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California is bucking the trend...

California is bucking the trend seen in much of the wine-producing world.  Namely, increased pressure on demand, indicating a slow down in sales, after 20 years of near continuous growth.  

Large vintages in recent years have resulted in California’s bulk wine market becoming somewhat over supplied, and depressing prices with the glaring exception of Napa Cabernet.  

But after the relatively small 2016 harvest, the bulk market has became more balanced in 2017, according to Silicon Valley Bank’s Rob McMillan.  

With another average harvest in 2017 of approximately 3.8 million tons, prices offered and volumes demanded should also be in balance, he said.  

After two decades of steady increases, volume growth in wine sales in the US is beginning to level out, according to McMillan, who predicts the total industry to grow by between 2% to 4% in dollar sales, and only 1% in volume terms.   

The sales slow down has created great opportunities for bargain-hungry overseas buyers, which along with the reasonable sized 2017 Central Valley harvest means there is more than ample supply, particularly of Californian bulk red wine, to satisfy the demands of export markets.  

What makes Californian wine an even more appealing proposition to European and Asian buyers is a weakening US dollar. This is at a time when prices from many other countries have been ratcheting up, particularly on key in demand varietals, which has brought Californian pricing in line with rival producing countries.  

The US wine exports market is dominated by California, making up 90% of sales, and enjoyed a record year in 2017.  

This stellar performance was achieved despite the strong dollar, high tariffs and heavily subsidised foreign competitors, with wineries seeing their revenues inching up by 1% from 2015, according to the California Wine institute. Total volumes shipped from the US were 412.7 million litres, the equivalent of nearly 46 million cases last year.  

Another possible outcome of the weaker dollar and the increased price of bulk wine around the world is a reduction in bulk wine imports into California and the US compared to last year. Simply put, California and US has sufficient domestic bulk supply to fulfil demand.  

The 2017 crush total production

• California growers produced just over four million tons of wine grapes in 2017, about 0.5% more than in the previous year, according to the final 2017 California Grape Crush Report.
• Red wine varieties accounted for the lion’s share of the total crush, with about 2.25 million tons crushed in the state in 2017 - down 1.4 % from 2016.
• The white grape crush totalled 1.8 tons up 0.8% from 2016.  
• Red wine grapes averaged $965 per ton, up 5.1% on the previous year, while white wine grapes sold for an average price of $588 per ton, a 1.8% decrease on 2016.  
• Chardonnay remained the leading wine grape variety crushed in California in 2017, accounting for 14.5% of the total crop.  Cabernet Sauvignon comprised 14.2% of the total crush volume.        

Prices of Californian grapes

• Napa's total crop was valued at about $740.2 million in 2017 according to the final crush report, with Sonoma’s crush coming in at $570.3 million.
• The average price for all varieties was $777.90, up by 1.9% on the previous year.  
• Across the state, red variety wine grapes averaged $965 per ton - up 5.1% from 2016, while white varietals cost on average about $588 per ton, down 1.8 % from the previous year.    
• The average price for Napa wine at $5,225 per ton was over 11% higher compared to 2016, while in Sonoma, the average price of $2,806 for wine grapes rose by 7.8% from 2016.  
• The 2017 average Chardonnay price of $923.67 was up by 4.2% from 2016, while Cabernet Sauvignon price of $1,553 was up by 5.6% on the previous year.
• The average price for Zinfandel was $591, down 2.2% from the previous year, while the average price of French Colombard moved up by 2.5% from 2016 at over $267 per ton.  
• Napa Cabernet Sauvignon averaged $7,449 per ton - or about 8.8% more than in 2016.  
• The average price per ton for Cabernet Sauvignon in Sonoma County was about $3,020 in 2017 - or about 1.8% more than in 2016.
• Pinot Noir averaged approximately $3,887 a ton in District 3, which includes Sonoma County, and about $2,778 a ton in Napa.
• The most expensive wine grape in Napa was Cabernet Franc, which weighed in at $8,000 a ton.  
• The average price per ton for fruit from Lodi averaged about $627 a ton – or 0.7% less than in 2016.  
• Grapes from Mendocino cost $1677 a ton on average - or about 9.8% more than in 2016.  
• In Paso Robles, Cabernet Sauvignon averaged $1,661 per ton, or around 10% more than in 2016.  

Napa Valley: highlights

• Only 4% of California’s wine grape harvest comes from Napa Valley, and represents only 0.4% of the world’s wine production.  
• 45,000 acres are under vine (9% of Napa’s area), with the valley being 30 miles long and just 5 miles wide at its widest point.
• It benefits from a diverse range of soils, with half of the word’s recognized 12 soil orders and 33 different soil series.
• Napa provides an annual economic impact of more than $13bn locally, and more than  $50bn in the US.  
• It is responsible for 46,000 jobs in Napa.
• There are around 700 grape growers in Napa County, with 475 wineries producing more than 1,000 different brands.
• The vast majority of Napa’s wineries are family owned, and nearly 80% produce fewer than 10,000 cases annually.    

Top varietals in Napa

• Cabernet Sauvignon – 47%
• Chardonnay 15%
• Merlot 11%
• Sauvignon Blanc 6%
• Zinfandel 3%      

For more information, contact your VINEX Regional Manager here