Friday, April 25, 2008
When Lewis Perdue's book, The Wrath of Grapes hit bookstores in 1999, he predicted a massive glut of wine would sweep through California and hammer wine prices starting in 2000/2001.
The wine industry responded like like stoners who've been smoking their shorts. "Glut? Ain't gonna be no stinkin' glut!"
Jay Palmer at Barron's wrote a detailed, well-documented article on this and came to the same conclusion. The wine industry mounted a massive PR blitz aimed at neutralizing Palmer, Perdue and anyone else who dared look at the statistics. Brokerage analysts played their puppet roles well, mouthing corporate press releases and failing to look at the facts.
They were all treading water or floundering when the predicted glut hit in 2001. Right on schedule.
And every year, year after year, they pronounce the end of the glut. Only, no one ever uses the "G" word.
This year is no different.
Premier Pacific Vineyards, a Napa-based vineyard investment firm issued a rose-tinted report this week taking about the decline in "non-bearing" vineyard plantings and implying that, somehow, this was yet another harbinger of good times ahead and even hinting at shortages.
It's true that non-bearing acreage can help foretell future prospects. It takes a newly planted vineyard three to five years to begin production. But if you're savvy and take your own look at the stats, you'll see that the numbers reported by the U.S. Department of Agriculture don't show the flood of California wine ending anytime soon. It just shows that the insane rush to plant new vineyards has decreased from delusional to merely out of touch with reality.
The USDA's 2007 Grape Acreage Report indicates that non-bearing acres decreased from 47,000 acres to 43,000 acres. WhoopieDOOO! Sure, you can talk about a, 8.5 percent decline. But the REAL story lies in the acres still producing enough wine to keep the Two Buck Chuck tsunami flowing.
The last time that California wine production came close to a balance with demand was 1995-96 when the state had about 300,000 acres of bearing wine grapes. Feloniously optimistic projections about demand from pump-and-dump artists and those standing to profit from the expansion of vineyards created a planting spree.
The 2007 Grape Acreage Report shows California with 480,000 acres, the same as 2006. This comes despite vineyards being ripped out and grapes rotting on the vines, even in premium areas of Napa and Sonoma Valley.
The reality remains that California has, probably, two-thirds-MORE acres of wine vineyards than it needs, a good portent for regular wine consumers needing something to ease the pain of oil and real-estate prices.
More factors aggravate the situation for vineyard owners, the most important being a worldwide glut of wine which has helped boost the market share of imports from about 12 to 15% in the mid-1990s to about double that today.
Significantly, California crushed about 3.7 million tons of wine grapes in 2007, according to the USDA. At the current levels of consumption and imports, that's probably 750,000 tons higher than supply and demand would merit.
Wines wizards of unreality will respond that those overall numbers don't really apply to the haute-appellation wines of Napa and Sonoma. More bullfeathers!
This wine, Castello Da Vinci, is a negociant bottle, filled with a Bordeaux blend from Napa Valley's trendiest appellations. The highly, highly respected winery that made the wine sold it for more than $100 per bottle. But they had 30,000 gallons of it they couldn't sell. So it was shopped on the bulk market for about. Some of it ended up in the Castello Da Vinci bottle and sold for $25. About $5 of that went for wine. Another $3 for the label, bottle and all other costs.
Napa is not immune no matter how must they protest.
DISCLOSURE: Castello Da Vinci is Lewis Perdue's own wine, created by for a character in my current novel, Perfect Killer. Sourcing the wine on the bulk market confirmed everything I had known anecdotally about prices and the availability of very fine wines.
Posted by SavvyTaster at 8:06 AM