SACRAMENTO - Despite a sluggish economy, California wineries last year posted their biggest increase in shipments in a decade and could soon face a shortage of some popular varietals that will drive up prices, experts said Wednesday.
Many wineries, however, still find it difficult to raise prices on store shelves, even as their suppliers boost prices for grapes and bulk wine.
California wine shipments rose about 5 percent in 2011, reaching about 210 million cases, analyst Jon Fredrikson said Wednesday at the 18th annual Unified Wine & Grape Symposium in Sacramento, the largest wine industry conference in the United States.
"By far the most growth we've seen in a decade or more," Fredrikson said. "And especially considering the conditions, it was a very strong market."
Price discounting, brands designed to cater to the nation's sweet tooth, and unpretentious labeling all contributed to the industry's growth, said Fredrikson, president of Gomberg, Fredrikson & Associates, a wine industry consulting firm based in Woodside.
Fredrikson called sweet red wines and red blends the "wave of the future," and said the wine industry has brought in new consumers with "gateway" wines like moscato, sangria and chocolate-infused wines. New labels that offer sweet red blends at a value price have done well.
"It's natural for wineries to blend up what they want, and I think consumers are really getting into them," Fredrikson said. "It's a free-for-all. It's a food fight. There are so many creative marketing ideas ... There's unbelievable creativity that is in fact driving the market."
Baby boomers have remained core consumers, apparently with the attitude that "Life is too short to drink bad wine," Fredrikson said.
A preponderance of mass market media helped raised the profile of California wines in 2011. New celebrity brands like "Skinny Girl Sangria" and endorsements of moscato wine in hip-hop lyrics attracted younger drinkers, Fredrikson said. And Sonoma County's exposure as a wine brand grew with Ben Flajnik's starring role on ABC's hit reality shows "The Bachelorette" and now "The Bachelor," and will likely grow further with the appearance by Rick Tigner, president of Jackson Family Wines, on "Undercover Boss" this Sunday. Flajnik attended the Sacramento symposium and posted a photo from the conference on his Twitter account.
Pinot noir sales were particularly strong, climbing 12 percent by volume in food stores, Fredrikson said. Trendy sweet red wines jumped a whopping 200 percent. And moscato or muscat wine sales grew 64 percent in food stores. But sales of blush wines, white zinfandel, merlot and syrah or shiraz fell.
Among the hottest California wineries in 2011 was Gloria Ferrer Winery, a Sonoma sparkling wine specialist that had strong pinot noir sales, Fredrikson said.
Other North Coast wineries singled out for their performances in 2011 were Crimson Wine Group, which owns Seghesio; Purple Wine Co. in Graton; Wheelhouse Wine Cellars in Graton; La Crema in Healdsburg; Cecchetti Wine Co. in Sonoma; the Mendocino Wine Co. in Ukiah, which owns Parducci; and Shannon Ridge in Lake County.
Meanwhile, the California wine industry is heading for shortages, in part because vineyard planting hasn't kept pace with the projected demand for California wine, said Nat DiBuduo, president of Allied Grape Growers.
And rainfall has been scarce this winter, raising concern among some growers that the 2012 harvest may have challenges.
"The lack of rain worries me, because there is no underground aquifer," DiBuduo said. "We're telling all our growers to irrigate."
The size the 2011 North Coast grape crop fell an estimated 15 percent from 2010, also a year that experienced a short crop.
"Grape demand remains strongest at the lower price points," DiBuduo said.
Compounding the grape shortages, inventories of bulk wine have sank to their lowest level in 11 years, said Steve Fredricks, president of Turrentine Brokerage, the Novato-based wine and grape brokerage firm. The drastic change comes after 10 years of excess, and corresponds with global lows in wine inventories, Fredricks said.
There will be shortages in cabernet sauvignon grape supply, so there will be rationing and high prices in the future, Fredricks said. New cabernet sauvignon vineyards are being planted in the San Joaquin Valley, mostly by wineries or under contract. And supply of planting materials is outpaced by demand.
"If you're not one of those wineries involved in those contracts, it's going to be tough for you to get that supply," Fredricks said.
As the trends collide, some California wineries are turning to countries with favorable exchange rates to purchase wine, instead of sourcing from more expensive California grapes, Fredricks said.
The strong growth in sales could change as wineries limit the discounts they offered to customers during the depths of the recession to clear inventory, Fredrikson said.
"The general trend is, you're not going to see the same heavy discounts," Fredrikson told reporters. "I think we're already beginning to see a little slowing. Prices are already going up."
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