbee.com or 578-2385.

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