Dunne on Wine

Sacramento gathering throws light on vexing changes in nation’s wine business

Despite rain, vineyard workers pruning vines in Sonoma County’s Alexander Valley in January. Mike Dunne
Despite rain, vineyard workers pruning vines in Sonoma County’s Alexander Valley in January. Mike Dunne

In 1994, about 500 members of the nation’s wine trade gathered in a downtown Sacramento hotel to ponder where they’ve been and where they were going. Exhibits ran to 20 tabletop displays.

The gathering has continued every winter since, now drawing about 14,000 participants to and about the Sacramento Convention Center for panel discussions, speeches and tastings.

The exhibits are much grander and more numerous, filling the center’s central hall with vendors dispensing information on everything from deer fences to forklifts. Participants jostle to kick the tires of the latest in tractors, to ponder the newest in bottling equipment, to ask about the cost of fermentation tanks, pausing for a glass of wine at tables set up by vintners from Washington, Virginia, Idaho and elsewhere.

After a quarter of a century, the Unified Wine & Grape Symposium has become Sacramento’s largest annual convention. It also provides the most sweeping and detailed look at the health of the wine trade.

Over three balmy days, while much of the rest of the country dealt with frigid temperatures and deep snow, the conventioneers were being hit with a blizzard of another sort – slide after slide as panelists grasped PowerPoint clickers to spell out graphically just how much the nation’s wine scene is changing. After a quarter of a century of generally positive growth that has paralleled the popularity of the symposium itself, the wine industry is entering a new era of uncertainty and challenge, participants repeatedly were told.

Make no mistake, the nation’s wine culture remains sunny if not quite as bright as it has been. The United States still is the world’s most lucrative wine market, with sales nudging up 1.2 percent this past year.

In California, responsible for about 61 percent of the wine sold, farmland devoted to wine grapes stands at around 600,000 acres. Last year alone, nurseries sold 22 million grape vines to California growers, the largest amount in four years.

Figures still are being tabulated from last fall’s harvest, but indications are that the California yield could set a record, almost surely topping 4 million tons of grapes. Per-capita consumption has leveled off, however, and farmers and vintners who have weathered past threats, from economic recession to an invasion of glassy-winged sharpshooters, face not only the possible reemergence of those sorts of pests but a beverage landscape striking for the breadth and speed of its current change.

In the four states where marijuana is legal, for one, scores of cannabis-laced beverages are being marketed – carbonated water, iced tea and lemonade, coffee and cocoa. It’s a segment generating $40 million a year in revenues, expected to grow to $100 million within the next three years.

None of the beverages is wine, a combination still illegal. Other beverages, some with alcohol, some without, increasingly are slaking the country’s thirst. Hard seltzers have hit $500 million in annual sales, the same as for pink wines, the hottest segment in the wine business.

Over the past four years, sales of bottled water have jumped nearly 4 percent, packaged coffee drinks 9 percent and kombucha 36 percent. No less a beverage giant than Coca-Cola has picked up on the country’s shifting drinking preferences, introducing such non-alcoholic bottled cocktails as Spiced Ginger Mule, Dry Aged Cider and Bellini Spritz.

If no one yet has created an app to let consumers know the composition of all the new drinks along the beverage aisles of grocery stores, it isn’t far off.

The foundation of the country’s modern wine trade – everyday jug wines and competitively priced varietal wines – is suffering, with sales slumping steadily over the past five years. That could explain in large part a turndown in wine shipments last year for three major wine companies: E.& J. Gallo was off 4.2 percent, Constellation Brands was down 1.7 percent and Bronco Wine Co., celebrated for its line of “Two Buck Chuck” wines at Trader Joe’s, sagged 9 percent.

Wines priced above $11 are holding their own or growing, but sales of wines under $11 have fallen, and those are niches dominated by corporate wineries. What’s more, wines priced less than $11 account for three-quarters of the volume of wine sold.

Demographically, three groups look to be behind shifts in beverage preferences. Two are “seniors” and “boomers,” segments largely responsible for the growth of the nation’s wine trade over the past couple of decades, now aging and realigning their drinking and spending habits. And then there’s the quixotic drinking preferences of the elusive “millennial” generation, a segment coveted by the wine trade but resistant to being corralled for reasons ranging from being cash strapped to being perhaps more health conscious than earlier generations.

When millennials drink, they show a slight preference for spirits and beer rather than wine. And as they mature they may never drink alcohol as much as their parents and grandparents. When the Harris Poll asked “regular” drinkers – defined as persons who drink alcohol several times a year – whether they were attempting to moderate their consumption, two out of three millennials said they were, more than any other age group. (Millennials are defined as ranging in age from 21 to 34.)

Similarly, when the Harris Poll asked consumers in early January why they were consuming less alcohol now than they were a couple of years ago, nearly a third said they were “opting for a healthier lifestyle.” While studies have shown that moderate consumption of wine can be beneficial for some people, a significant portion of the population is skeptical or is finding more pleasure and benefits in the likes of coffee, kombucha and cannabis.

When wine enthusiasts do drink, on the other hand, they want to drink better, or they at least are willing to pay more. Depending on varietal, sales of wine priced from $15 to $20 grew between 5 and 10 percent this past year, while sales of wines priced more than $20 leaped 10 percent or more.

In addition, both consumers and members of the wine trade look to be smitten more and more with what at least two speakers called the dominating “chocolate, strawberry and vanilla” of the market, that being cabernet sauvignon, pinot noir and chardonnay. Of those 22 million wine-grape vines sold in California last year, for example, nearly 31 percent was cabernet sauvignon, 26 percent was pinot noir and 19 percent was chardonnay.

Of the anticipated 6 percent rise in bearing wine-grape acreage in California over the next three years, two-thirds will be cabernet sauvignon, chardonnay and pinot noir. (On the other hand, acreage devoted to zinfandel and merlot has dropped in nearly every region of the state and in nearly every price niche.)

For consumers, what do all these numbers mean in the near future? With this past year’s grape harvests generally up (13 percent globally), substantial inventories of bulk wines on hand (600,000 gallons of Napa Valley cabernet sauvignon alone), imports holding their own in the American market and rather modest gains expected in consumption, prices should hold steady this year, though deep cuts and exceptional bargains could materialize.

As one speaker noted, however, the California wine trade faces serious labor challenges, not the least of which is a mandated 50 percent increase in the minimum hourly wage between 2017 and 2021. Labor, said speaker Marissa Lange of Lange Twins Family Winery and Vineyards at Lodi, accounts for approximately 45 percent to 65 percent of any given winery’s operating costs.

As a consequence, in three years a grower will need to be paid upwards of 15 percent more per ton of grapes to retain existing margins, Lange said. Whether wineries can accommodate that kind of increase for fruit in today’s shaky and unpredictable market remains to be seen. Also what remains to be seen is how Unified’s participants react to a temporary shift in their home for next February’s symposium.

Because of the pending makeover of the Sacramento Convention Center, the show will move to Cal Expo, about 5 miles from the downtown and midtown hotels and restaurants that participants fill each winter. But for any group facing such a dynamic business climate, that small a shift to watch PowerPoint presentations should be an easily handled challenge. (The statistics mentioned here come from a variety of seasoned sources attributed during the symposium, including the International Organisation of Vine and Wine in Paris, Allied Grape Growers in Fresno, Silicon Valley Bank, The Nielsen Company, the Harris Poll, Ciatti Wine Co. and bw166.)

Wine critic and competition judge Mike Dunne’s selections are based solely on open and blind tastings, judging at competitions, and visits to wine regions. He can be reached at dmichaeldunne@gmail.com.