As North Coast grape harvest nears end, wine industry frets about oversupply
As he walked around a cabernet sauvignon vineyard along a hilly stretch just west of Lake Sonoma this week, Clay Mauritson couldn’t help but be bullish about his 2018 grape vintage.
Mauritson, owner of his family’s Mauritson Wines in the Dry Creek Valley, said the almost perfect weather has allowed him to dial in the right time to conduct a pick during this year’s North Coast harvest — which still has about three more weeks.
“We are just getting into cabernet. I feel our cabernet crop is heavy, which we are ecstatic about because our crop in 2017 was so small,” Mauritson said.
The yield for his winery this year is expected to be about 10 percent more than his historical average.
Mauritson’s enthusiasm about his predicted bumper crop, however, is not shared by some others in the local industry, especially the larger wine companies, analysts said. The concern is the American wine companies could be at capacity given the leveling off of sales in the marketplace, they said.
“It’s a million-dollar question,” said Rob McMillan, executive vice president of Silicon Valley Bank’s wine division. “The question is declining consumption. ... Is this a short-term or a long-term thing? I think it’s a medium-term or a longer-term issue.”
Growth has slowed and volume has flattened in the U.S. industry, of which California produces roughly 90 percent of the wine with $35.2 billion in domestic sales in 2017. The sector has about 1 percent volume growth now and a 2.5 percent increase in retail sales, though the North Coast premium wine market should experience sales growth from 4 to 8 percent this year, McMillan said.
One telling point: It’s a buyer’s market this fall on the spot wine grape market — which represents around 15 percent of the overall market — where growers sell their excess grapes that have not been locked into contracts with wineries. Prices are now about half on the spot market of what they were one or two years ago, said Mike Needham, a broker at Turrentine Brokerage in Novato.
“I’ve talked to some wineries that said, ‘Our (sales) projections were too high,’” said Brian Clements, vice president at Turrentine. “It’s supply and demand. Demand has ebbed and supply has crept up.”
Another troubling signal is excess wine sales on the bulk market also have been sluggish for the past six months.
In addition, Clements said, wine from the 2018 vintage already has started showing up on the bulk market — which typically doesn’t happen until the new year. Still, he added that this year’s harvest is “not quite as bad” in terms of finding buyers compared with 2008 when the U.S. economy was in recession.
Brokers are seeing the real-time activity in oversupply all across the state.
“The lack of market activity, together with the fact the 2018 crop is looking big, means prices are softening across the board; it has also meant that space in the wineries for the new crush is at a premium. The market for grapes, and for bulk wine, continues to be slow,” according to a report this month from Ciatti Global Wine and Grape Brokers in San Rafael.
The issue has come to the forefront in Lake County, where large wineries have rejected fruit they contend has been damaged from smoke taint as a result of this summer’s Mendocino Complex wildfires, the largest based on acreage in U.S. history.