Winegrape Growers Toast Fortune At Unified Symposium
March 5, 2012 
After years of being buffeted by a series of ill winds — from oversupplies of winegrapes both at home and abroad to a recession that hit restaurants and thus premium wine sales extremely hard — California’s grape growers are back in the saddle and riding high.
The situation is so far reversed from a few years ago, says the president and CEO of the grower cooperative Allied Grape Growers, Nat DiBuduo, that growers actually feel wanted. “I’ve never seen this much interest from wineries,” said DiBuduo. “It’s very unusual to have buyers still looking for grapes in late January and early February. They want to know if you have grapes, and if they can get them.”
DiBuduo, who serves on American/Western Fruit Grower’s Editorial Advisory Board, said that the competition among wineries for fruit is so fierce, it’s tough to get used to, not that he isn’t enjoying it. “It’s unheard of in my tenure here,” says DiBuduo, who’s been at Allied since 2005. “It bodes well for 2012 — if Mother Nature takes care of us.”
The situation is reminiscent of the heady days of the last century. For that reason, DiBuduo, who gives an annual “State of the Industry” address at the Unified Wine & Grape Symposium each January, titled his talk this year “Back to the Future.” In addressing conference attendees each year from 2005 through 2010, DiBuduo told the growers in the audience straight away that they should not plant any new acreage.
In 2011, he hedged a bit, saying growers might consider planting, but only on the condition they have solid contracts with buyers. But this year, for the first time, he said the time of acreage expansion is here.
Though ever cautious, he urged the growers not to forget the industry’s history of over-supply. What follows are some other highlights from his annual “State of the Industry.”
• Winegrape growers are negotiating in an entirely new environment, one in which they, not the wineries, are holding the cards. Growers need to keep in mind that it’s a very different situation from a few years ago, when they were essentially just price takers. Not too long ago wineries were insisting on longer hang times for red grapes, saying they wanted a higher Brix. Growers, who are paid by the ton, had to watch helplessly as their grapes lost weight — some to the extent that they began to raisin. Now, said DiBuduo, growers should consider asking for bonuses for higher sugar, or for higher quality in general.
• The industry is “on the cusp of a shortage” of winegrapes. Allied projections show that demand will outstrip supplies through at least 2014. The 2011 California winegrape crush was 3.34 million tons, and Allied estimated that demand this year will be 3.61 million tons. Demand will continue to grow on a steady pace, they project, to 3.68 million tons in 2013, and to 3.75 million tons in 2014.
• However, while the potential does exist for a multi-year shortage of winegrapes, growers need to carefully weigh a whole host of other factors that are unique to their own regions, varieties, etc. “We’ve shown you a macro-picture of industry inventory. Within this picture, there are varieties, vintages, and regions that are short and long on supply. The flexibility vintners have to make adjustments allows these ‘overs and unders’ to be mitigated. At any given time, surplus and shortage can and does exist simultaneously.”
• Allied conducts a nursery survey each year that it says is pretty accurate, as it covers 85% of the winegrape vines sold last year. The surprise result this year was that for the first time in many years, white winegrape vine sales exceeded red winegrape sales, by a margin of 55% to 45%.
• The hot “new” white winegrape is Muscat. The wine made from it, Moscato, is a sweet, generally reasonably priced white wine that is popular with “Millennials,” those in the 21 to 30 age group. Interestingly enough, these young people are sometimes called the “Echo Boom” generation, which is appropriate. They and their “Baby Boomer” parents generally consume more wine than those in the generation in between, the 30 to 50 age group. Industry analyst Jon Fredrikson told the Unified audience that sales of Moscato, which is especially popular with young women, are up a whopping 60% in just the past year.
• Another sea change in the industry is that the region that produces the lion’s share of the state’s grapes, the San Joaquin Valley, is hot again. Just a few years ago, many vineyards were uprooted in the valley. But thanks in part to varieties like Muscat, which thrive in the valley’s intense summer heat, contracts are being offered and the expansion rate is strong. What’s hot besides Muscat? “Anything that looks, tastes, smells, sounds, or feels like a grape,” DiBuduo concluded.
Nat’s Top 10 Take-Home Messages From Unified Symposium
Each year at the Unified Wine & Grape Symposium, Nat DiBuduo, the president and CEO of Allied Grape Growers, concludes his state of the industry speech with some take-home messages. Here is the 2012 edition.
1) The 2011 winegrape crop was likely 5% to 10% below average, with an average crop now being closer to 3.5 million tons.
2) Via increased wine shipments and a relatively short crop, the industry is in a balanced inventory situation, and perhaps on the cusp of shortage.
3) Grape demand remains strongest at the lower price points. Large volume producers have a great need for product.
4) It is more likely that the industry will be inventory-limited over the next three years than oversupplied. Shortages and surpluses can and will exist simultaneously. They can be mitigated, but only to an extent.
5) The time for acreage expansion is here. But, like consumption, it must be done in moderation!
6) Planting activity today is heavily weighted toward the interior regions of the state, driven by consumption and evidenced by what is being planted.
7) When considering acreage expansion, err toward developing vineyards with varieties that are appropriate or proven for the region.
8) The industry continues to deal with political, economic, regulatory, and pest issues.
9) Appropriate supply expansion and contract negotiations can enhance inventory balance, and therefore assure a sufficient domestic supply to challenge imports, meet consumer needs, and maintain profitability.
10) Quality, proper planning, and economic sustainability will keep our industry strong and successful into the future.
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