As economy takes toll on wine sales, growers find wineries aren't buying

Grapes from Bill Nachbaur's knotty, old vines in the Russian River Valley have been hot sellers in years past.

Contracts to buy them are usually signed months before harvest with award-winning wineries producing syrahs and zinfandels commanding more than $30 a bottle.

But things are much different this year. The recession has cut consumer spending on wine, especially at the high end, and wineries are responding by making less of it.

That's left growers like Nachbaur in a tight spot. About a quarter of the crop from his 27 acres near Healdsburg is still uncommitted. If he can't find a buyer by September, he might be forced to crush the grapes himself, sell them at a loss on the bulk market or worse -- leave them on the vine.

"We've been advertising and no one's calling," said Nachbaur, a retired attorney who bought Alegria Vineyards 19 years ago with his wife, Betsy. He bottles under his own label, Acorn Winery.

"I guess they're not sure they want to make more wine," he said.

Anxiety is gripping Sonoma County's $400 million-a-year grape industry this season as buyers hesitate to enter the spot market and prices plummet.

Although a majority of the region's 61,000 acres are spoken for in annual contracts, up to 20 percent of the crop sells on the open market in the nine months leading up to harvest.

Brian Clements, a senior partner for Novato-based Turrentine Brokerage, said about 70 percent of that market is unclaimed compared to about 40 percent at this time last year.

Battered by shrinking demand for luxury wine and rumors early on of a big crop, some varieties are now selling for about half of what they did last year -- if they sell at all.

For example, he said pinot noir that went for $3,000 a ton last year is getting about $1,700, and chardonnay that went for $2,000 a ton now sells for $1,400.

"Consumers stopped spending money on wine, so distributors slowed orders to the wineries," Clement said. "The wineries, therefore, pushed the inventory back on the growers."

Growers with high expectations balked at early offers, he said, only to find the value of their grapes dropped later in the season as the economy worsened. Now, there is virtually no movement, he said.

"Some people waited, and the market has gotten worse," he said. "Now they're in a panic mode."

Broker Glenn Proctor of San Rafael-based Ciatti Co. said the push to shed inventory has prompted some wineries to try to cancel grape contracts. Those who get stuck with unwanted fruit may be trying to resell it, driving prices down further, Proctor said.

Growers of premium grapes are especially concerned as a "chic to be cheap" mentality appears to take hold, he said.

"This isn't a year to cut a fat hog," Proctor said. "This is a year to get by. It's a year to make sure you are getting paid."

One needs only to look at the Internet to find a measure of the hard times. Pages of classified ads on the Sonoma County Wine Grape Commission Web site offer grapes for sale, offset by just a handful of listings from buyers.

Activity on the site has picked up recently as hundreds of tons become available from renowned appellations, including the Alexander Valley, Dry Creek and Russian River area.

"It's a marketplace we haven't seen for a few years," said Jim Murphy, an Alexander Valley grower whose family has been in the business since 1968.

But there is optimism amid the gloom.

Nick Frey, the commission's president, said the industry remains strong despite the situation.

Some small growers who depend on the spot market for a majority of their sales or those who are overly leveraged could be hit hard, he said.

But he said business could pick up as harvest approaches.

"Buying is unpredictable," Frey said. "Of course, there will be value buyers. But if people need fruit, that could put strength back in the market."

Duff Bevill, a Dry Creek Valley grape grower and vineyard manager, said the crop might come in smaller than expected, fueling a late-summer rally.

By the end of July, he said, growers will have a better sense if the cooler weather produces smaller fruit.

"I just don't think there's as big a crop out there as people were afraid we might have," said Bevill, who farms about 1,000 acres. "I honestly believe there will be activity between now and September."

Others are preparing for a glut.

Joe Reynoso, who has about 40 percent of his 150 acres in the Alexander Valley uncommitted, said he made plans early to custom crush his unsold grapes rather than accepting low-ball offers or leaving them to rot.

He'll keep the wine in storage for up to two years and sell it on the bulk market or make his own wine.

It's risky, he said, because he's forgoing an immediate paycheck on the hope someone will buy the wine in the future. But it's one of the few options in the downturn.

"Not to put too fine a point on it, but it sucks," Reynoso said. "It's the toughest in my 15 years. The growers who can't find a home for their fruit will be in bad shape."

You can reach Staff Writer Paul Payne at 762-7297 or paul.payne@pressdemocrat.com.