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SACRAMENTO — The economic storm that has battered the North Coast wine industry since 2008 appears to be over.

Three years of slumping wine sales finally hit bottom in 2010, analysts said Wednesday at the annual Unified Wine & Grape Symposium in Sacramento, the largest wine industry conference in the United States.

High-end wine sales grew by double digits last year, said Danny Brager, who tracks wine sales for The Nielsen Company. Wine prices, which fell steadily throughout the first half of 2010, began stabilizing in the summer, marking a break in the intense discounting that gave consumers lower and lower prices.

"The economy is no doubt in a better place," Brager said.

But many growers and vintners still face the difficult task of cleaning up the lingering financial mess left from last year's calamitous harvest and a severe downturn that eviscerated sales for more than a year.

Winegrape production on the North Coast fell 20 percent last year after a disastrous growing season, which was plagued by a cool summer that slowed grape growth, an August heat wave that fried grapes, and October rains that spawned ruinous mold outbreaks, according to crop estimates released Wednesday by the Allied Grape Growers.

In total, California's grape harvest will be down about 14 percent, said Nat DiBuduo, president of the grower association.

"Unless something changes, we are going to be significantly short of grapes going into the future," DiBuduo said.

Last year's small harvest could eventually help buoy grape prices, which have fallen significantly in the last two years. For now, growers are still feeling the pain from having less fruit to sell in 2010. Not every vintner and grower will likely recover, and foreclosures and bankruptcies could increase in 2011 as unpaid bills that stacked up during the downturn drag some under.

"We're bottoming out, but accompanying that is a shakeout," said John Aguirre, president of the California Association of Winegrape Growers.

Still, the brightened mood was unmistakable among wine executives attending the trade show in the Sacramento Convention Center.

"There are strong signs that wine sales continue to improve," said Nick Frey, president of the Sonoma County Winegrape Commission, which represents 1,500 local vineyard owners. "Some wineries are already offering grape contracts."

Wineries were the first to feel the financial pain after high-end wine sales dropped 6 percent starting in late 2008 for bottles $20 or more. In response, many North Coast wineries began waiting until shortly before harvest to purchase grapes.

Now, rebounding revenues appear to have emboldened some to venture back into the more normal practice of purchasing grapes earlier in the year, Frey said.

The fastest-growing wine segment last year was high-end wine costing $20 or more, which grew by about 11 percent. Sales of wines under $10 were nearly flat, ending a period of expansion in 2008 and 2009 when budget-minded consumers searched for less expensive options.

The rebound of high-end wine sales began in late 2009 but did not immediately translate into higher revenues for wineries, which had been forced to drop their prices in order to drive sales. That discounting appeared to end in the middle of last year, according to The Nielsen Company.

"Maybe we have come to the bottom of the price downshifting," said Brager, who was one of three panelists to deliver the conference's annual "State of the Industry" keynote address to several hundred people Wednesday.

Wineries with large direct-to-consumer programs, such as wine clubs, saw their sales pop in 2010, according to Nielsen data. Direct-to-consumer sales volume increased 13.8 percent last year, and the average bottle price was $36.56.

"We were nervous in the spring because of the bad economic climate," said Michael Browne, founder and winemaker at Kosta Browne Winery near Sebastopol. "But we're fortunate we don't move a lot of wine in the three-tier system."

Rather than rely on a network of distributors and retailers, which is often referred to as the "three-tier system," Kosta Browne sells about 85 percent of its wine directly to consumers.

While an important sales channel for high-end wineries on the North Coast, direct-to-consumer sales represent about 1 percent of the overall U.S. market, according to Nielsen. The vast majority of wine in America is sold in stores and restaurants.

Sales at restaurants and bars continued to decline last year, according to Nielsen data. And most shoppers are continuing to look for the best deals, displaying little loyalty to the name on the label.

"Wine drinkers have a sense of adventure," Brager said.

About 42 percent more people like to explore new brands than stick with what they already know, he said, citing a Nielsen survey. And an overwhelming majority said they are finding good wines at lower prices, making it harder for wineries to begin raising prices again, he said.

Still, Francesca Schuler, chief marketing officer at Treasury Wine Estates, said brand development still matters and helps wineries differentiate themselves in a tight market.

Schuler, one of the keynote speakers at Wednesday's symposium, encouraged wineries to use new social networking tools such as Twitter and Facebook to reach out to customers.

"Talk to consumers where they are talking to each other," she said. "It will end up being a far more effective tool for all of us going forward."

DiBuduo, president of the Allied Grape Growers, wished the wineries luck in their marketing efforts because his growers must get paid more money for their grapes in order to survive.

"At today's market prices, growing is not economically sustainable," he said.

The average cost of farming vineyards in Sonoma County was about $12,000 per acre, DiBuduo said. At 2009 grape prices, that means a grower would need to harvest 5.6 tons of grapes per acre to break even. Most Sonoma County growers only get about 3 tons an acre.

"We either have to either increase production, or lower production cost," he said.

Overall, the market has a ways to go before it returns to previous highs, according to Nielsen data.

"We certainly see conditions improving," Brager said. "But the improvement will be slow."

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