allocation situation
Tim Persson, CEO at The Hess Collection,
says his winery’s flagship Cabernet has
been on allocation for the past year. Hess
had been making 7,500 cases annually of
Hess Collection Cabernet Sauvignon but
could only manage 5,000 cases in both
2010 and ’11. “That enabled us to take
price increases and we’ve seen little effect
on demand,” Persson says. “We’ve been
able to increase our case FOB by about
$20 in the last year and a half. It’s closing
in on a 10% increase that we’ve been able
to take over the last year.”
It’s not pure profiteering from wineries,
though, because northern California
growers demanded—and got—more
money for their grapes this year after
suffering through consecutive small, lesser
quality harvests in 2010 and ’11.
“In some places on the North Coast,
the Cabernet price [for 2012] was as high
as anyone had seen,” notes Nat DiBuduo,
president of Allied Grape Growers. “All
the wineries wanted them, and the crop
was not expected to be as big as it was.
It got a little competitive. I had people
calling me and saying, ‘I want to buy the
grapes I buy every year, but if Joe Blow
winery doesn’t want to buy his grapes,
then I want them, too.’”
Industry analyst Barbara Insel of
Stonebridge Research says even without
higher prices for grapes, wineries had
been putting off price increases because of
the soft economy. “Last year, the smarter
wineries did things to hang onto their
prices…to keep moving the volume,”
Insel says. “Strong brands are going to
want to increase pricing this year.”
One factor keeping prices down has
been the proliferation in recent years
of “overnight brands”—brands created
quickly to take advantage of quality
grapes that were available on the bulk
market. If those brands spring up like
weeds, the small 2010 and ’11 harvests
were like Roundup.
But like weeds, the overnight brands
will eventually be back, though not
until after this year’s price increases. “In
2011, there was no Cabernet to be had,”
Insel says. “In 2012, there’s going to be
a healthy supply of grapes for negociant
wines. This is going to be a big harvest.
People are comparing it to 2005.”
It’s important to remember that
California is huge, with a bigger change
in latitude from north to south than
France, so a good harvest in one region
doesn’t mean everywhere enjoyed the
same conditions.
For example, Santa Barbara County
vintners said their 2010 and ’11 vintages
were perfectly good while the North
Coast was plagued with rain and mildew.
And in 2012, while Napa and Sonoma
vintners were celebrating, farmers in the
San Joaquin Valley—which supplies 85%
of the grapes in California, according
to Bronco Wine Company CEO Fred
Franzia—were enduring an off year.
Franzia points out a simple reason
that Napa Valley’s harvest dominates
the news. “Napa has 500 public relations
workers,” Franzia says. “In the San Joaquin
Valley, I think Gallo has one. That’s how
they get all the press. They work harder
at it. Napa has carved out a PR niche
with 500 people pretending the whole
universe of wine moves around them.
It’s a myth.”
thinking global
In fact, globally minded Napa wineries
will be paying attention to prices else-
where. The 2012 harvest across Europe
was down about 15%, according to OIV.
That could lead to higher prices for Eu-
ropean wines that will make Napa wine
price increases seem less onerous.
“If you look at global wine supply
versus consumption, there’s a global
3% undersupply,” says the The Hess
Collection’s Persson. Moreover, of major
world bulk wine producers, only Chile
had a slightly larger harvest than usual.
Neighboring Argentina, which had been
Scenes from the 2012 harvest at
The Hess Collection, Mt. Veeder, Napa Valley.
“Every large winery has decided that
much of the growth in the market
is coming from NPD—new product
development. As a consequence, you’re
seeing more new brands that are in the
$10 to $12 range.”
– Joel Peterson
Joel Peterson
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