Purely from the farming side of things, growing grapes can be a rough business—and then there’s the effort it takes to sell them. Managing that green-to-red-to-black-colored crop can be touchy, and those fruity clusters support an industry that is just as finicky.
An unusually cool breeze that comes along on the wrong day could cause a wine grape crop to yield less fruit. If it’s too hot early in the growing season, the grapes just don’t ripen the way they’re supposed to. And too much rain or wet conditions could cause the fruit to mold.
How many bottles fly off the shelf is completely dependent on what consumers want and how much they’re willing to pay for it. However, it takes a while to translate the whims of wine buyers into what’s stocked on store shelves.
The time it takes to get wine into a bottle after the fruit is harvested off the vines can be anywhere from four months to more than a year—depending, of course, on the variety of the grape. Not only that, but a newly planted vine can take three to five years to produce any fruit worth harvesting.
So let’s say consumers decide they want to drink more pinot noir and there aren’t enough pinot noir grape vines planted to meet the demand. If farmers run around and grab as many new vines to plop into the ground as they can, it would be at least three years before they could harvest the fruit and crush it into wine. Then it would take at least another year or two before the wine is put into bottles and shipped to stores.
In that sense, vineyard managers and winemakers are always playing a lagging game of catch-up with consumers, said Audra Cooper, a Central Coast grape broker with Turrentine Brokerage.
“We have a tendency to go a bridge too far, or a bridge too far behind—over-plant or under-plant—one of the two,” Cooper said. “You’ll have numbers that say, ‘consumers want this,’ but if we don’t have the grapes in the ground, it takes years to satisfy that demand. And by the time we get there, consumer demands may have already changed.
“It’s nearly impossible to say ahead of the curve,” she said.
Right now, the wine industry is in what Turrentine Brokerage labels as an acute shortage. It means we’re not in a shortage yet, but we could be soon. Essentially, there aren’t enough grape vines planted to meet the predicted future wine demands of consumers—who are drinking more and more wine every year.
Cooper said the industry has been in acute shortage mode since 2007 or 2008, but the recession took away some of the pressure because people weren’t buying as much wine. When the economy took a turn for the better, after 2010, consumer demand started to increase again.
In addition to the greater demand, the harvest in California in 2012 was above average and plentiful—even with a supposedly fewer number of vines in the ground—so the industry is still waiting for the actual shortage to hit. And harvests look like they will be good for 2013, so it’s a safe bet that having a diminished supply of grapes isn’t going to happen this year either.
“It’s hard to paint any picture other than roses at this point,” Cooper said. “The coastal wine industry is enjoying a good ride, or a good year.”
Even with last year’s abundant harvest, grapes are holding their price per ton, wineries are still looking for grapes to purchase, and grapes are available for purchase. Wineries that didn’t purchase grapes in 2008, 2009, and 2010 are beginning to buy again. New investors are buying up land that already has planted vines, and some vineyards are even planting new vines, which is something that hasn’t really happened on the Central Coast for almost a decade, Cooper said.
“But we’re keeping in sight the issues or factors that have historically affected our supply cycles,” she noted.
Those factors could include the all-too-finicky consumer, price points, a bad weather year, how many empty wine tanks are available, the amount of new vine plantings, and what’s going on with water, land, and labor.
Recession proof?
Turrentine Brokerage has trained a keen eye on all things California grape for the last 40 years. The company has brokers all over the state who buy and sell grapes by the truckload and by the pallet.
Cooper’s Central Coast territory runs from Buellton to Paso Robles. She keeps her nose in the industry, tours vineyards, meets with customers, and drives all over two counties in her big, white Ford truck.
It’s essentially her office, and she’s put 50,000 miles on it in the last year.
“I drive a lot,” she said.
Cooper bought the truck about a year ago, when she moved to Paso Robles from Northern California. She’s worked for the brokerage firm since 2006; she started with a territory that encompassed the Napa Valley and Sonoma. She said the biggest difference between where she was and where she is now is the number of clients she has and how many grapes she’s moving.
“There are fewer clients who represent a larger tonnage [here],” Cooper said.
The Central Coast’s ability to grow for bigger wine producers helps its grape industry stay afloat when the economic going gets tough and consumers trade down, like they did in 2007, 2008, and 2009. There is also a contingency of boutique vineyards—smaller acreage, more labor intensive, and expensive—throughout the coastal region that are starting to see an uptick from consumers trading back to more expensive wine.
Cooper said the region really has an ability to supply all sectors of the industry.
“The fact is, we supply just about everything you can imagine,” she said.
Jim Stohlberg has experience on both sides of the size spectrum. He’s the vineyard manager for both Riverbench and Presqu’ile wineries in the Santa Maria Valley.
He manages grapes that are grown for, contracted, and sold in bulk to large-scale wineries. Those generally end up in value-priced wines that sell for $10 to $15 a bottle. Stohlberg also cultivates estate-grown grapes grown specifically for the wineries he works for and grapes that are grown in smaller, more labor-intensive quantities and sold to higher-end wineries. The not-so-value-priced grapes generally go into wines that will be sold for $20 to $50 a bottle.
Most of the grapes ripening in both kinds of vineyards for the 2013 harvest season are already contracted out to wineries.
He said having the ability to swing the economic spectrum helps when the pendulum moves in one direction or another. But he said what really keeps vineyards afloat during tough times—such as a poor harvest year, as in 2011, when neither vineyards nor wineries had enough product to cover their costs, or during the recession when some wineries just stopped buying grapes—is having a winery producing right alongside the vines.
“In most cases, if you can be in the grape-growing business and the winemaking business, you can buffer that [hard time],” Stohlberg said. “If you can be vertically integrated, it balances the economies.”
It’s almost like having a finger on the pulse of the whole industry. Stohlberg said the constant conversations he has with other growers, contractors, and area winemakers make it easier to supply what’s needed when it’s needed. It’s easier to know when to pull grapes off the market, when it’s time to bottle what’s in the tanks, or where to sell extra grapes.
Right now, Stohlberg said everyone in the valley is pretty happy, and the industry is in an upswing. That upswing means consumers are trading up. For the Santa Maria Valley, where pinot noir and chardonnay grapes sell for a higher price per ton than elsewhere, that’s an extra boon.
“Unfortunately, it’s not going to last,” Stohlberg said. “People who drink wine are always going to drink wine. The question is, how much money is in their pocket?”
Signs of what’s coming
Presqu’ile’s vines are rooted a couple of miles east of U.S. Highway 101 on East Clark Avenue. A long driveway takes its time to get from the gated entrance to the winery and tasting room. The road winds through some of the vineyard’s 200 acres of straight-rowed vines. Atop the rolling part of a hill, the recently-opened-to-the-public winery offers views of its valleys of grapes.
Stohlberg works the farming and operations side of things, from purchasing new vines to selling the fruit. Between Riverbench and Presqu’ile, he nurtures at least nine grape varieties: pinot noir, chardonnay, sauvignon blanc, nebbiolo, syrah, riesling, albariño, viognier, and pinot gris.
Presqu’ile is entering its eighth harvest year and is one of the Central Coast’s few vineyards that will be picking from newly producing grapevines. Stohlberg said the vineyard planted 60 acres of new grapes in 2008, and is going to pull the first big harvest off them starting in September.
As far as new vines go, Presqu’ile is one of a handful of vineyards that has planted anything at all in the last decade in the Santa Maria area. But people are starting to plant again, Stohlberg said, and that’s a sign of optimism.
He said he’s chatted with some big vine nurseries over the last couple of months that have said this year was their biggest year for vine sales, and next year’s plants are already sold out.
“What that means is that people are planting,” Stohlberg said. “That means the wine business is doing well.”
According to numbers in the Allied Grape Growers’ Spring 2013 newsletter, more than 30,000 acres’ worth of new vines were sold in California during 2012. Allied Grape Growers is a wine grape marketing cooperative based out of Fresno with more than 600 members from wine grape growing regions all over California. The same newsletter said 2012 had a 50 percent increase in vine sales over what was sold in 2011.
Some of those new vines were purchased to replace old vines, but the majority were bought to plant new rows, and much of the acreage is being planted in the San Joaquin Valley. Allied’s projections estimate that California will increase wine grape acreage statewide by 65,000 acres before 2017. This year, there are approximately 535,000 acres of mature grape-bearing vines planted across the state.
“Increasing grape prices the last two years have all but halted wine grape vineyard removals statewide,” the newsletter said.
What Allied is saying is that the price grapes are selling at right now is better than what it’s been in a while. Farmers want to keep their old grapevines producing, rather than rip them out, plant new ones, and wait three or four years to harvest.
Mesa Vineyard Management’s Dana Merrill agrees that new vines are starting to make an appearance again and aren’t going in the ground as replacements. Mesa Vineyard Management runs vineyards in Santa Barbara, San Luis Obispo, and Monterey counties.
Merrill has been in the wine grape growing business since the early ’80s and has seen the endless cycle of ups and downs. He said vineyards generally replace old vines at the rate of 3 to 5 percent per year, but that hasn’t happened on the Central Coast for the last 12 years.
He said in the last two years, since the economy slightly changed course, Mesa has planted 1,000 acres of new vines. Most of the planting has been in the Paso Robles area. Merrill said grape growers are predicting that 5,000 to 8,000 acres of new vines will be planted in and around Paso Robles over the next three years.
There are a couple of reasons why there is a flurry of planting activity centered on Paso: Land is available and reasonably priced, and everyone is currently gaga over cabernet sauvignon grapes, which need a warmer climate to mature.
Merrill said it’s a cycle he’s seen before, and it all starts with the consumer. Right now, consumers are drinking more wine than in the past and what they want is cabernet or red blends with cabernet in them. He pointed out that the industry as a whole is perceiving a shortage of grapes in the future, so the planting activity is happening all over the world, not just in California, and not just on the Central Coast.
“We have a history of responding to things like this by planting grapes,” Merrill said. “We keep putting more and more [vines in] and then, finally, we end up with a ton of grapes, and then we swear we’re never going to plant grapes ever again.”
Resource management
Merrill has lived through three big economic grape cycles while in the vineyard management business. The industry hit a low point in the mid-’80s, right after he started working in it. Wine production started to pick up again as the decade changed into the ’90s, and hit a high point in 1997 before backtracking again. Then the up-and-down movement of the wine business became short and choppy.
“When it was good in the ’90s, it was almost good for 10 years,” Merrill said. “So when it went bad, it took longer to get out of it.”
It’s almost as if the industry is still trying to get out of it, continuing its northward march to the high point, but hitting speed bumps along the way. One of the bigger bumps was the recession, but the good news for the industry is people still drank wine, and they are continuing to drink wine.
This “acute shortage” the wine grape industry is in is a problem Merrill hopes will stick around for a while because it’s good for business. But he added that while investors seem to be flooding into the Paso Robles hills, local boutique wineries that were hit hard by the recession are keeping their wallets close.
“There’s no question that the economy’s doing better,” Merrill said. “[But] I think there’s a nervousness still about the economy.”
Wineries are signing up for three- to four-year grape contracts, whereas before they were often 10- to 12-year contracts.
“A lot of wineries are waiting to see what will happen,” he said. “Things are good, but you’re just not sure, you know?”
Even with the estimated 5,000 to 8,000 new acres that are supposed to be planted with vines, there’s a big question mark. The hubbub over dropping water levels in the Paso Robles groundwater basin could put all future agricultural development at a standstill. The San Luis Obispo County Board of Supervisors is talking about an emergency ordinance that would stall future development that draws water from the basin.
Affordable land is one of the big reasons why new vines are planned in the Paso area. In Santa Barbara County, land is more expensive and can be scarce because of the endangered tiger salamanders’ wide-ranging territory. In Monterey County, land is also a bit pricier, and row crops like strawberries, broccoli, and artichokes take up a large chunk of it.
But now that water has come up as a gigantic issue, land above the Paso groundwater basin might not be as readily available as everybody thought. Without access to water, there will be no new grapes.
It’s not an issue that has surfaced in the Santa Maria Valley yet because the water levels in the Santa Maria water basin seem to be holding steady. Santa Maria also has a supplemental supply of state water that the city buys to augment what’s underground. Merrill said if we get many more winters without the rain we need, Paso won’t be the only town on the Central Coast worrying about water.
“It’d better rain sometime, because I don’t know that anyone is immune. At some point, it’s got to rain and refill the basins,” Merrill said. “We’ll get through this year, but what if it doesn’t rain next year and the next [year]?”
Contact Staff Writer Camillia Lanham at clanham@santamariasun.com.
This article appears in Aug 15-22, 2013.