Nurseries Monitor Economy, Buy Local Trend

In an economy where every penny counts, luxuries like high-end wine are taking a backseat to necessities, and justifiably so, even winegrape growers will admit. The real story, though, is how nurseries and growers are adapting to changes like these, and where the opportunities lie.

Ernie Bowman of Kendall-Jackson Nursery in Santa Rosa, CA, says sales volume is down about 50% this year over last, and he anticipates 2010 being an equally challenging year. “We did about half the production that we would normally do,” he says. “We had a lot of dormant vine inventory left at the end of the season, so we ended up replanting a lot of dormant vines from this year for next year.” Regrafting helped the nursery achieve significant cost savings. “But I guess time will tell if that was a smart move or not,” he says.

Trading Down = Pent Up Demand?

While things may be looking bleak for high-end wines right now, the current economic situation could prove to be a boon to that industry in the future. “Everyone’s trading down, but when we get past this economic hiccup, I think there’s going to be pent up demand again for premium-quality grapes, and people will start planting again,” says Ernie Bowman of Kendall-Jackson Nursery. And that’s not the only positive sign. “You look at all the demographics, and wine consumption is continuing to go up. It seems that more younger people are now drinking wine, so I think the demographics are good, and so I’m optimistic about the future,” he adds. “I think it’s going to take us a couple of years to get back, but I think once we do, the pent up demand is going to be there and the business will be healthy again.”

Bowman believes that if there’s going to be any vineyard expansion in the next couple of years, it likely will be in the central valley from Lodi down to Fresno, where land costs less. Many of the major plantings in California in the past 10 years have been primarily coastal, he says, where the price of land is an issue. “You have land cost and then you’ve got development cost of vineyards, and that dictates that you’ve got to get a certain level of pricing for that fruit to make it all economically pencil out,” Bowman says. In lower cost areas, however, growers can produce fruit for a dollar value per ton that makes it easier to stay profitable.

Quality Sells

Since it’s difficult to predict consumers’ behavior, determining what grapes to plant can be tricky. It’s market driven, and in many ways, reactionary. “Five years ago, Pinot Noir was really somewhat of a minor variety,” Bowman says. “But with the advent of ‘Sideways,’ all of a sudden the focus really became on Pinot Noir, and in the last five years, California has probably planted more Pinot Noir than they had planted previous to that, so there are a lot of non-bearing acres of Pinot Noir. Will that trend continue? I don’t know.”

Bowman says the biggest opportunity growers have to shine is from a quality standpoint. “I think quality always sells,” he says. “I think what growers have to do is figure out what the best variety for their site is and grow the best quality fruit they can. So a lot of it is doing due diligence and making sure that what you’re planting is the right variety and rootstock for that site to give yourself a chance to grow the best fruit you can.”

John Duarte of Duarte Nurseries in Hughson, CA, is quick to point out that low-price imports also are affecting U.S. grape growers. “Where everyone was expecting Chardonnay, for example, to become more demanded by now, there’s so much bulk Chardonnay being hauled in from Australia at low prices that a lot of Chardonnay growers are surprised to see their crops aren’t in demand,” he says. “So there’s not a lot of Chardonnay planting, and I think a lot of us would’ve predicted Chardonnay would be short in California right now.”

Love The Locavores

The economy isn’t the only factor affecting growers and nurseries this year. The burgeoning buy local movement is making many growers rethink what they should grow and who they target. “We have what I would call a growing direct market industry in the East, and that’s roadside markets and farmers markets,” says Phil Baugher of Adams County Nursery in Aspers, PA. This has resulted in growers — particularly smaller ones — diversifying into a more mixed crop portfolio, he adds. “Where they used to be just tree fruit growers, they’re now diversifying into blueberries, strawberries — small fruits, and some vegetables, to respond to the growth in the demand for locally grown produce,” he says. “That has affected us in what we’re doing here at the nursery.”

Baugher adds that for some Eastern growers, maintaining a more local focus is easier than trying to compete with California peaches and Washington cherries in the wholesale market. The nursery has been adapting with the changes, but Baugher says the transition has been over time. “We used to grow primarily peaches in stone fruits, and now we grow a lot of white flesh peaches, nectarines, and donut peaches,” he notes. The nursery has had to broaden its selection, as peach growers who used to grow six or seven varieties for wholesale are now growing upwards of 40 varieties for retail, and a mix of different types of stone fruits, as well.

“We continue to see growth in the direct market, buy local trend,” Baugher adds. “I’ve seen some statistics that there’s about 10% annual growth in the direct farmer to consumer market.”

It’s hard to pinpoint what exactly led to this shift in consumer behavior, but Baugher thinks it might have something to do with shoppers’ disenchantment with big supermarkets and megachains. “This is just the pendulum swinging the other way,” he says. “People want to connect with the person that produces their food. The majority of the produce is still sold by the major retailers, but many growers on the East coast are turning to this direct market opportunity as a way to redefine themselves.”

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