Business & Real Estate

2013 was another solid year for wine industry, but drought looms

As much-needed rain fell outside the Hyatt Regency on Wednesday morning, a standing-room-only crowd was treated to more good news at the Unified Wine & Grape Symposium’s “state of the industry” presentation.

According to Allied Grape Growers, a Fresno-based grape growers association, an estimated 4.05 million tons of grapes were crushed statewide in 2013. It’s the second straight year that California logged more than 4 million tons of crushed grapes, following a record 4.3 million tons crushed in 2012. This glut of grapes has helped ease fears of shortages – a hot Unified topic in 2012 – and leaves the domestic wine industry with ample supply as drought hits California.

“The future looks bright for California and American grown grapes,” said Nat DiBuduo, president of Allied Grape Growers. “(An average 4 million tons crushed) may be the new average of the future.”

Wednesday also brought uplifting news for Bogle Vineyards of Clarksburg, which was named “2013 Winery of the Year” at the state of the industry’s conclusion. According to Gomberg, Fredrikson & Associates, a Bay Area-based wine consulting firm that supplies wine market data for Unified, Bogle shipped more than 2 million cases in 2013 – a 12 percent increase from the previous year.

Bogle enjoyed significant revenue growth during 2012 at food stores, with bottles that sell for an average price of $9.52. Bogle was also ranked as the country’s 13th largest winery by Wine Business Monthly, the trade publication that sponsors Unified’s state of the industry presentation.

“Bogle has been this incredible success story,” said Jon Fredrikson of Gomberg, Fredrikson & Associates. “They’re great quality wines that have a consumer ‘pull-through.’ They don’t have to spend a lot of money promoting because the consumers already want them.”

But California’s $61 billion wine industry also faces significant challenges in 2014. A prolonged drought could reduce the year’s crop load, along with increasing vine stress and potential for inadequate frost protection.

DiBuduo listed research and investment issues as other challenges facing the industry, but growers are fixated on one thing.

“It’s water, it’s water and it’s water,” said DiBuduo, addressing the crowd of more than 2,000. “All I know is that it’s bad, and we’ve got to exercise some caution.”

The specter of extended drought also carried over to the Sacramento Convention Center, which hosts 678 companies for Unified’s wine industry trade show. A Native American rain dance was performed on the exhibit hall floor, in front of a booth promoting a Napa wine bottle company.

The wine industry also is grappling with slowing growth for value wines, which provide the bulk of sales statewide. According to Fredrikson, almost 80 percent of California wine sales are for bottles priced below $10. Value wines priced below $9, meanwhile, lagged in 2013, and face increased competition from craft beers, ciders and spirits.

“If we’re losing that foundation of wine, it means we’re losing to other beverages,” said Fredrikson.

Domestic wine shipments rose to 370 million cases in 2013, a 2.7 percent increase over 2012.

Stuart Spoto, who operates Spoto Wines out of his Sacramento home, enjoyed the abundance and quality of the 2013 crop. He remains hopeful for a fruitful 2014, as every drop of rain becomes increasingly cherished in the wine industry.

“The 2013 vintage is going to be the best year ever,” said Spoto. “It was an incredible year for me profit-wise and for winemaking. It’s too early to tell how much the drought will affect things, but as Mother Nature has shown us, even in a challenging year most winemakers who know what they’re doing can get through it.”

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