Pandemic makes winery buyers skittish about buying grapes during upcoming harvest
The disruption triggered by the coronavirus pandemic adds uncertainty to a domestic wine sector already grappling with an oversupply of grapes and bulk wine, making regional wineries even more skittish to commit to buying fruit during this year’s wine grape harvest, a top industry analyst said Wednesday.
Steve Fredericks, president and partner at Turrentine Brokerage in Novato, said this market condition began with the large 2018 grape crop and still challenged vintners as the COVID-19 outbreak struck in March.
“We have seen demand become softer and changing,” Fredericks said during the Vineyard Economics Symposium, held as a webinar this year because of the pandemic.
In response to the coronavirus safety protocols, supermarket wine sales have increased since people are mainly staying home. Nielsen reported on Tuesday overall retail wine sales increased 30% during the week ending April 25 compared with a year ago, and was up 0.5% from the previous week.
The larger wine companies focused on retail sales at the lower-priced wines are “certainly benefiting” from this, Frederick said, noting those wineries are mainly in the Central Valley.
The industry, however, is reeling from closures of restaurants and wine tasting rooms, where many North Coast wineries generate a good portion of their sales directly from consumers.
“The companies at the higher end, the companies that are focused on restaurants and having people come through their tasting room, are having a much harder time,” the wine sector analyst said.
With these dynamics, winery buyers who are not under contracts with grape growers are waiting on the sidelines ahead of the 2020 harvest that starts at the end of the summer instead of making deals that typically occur in the winter. The 2019 North Coast crop decreased to $1.7 billion, down 15% from 2018’s record harvest.
“Your folks up there (in the North Coast) are playing it very cautiously. They are not going to take chances on anything that isn’t going to turn into a dollar for them,” said Jeff Bitter, president of the Allied Grape Growers of California, a grower-owned marketing group that represents about 150 farmers in the region. Also, there has been some renegotiations and discussion of alternative payment terms for winemakers under contracts with growers for their fruit.
“They are going to push it back as far as they can,” Bitter said of winery buyers. “They are not going to rush to make a decision.”