Market update



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MARKET UPDATE
Bill Turrentine - Editor

Vol 15, No. 2 March 11, 2003



Copyright 2003 Turrentine Wine Brokerage – Strategy, Action, Profit!


PROHIBITION, REPEAL & OTHER GOOD NEWS _________________
During Prohibition, my Dad was a newspaper reporter on the police beat in San Francisco. One time he was in a speakeasy when the Prohibition police literally chopped down the door and arrested the proprietor. Identifying himself as a reporter, my Dad asked to ride along as they took the proprietor in for booking. Next to him on the backseat of the police car was a box containing the confiscated liquor. Feeling cheated that he had not been able to finish the drink he had paid for, my Dad took a draw from a bottle. One of the officers observed him in the rearview mirror and commented, “Hey, our passenger is drinking up the evidence.” They made him cease and desist.
In another San Francisco Prohibition story, my Dad rode along with a fellow who had installed a grape crusher on the back of a truck. He drove around North Beach selling crushed grapes to Italian home winemakers. He would crush grapes on the spot and run the must down a long funnel from the crusher right into the cellars under the homes. Unlike the scene at the speakeasy, this was actually legal. The head of a household could register to legally produce up to 200 gallons per year of homemade wine, provided that the household was of Mediterranean descent.

Prohibition may have actually helped the entrepreneur with the mobile crusher, but it was disastrous for the wine business as a whole. In 1933 sanity finally prevailed and Prohibition was repealed. Wine Institute, founded shortly after Repeal, is now organizing commemorations of the 70th anniversary of this blessed event. As part of these celebrations, they have been collecting stories from wine business folks who lived through Prohibition and Repeal, including my Dad’s stories.

Now the year 2003 hardly rates with 1933 as a year of improvement for the wine business. As we move toward spring, the shadow of war clouds the economy, fostering uncertainty and caution. Many wineries struggle with excess inventories and eroding prices. But the wine business is showing a few signs of new life. Eager consumers are flocking to Trader Joe’s for bargain vino as our good friend Charles Shaw almost single-handedly drains the lake of excess San Joaquin Valley varietals. And the recently released crush report figures show that the Central Coast at least had a blessedly light crop in 2002, down 26% from 2001, the equivalent of about 17.7 million gallons less, and this in spite of an increase in bearing acres.
Under pressure from cautious lenders and investors, wineries worked overtime in 2002 cutting back inventories by any means possible. Many brands that had normally purchased bulk red wine in the spring following harvest (i.e., 2001 reds in the spring of 2002), simply postponed those purchases. This forced bulk wine sellers to carry 2001 reds in their tanks and barrels through the harvest of 2002. But this kind of delay only works for one year. By early 2003, the brands needed to get 2001 red bottling blends finalized.
Sales of 2001 reds in bulk have been humming ever since. Of course, much of the 2001 red wine that did not have a home going into the crush of 2002 was not aged in oak and was not prepared for a premium quality bottling blend. These tank-aged wines have generally not worked for buyers who have needed to get the blends into a bottling schedule in short order.
EXECUTIVE SUMMARY____________________________________________

Chardonnay: Statewide production climbed 4.6%, which is less than the rate of sales growth. The Northern Interior jumped 32%, more than offsetting a startling 27% drop in the Central Coast. Actual sales are slow so far for 2002 Chardonnay wine in bulk, but more companies are looking at samples and less wine is available. We expect prices in the range of $2.00 to $4.00 for California appellation Chardonnay; $3.00 to $7.00 for Central and North Coast; and $5.00 to $10.00 for Napa and Sonoma Chardonnay. Grape sales are also slow, but we have made some grape sales already in a few special appellations.

Cabernet Sauvignon: Despite an increase in bearing acres, the Cabernet Sauvignon crop dropped 3% compared to 2002. Four sources contributed to this: growers pruned severely, winemakers required exceptionally high sugars, Mother Nature gave us small berries and the tough market left some Cabernet unpicked. Even with more acres, most regions harvested about the same tonnage as last year. The Central Coast pulled the overall average down with 17% less Cabernet than the previous year. The Cabernet Sauvignon bulk market is generally slow, with most activity focused on 2001 wines. Many lots of California Cabernet remain on the market but most buyers are only interested in the best quality lots. With $1.00 to $1.50 per gallon Cabernet still plentiful, sales of the top 5% quality-wise of the California appellations lots have ranged from $2.50 to $5.50. Central and North Coast 2001 Cabernet Sauvignon has been mostly $4.00 to $8.00. Sonoma Cabernet 2001 is mostly $8.00 to $14.00. Napa Cabernet Sauvignon is still in better balance than the rest of the state – we have about 20 active buyers right now. But we also have about 50 individual lots of 2001 and 2002 Napa Cabernet for sale. Napa prices have been running in the $10 to $17 range, but truly exceptional lots can still command higher – sometimes much higher – prices. The Cabernet grape market statewide is slow and likely to remain difficult. Using other, stronger varietals to help move Cabernet Sauvignon grapes does not work well when many wineries already have too much.

Merlot: Statewide production climbed 13%, balancing a 32% increase in the Northern Interior with a 13% decrease from the Central Coast. Demand is strong. We have been selling substantial quantities of 2001 Merlot in bulk and have even been making some one, two and three year grape deals for good

quality grapes from Lodi and the North and Central Coast. Bulk California appellation Merlot 2001 has

been bringing $2.50 to $3.75; North and Central Coast 2001 Merlot has commanded mostly $5.00 to $9.00; Napa and Sonoma Merlot has been somewhat slow at $8.00 to $16.00.

Syrah: Syrah gained 13.5%, with the biggest percentage increase, 29.5%, in the North Coast. The bulk market for Syrah is selective. Good quality California appellation Syrah is bringing $2.50 to $5.00. Central and North Coast Syrah has been in the $4.00 to $6.00 range. Napa and Sonoma Syrah is $7.00 to $12.00. The grape market is still slumbering, except in occasional packages with other varieties.
Sauvignon Blanc: Sauvignon Blanc dropped 12.6% on the Central Coast but gained 1.9% statewide. The bulk market has seen some good volume activity, with sales in the $2.50 to $3.50 range for California appellation; $3.50 to $5.00 for North and Central Coast and $4.50 to $9.00 for Napa and Sonoma. We have grape buyers looking for good, cool climate Sauvignon Blanc.
Pinot Noir: Mother Nature granted us a reprieve from the onslaught of new acres of Pinot Noir. A drop of 14.8% statewide, including a 32% drop in the Central Coast, has kept inventories from inundating the wine world. But the flood has only been postponed, not eliminated. Bulk sales have ranged from $3.50 to $7.00 for broad appellations such as Central and North Coast. Specific appellations such as Santa Barbara, Russian River and Carneros have been $6.00 to $14.00. Grape purchases are slow so far.
Kangaroo Comments___________________________________________
J

anuary’s article on research spending and the remarkable achievements of the Australian wine business generated many comments. Roger Boulton, Professor of Enology and Chemical Engineering at U.C. Davis, provided the graph below, which shows the cumulative difference between wine-related research in Australia and the U.S. Many details can be debated about the figures used, (exchange rates and the value of private research, for example). Nevertheless, even though the Australian wine business is only a third the size of the American wine business, the gap between their higher level of research investment and ours is substantial and getting bigger. Either the Aussies are investing much more than they should, or we are investing much less than we should.

MARKET OPPORTUNITIES
The bulk market is busy. Now is the time to pick what you need while there is still a decent selection. Give us a call now with your current needs and also with what you have for sale. The grape market is also starting to move.
Check out our website: www.grapes-wine.com, which lists all available bulk wine and grapes.

I. Wines


Needed: White Riesling, Muscat Canelli, Gewurztraminer, Symphony, 2002, multiple buyers.

Needed: Sparkling wine cuvee.

Needed: Syrah 2001, North Coast.

Needed: High-end case goods for private label.

Needed: Napa Valley Cabernet and Merlot, high-end especially.

Needed: Pinot Noir Russian River 2002.

Needed: Chardonnay 2002 Napa Valley.

Needed: Petite Sirah, 2001 and 2002, all regions.

Needed: Merlot or Cabernet Sauvignon, 2000 vintage, any appellation, coastal quality.

Needed: Processing capacity needed to cold ferment approximately 175,000 gallons of Chardonnay to

be delivered as juice in September 2003. Fermentation tanks must have jackets or internal

cooling for slow fermentation, dropping app. 1 Brix per day. Tanks not to exceed 60,000

gallons each.


Available: Zinfandel, high-end Sonoma Co., 2001 bulk wine. Also Sierra Foothills Zin, 25,000 gal. Available: Pinot Grigio, 2002 Central Coast, 5,900 gallons; 2002 Monterey Co, 6,000 gallons.


Available: Napa Valley Viognier, 2002, 2,600 gallons.

Available: Syrah, 2001 Santa Barbara Co., 1,300 gallons.

Available: Pinot Noir, several lots of Santa Barbara, 2001.

Available: White Zinfandel 2002, 25,000 gallons.


  1. Grapes


Needed: White Riesling, all coastal areas.

Needed: Carneros Chardonnay for sparkling wine and Napa Carneros Chardonnay for table wine.

Needed: Petite Sirah, all coastal regions.

Needed: Sauvignon Blanc, Central Coast and North Coast.

Needed: Malbec and Petit Verdot, Coastal areas.

Needed: Pinot Grigio, all areas, special need for Napa Valley.

Needed: Merlot, Central Coast and North Coast.

Available: Sonoma Valley reserve quality Merlot. Hillside Zinfandel, Syrah & Cabernet Sauvignon.

Available: Russian River Valley Merlot.

Available: Delta Chardonnay, Merlot, Petite Sirah, Viognier, Sauvignon Blanc and Cabernet Sauvignon.

Available: Alexander Valley hillside Cabernet and Merlot.

Available: Dry Creek Cabernet and Zinfandel.

Available: High end Lake County Cabernet Sauvignon.








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