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Consumer Spending Falls: Wine Market Trends

Consumer Spending

One of the interesting parts about the wine market is that although it changes from year to year and country to country, we do have a few hundred years of very real, hard data. So there was a report from JP Morgan this morning showing that consumer spending had fallen 6.5% in the beginning of September. The logical question in this space, if that continues, what is the end result for the wine industry?

So we know that two things absolutely happen when consumer spending is falling.

  1. Consumers choose cheaper wine.
  2. That choice for cheaper wine means that winemakers will pay less for grapes and the price for bulk wine will drop.

Additionally, we’ll see a retrenching of the industry. First, some small wineries are going to go out of business. Plus, Covid is an extinction level event for restaurants and small wine shops. As small wineries close, two things tend to happen. First, those wineries are no longer taking grapes from growers, so those same growers need to find a place to buy their grapes. Since they just got burned by a small winery, they tend to look for security, so large wineries and wine conglomerates step in to buy those same grapes. In essence, small wineries close, but large wineries get better grapes, at better prices.

But, that doesn’t happen for every grape and not in every region. Two years from now, you’ll find me writing about people that make outstanding wine and only could do so, because they found some cheap grapes and a custom crush had enough space to take them in, for only a few tons. So there will be new wineries. There will, as always, continue to be larger and larger wineries.

Other than that, it’s hard to say how the industry will change as there are an entirely new set of restaurants, wine shops and wine bars to sell to.

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One Law to Change Today: Refillable Wine Bottles

This is a Shiner

We’ve talked about how craft beer continues to grow and small production wine (same product, same market) has struggled to gain the same foothold.

There’s one reason for that and it’s price. I thought about this after cleaning out part of my kitchen this morning (Covid makes for some strange bedfellows) and found an old growler. Refilling a growler is one easy way to save a ton of money on beer. For a wine under $10 per bottle, often the bottle and cork cost more than the wine itself. An article in the San Francisco Chronicle this week about a small local winery here put the price of juice at $1 and the price of the packaging at $1.30. So why not remove the packaging cost from your local wine retailer and refill your wine bottle?

You legally can’t.

Why not?

There’s an old federal rule that only a licensed and bonded winery can refill a wine bottle, or any other container for that matter, meanwhile the same rules for beer simply do not exist.

It’s something we should be attempting to have changed…..although I’m enough of a realist to understand that there is almost zero chance of any regulation like this changing in our current political environment.

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Smoke Taint, Testing and Speed

Air Quality Image

I remember being a kid sitting in Pauley Pavilion on UCLA’s campus to hear John Wooden speak. He spoke in part about how it was important to be fast, but not to hurry.

I was reminded of that semi famous quote today when I saw that a number of wineries are requiring smoke taint testing before the acceptance of grapes. As you might expect, there’s some issues with this. First, lab space is sparse right now and normally the industry uses some non food related labs to run some of these tests, but those labs are running at more than full speed already to run Covid tests….so lab space is now limited to say the least.

Additionally, smoke taint tests can take a week or so to come back. Which might not be an issue. BUT, at harvest things are always on a massive time constraint.

Wineries are left with choices, all bad:

-Do they buy grapes while waiting for smoke taint tests to come back? That’s a big financial ask. In this scenario you’d assume the grapes are good and throw them out mid fermentation if they aren’t.

-Do they smoke test grapes while they’re on the vine? There’s no financial risk. But the timing is tough as there’s still smoke in the air, so if the grapes aren’t picked you’re getting different grapes than you tested. Plus winemakers are accustomed to more control of this and adjusting on the fly for BRIX levels ain’t easy.

-Do you pick the grapes and not start fermenting them before the tests come back? Ok, we’re not making raisins, so that’s not really an option, at least not for everyone. Some of the largest wineries will have enough cold storage to stop fermentation from beginning in earnest, so this could work for a small percentage of spots.

-If you’re a very small winery, do you simply skip a vintage? If you do so, can you get your grape contracts back next year?

Ok, so that’s a lot of bad choices. Like really bad.

And here we go. Let’s see what winemakers choose and why.

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Fires in California Wine Country…..Again

LNU Fire Map

We got a break last year from the wildfires in wine country. After a devastating 2018 fire season ravaged Napa and Sonoma right around Cabernet harvest in October, 2019 proved a welcome respite.

While I’ll let you all look up the current state of the LNU Complex fire that is burning in wine country, as of last night (August 26th) the fires were sitting at 33% containment.

While any loss of vineyard is difficult to deal with, as the soils take approximately 2 years to get ready for new planting and after vines are in the ground, it takes 5 years for the grapes to be usable for world class wine grapes.

Any loss of life is of course the biggest issue and is incredibly tragic. Luckily first responders have gotten really really great at evacuating people and the total loss of life looks like it’s currently under a dozen people.

But, there’s one major factor that we haven’t really had to deal with in California wildfires over the past few years…..smoke. I’ve talked about smoke before, but really many consumers misunderstand how smoke is imparted to grapes. The grape skins are thick enough to keep the smoke out, but the smoke can be imparted from the leaves into the grapes through the plant.

In the past, the wildfires have come late enough in the season that this hasn’t been a significant issue. This year is completely different.

When this current crop of wildfires began, harvest was only beginning. Not even all the light alcohol white wines in Sonoma had been harvested and virtually none of the reds.

For the first time in California we’re looking at basically a lost vintage if the smoke sticks around for too long. It’s unprecedented in modern times and left winemakers with a crucial choice.

Two Choices:

Chance it.

Make Rose.

As you might expect, most are going to chance it. But I hope you’re ready to drink a lot of really, really great cheap Rose from Napa and Sonoma. The onshore breeze is back, it not only cools everything off and adds humidity, but it blows the smoke back out the valleys to the east. While that isn’t great for Sacramento’s air quality, it is good for air quality in Napa and Sonoma. So that choice to chance it, might actually work out.

Lastly, I think you’ll see one other choice that comes into play. If the smoke is largely gone by this weekend (possible given smoke dies down as soon as a fire hits 60% containment and we’re over half way there) some winemakers are going to hope that letting the grapes hang on the vine will let some of the smoke taint fall out.

Will it? There’s some decent research from Australia, but this entire phenomenon is relatively new and the research into it is new and ongoing.

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Covid-19 And The Wine Industry

Covid 19 and the wine industry

Over the past few months, Covid-19 has changed the world. It’s changed our daily lives, it’s changed our economic circumstances and it’s changing the world before our very eyes.

It’s caused us to be running a high school counseling department, 3rd grade, preschool and a small business out of the house. We’re ordering groceries online, I’m using a bleach soaked paper towel and q-tip to get gas every couple of weeks.  I’ve taught the kids to wear masks.  The 4 year old is obsessively crossing the street whenever he sees another person.  He yells at people from the couch if they aren’t 6 feet apart as they’re taking a walk, same family or not.

But we’re good.  We’re safe and other than an early scare of Influenza A finding the house, healthy.

I can’t imagine those that aren’t and while the amount of human suffering should stand on its own and thinking of how this effects the wine industry doesn’t seem right to me, we’re in this for a while, so I thought having a look at what’s happening and what’s next for the wine trade, makes some sense.

Before we go on, I think we should take a second to take stock at what a true 100 year event this is.  The last time California closed wine tasting rooms was Prohibition.

First, you’ll read a ton about how Covid-19 has increased wine sales.  Overall sales have increased 66%. Even moreso, online sales are up 243%.

So all good right? No wait, GREAT…..right? I mean, as an online wine club, seeing wine sales up 2/3rds and online wine up more than 2x, this is basically Christmas for online wine sales right? Wait, better than Christmas. Finally, I’m winning, the demographics have come home to roost, but in my favor…..right?

Not really.

The direct to consumer market for wine is an interesting one.  It’s largely dominated by websites and retailers that you recognize.  My former business partner said that it’s like a mall, but people only stop at the first two stores and the only available leases are in the back. 

What’s actually happening? So there are some larger groups of wineries and though those groups, often through winery software that they share, give us some idea on who is winning and who is losing.

So who’s getting all these sales?  

Welp, I’m sure spots like Wine.com and Total Wine are doing great.  They’re hiring after all. Whole Foods and other grocery delivery apps are also eating a lot of these sales.  For the most part those sales are sitting at the lower end of the price spectrum.  I mean, a lot of people are drinking more, but those sales are stocking up. There’s too many tales already about small locally owned wine shops that are laying people off.

The small groups of wineries show us that wine club memberships, generally the backbone of direct to consumer sales are actually decreasing during Covid 19. Why? It’s an economic crisis and the average bottle sold direct to consumer is often about 4x as expensive as the average bottle sold in the country as a whole. So they’re luxury purchases.

To help articulate that point, according to Wine Business the fastest growing wine brands during the Covid crisis include “Barefoot, Black Box, Bota Box, Franzia, Josh, Stella Rosa, Woodbridge, and Yellow Tail”

Are you looking for all the little producers in that list? Yeah you won’t find any.  But this makes sense, not only are we having a crisis in terms of this virus, but the current economic fallout as well as, the long term economic fallout means people are watching their money more carefully.

Anecdotally, I heard from a major deal site in a severely affected city.  They’ve run ads for perhaps my cheapest competitor and sold 2,000 wine club memberships.  They also ran one for a mid priced competitor (I sit at the high end of the price spectrum) and sold only 200 wine club memberships. That’s about the ratio that I would expect and I think we’ll see it continue moving forward. The cheapest drinkable wine will win the day, even if sales are going to dry up at your local grocery store…..because much like the meat department, they won’t need to offer them to make sales any longer.

Looking forward, there are even more sobering statistics.  Small wineries (those producing 5,000 cases or less) are expected to see a 57% decline in sales. 

I’m going to empathize that for a second, if you only have one take away here, please remember that. The average winery that would have a winemaker, often a spouse or business partner running the business side and some small consulting help in terms of accounting etc…..is about to lose over half their sales.

Here’s the full quite from an article in the San Francisco Chronicle: “Of the 2,077 wineries in Napa and Sonoma counties, 74% produce fewer than 5,000 cases of wine annually, according to Wines Vines Analytics. On average, American wineries of that size are expected to see a 57% drop in revenue in 2020”

With what I know about small winery finance that 57% drop in revenue basically ends the industry as we know it.

As you might expect given these grim statistics and predictions, the industry is already working on how we might fix this, or at least keep people in business.  No, I’m not talking about PPP because the likelihood of those helping anyone survive more than a month or two is low.  I’m talking what the industry can do, as tourism continues to struggle through the summer.  To get there though, we’ll have to chat about how small wineries actually make their sales. That’s next time. Tomorrow maybe. Maybe the day after. Depends on how 3rd grade writing goes, preschool etc. Such is life during a shelter in place, Covid 19 lockdown here in the Bay Area.

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Where To Go For Red, White, And Pink In Newcastle? Inner City Winemakers

Inner City Winemakers

Ok, so I do accept guest posts on my site. Honestly, it can be a bear. Most of the stuff that I get, is complete and utter garbage (if I am being honest). Our writer here Liam, reached out and then almost amazingly, wrote something custom based on the city in which he lives. So, I’m happy to bring this to you, about a custom crush and urban winery based in Australia. Given that I think these type of wineries are the future of the wine industry, it’s nice to see them starting in other parts of the world as well.

Once upon a time in 1989, an earthquake shook the Australian city of Newcastle. But now more than 30 years from that incident, this city is beginning to experience some rumbles and is being shaken by something entirely different from the earthquake. The landscape of the inner city of Newcastle is changing into a more cultural and social hub from the wasteland that it was over 30 years ago. Restaurants and cafes are beginning to take up different positions in the city hub, as the city continues its post-BP and post-mining era. 

But one thing that is most symbolic of the dramatic change in the city and its evolution into a cultural and social hub, it’s the founding and subsequent growth of a winery in the inner city of Newcastle. 

This winery was opened by Rob Wilce, a winemaker, and Janine, his partner, in what was formerly a car workshop backing a laneway that was known for prostitution and drugs. This winery has now grown in leaps and bounds from when it was first started in 2011 till now. 

According to Rob, when they first started they were the only winemakers in the inner city in Australia. Rob and Jaime worked at the Hunter Valley wine industry at Pokolbin before moving from Sydney to Newcastle more than sixteen years ago. They started the winery after the migration, and that was something they always wanted to do for themselves according to the old. They would have started out at the inner city in Sydney but that would have cost them a lot more, so they decided to move into Newcastle to accomplish their dream of owning a winery. 

It took them until 2014 before they were able to make their first vintage after they had taken some years to develop the concept, they had to find the most appropriate premise and get approval from the necessary councils. 

Grapes used for the wine are gotten from a hunter valley nearby and also from other regions of New South Wales, Young, Orange, Tenterfield and New England. The winemaker will try out unusual varietals to produce a Gewurtztraminer, and a bouquet rich in pineapple and lychee, which accompanies spicy food. 

This winery in the inner city of Newcastle is already receiving a lot of plaudits, and deservedly so.  A Winestate magazine named its product, Hilltops Cabernet Sauvignon, ‘best in its class’ at the back of a five stars award in 2015. 

Wilce’s winemaking philosophy is that 95% of the wine is created in the vineyard, a winemaker just guides the final process through. According to him, they have an extremely rustic method in which the wines are pressed with the hands and during fermentation, the reds are also plunged with the hands. 

The winery at Wickham has an artistic feel which is partly due to Janine, Wilce’s partner being an artist and partly due to the beautiful street work in Wickham. Every two months, the winery hosts exhibitions and also makes some street art wines, which features labels that the local talents created. This winery is also prominently involved in the street art festival that comes up every two years in Wickham.  

The locals at Wickham have now completely embraced the winery and it’s also beginning to garner attention from other visitors as well, and rob while explains that he regularly source grapes from different regions. The diversity that he gets from these locations helps him to craft out the best wine collections, which ranges from whites to sparkling reds and the fortified variety. 

The plan which he had for the winery initially was an on-site production of the wine. But that soon became impossible for Rob with the council taking as much as three years before they approved their business application. He figured they couldn’t wait for that long before he started to make wine. So, he moved out of the production of his wine off-site to Branxton where his friends also own a winery. 

He made the decision to allow local artists to use the space when he saw the prospect for his business beyond just wine production and that decision has proven to be the right one. They have gallery openings every 5 or 6 weeks, and they also have wine tasting nights within an interval of 6-8 weeks. the little space only accommodates an average of 50 guests, but as word started to spread about the entertainment and food quality, Rob has made more successes along with some local artists. This has led to local artists booking the space out throughout the whole year. If you ever find yourself in Newcastle during one of these meetings, you should your way down to Rob’s winery. The hospitality and warmth that you are bound to receive are next to none. 

Every person who has been to Rob’s winery at the inner city of Wickham in Newcastle has had something positive to say. The rave reviews are usually centered on the delicious taste of the wine, and the hospitality and friendliness of Rob, the winery owner. Something that also commonly fascinates the visitors, about Rob, when they go to the winery is the amount of knowledge that he has about wine and winemaking and his willingness to talk about it, share his knowledge and experience with other people. Of course, you’d expect a great deal of experience from someone that has been in this business for over 20 years. But when you realize that his main work in the wine companies he worked at formerly was marketing and sales, it hits you that the amount of knowledge and skill he now has is due to his diligence in learning the fundamentals of winemaking in all those years. 

Today, Rob’s winery is your best bet for red, white, pink, vintage wines in Newcastle. His fame and acceptance among the locals have grown and he’s beginning to attract interest from external parties and visitors as well. Rob now has a wine club with hundreds of members already, and these are the people that help him with his marketing. You really can’t taste those wines and not want to help market them. That’s how good the wines are. 

This popular winery is located at 28 Church Street, Wickham, NSW 2293 and has opening days and time. From Wednesday to Saturday, it’s open from 10 am to 5 pm. But on Sundays, it closes by 6 pm and opens by 10 am. While it isn’t open on Mondays and Tuesdays. The telephone number of (02) 49623545 and their website is www.innercitywinemakers.com.au.

It would have been hard to imagine what Newcastle would look like in the future back in 1989 after the earthquake. No one then would have been able to predict how much the city would recover or if it ever would. But 30 years from then, the disaster is already in the distant past, the city becoming a new cultural and social hub with a winery that has caught everyone by surprise. 

Author’s bio 

Liam Catalan has been working as a self-employed copywriter for 5 years and has developed a reputation for great assignment writing services after previously working as an editor at the University of Melbourne newspaper. He is an expert in topics related to traveling, gaming, and writing. 

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How Many Pounds of Grapes Per Bottle of Wine?

Pounds of Grapes per bottle of wine

I actually thought this was an interesting question, but as the kids say in elementary school:

Warning: Math

Ok, so let’s start with the basics. To figure this out, we’ll need to get I’ll have to simply give you the first part of this number and then we’ll work backward. A ton of grapes yields somewhere from at least 110 gallons of wine, up to 180 tons depending on a number of factors including farming practices and varietal of grape in question. Just as an example, if a farmer waters the grapes the day before they’re harvested, there’s suddenly more grapes (IE more water weight) which is something that winemakers struggle against consistently.

Let’s make our life easy though and say that we receive 150 gallons of wine from each ton of grapes.

So that’s one of our inputs, but the question now becomes, how many bottles of wine do we receive from that same ton of grapes?

Now, we have another known quality, a bottle of wine is 750ml. To get this into gallons, it’s actually easier to use a case of 12 bottles of wine, which is 2.378 gallons (you’ll sometimes see this listed on cases since this is how tax is collected for wine).

So each ton of grapes gives us 63 cases of wine, more or less a pallet which does make life at a winery a lot easier.

63 cases is actually 756 bottles of wine.

Ok, so now we know that a ton of grapes produces something around 750 bottles of wine. So how many pounds of grape per bottle of wine? There are 2,000 pounds in a ton (about half the weight of your car).

Since we’re now in the same units this is easy enough, there are 2.67 pounds of grapes per bottle of wine. To put that in perspective, a bag of grapes sold at your local Whole Foods weighs on average, 2 pounds.

So how many pounds of grapes per bottle of wine? The answer is 2.67, but it’s probably easier to remember it’s about two and a half pounds, or about the normal weight of a bag of grapes at your local grocery store. Which if we’re estimating, makes sense based on size right?

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Projecting Winners and Losers from EU Wine Tariffs

Wine Tariff Winner and Losers

Ok, so generally speaking there is one simple take away here: we’re all losing when it comes to these wine tariffs. Seriously. There are literally no winners, when about half the wine consumed in America is about to be twice as expensive. But, people are still going to drink wine and this absolutely will effect the market. There is going to be less sales of EU wines, especially the cheap stuff where people are more price sensitive. California isn’t really set up to meet that sudden increase in demand, Washington can probably get some grapes on line more quickly, but really the winners in terms of distribution will be other international markets not effected by these tariffs since they’ll going to keep prices consistent and gain distribution. I think New Zealand is a logical fit for Pinot Noir and before the fires and depending on their aftermath, Australia would be a logical choice as well.

Video Transcription:

Mark Aselstine with Uncorked Ventures.

So, I’ve got a lot of content this week about the upcoming tarrifs coming to European wines and I think over the next week or two after these go into place you’re going to hear a lot about what who the potential winners and losers are and really a lot of people are going to say that California wine is going to be a giant winner in this scenario.

However, if you talk to most people within the industry, that’s just not true.

Here’s why: you absolutely cannot handle this huge difference in price coming from International markets immediately if you think about if you wanted to produce more $10 wine California you would have to have cheaper grapes you would have to have more grapes excetera excetera really talking about changing the either the entire wine making process for some places or dramatically extinct expanding production which is the most winemakers tell you virtually impossible without a year or two.

So who are the potential winners? If you’re losing a lot of cheaper EU wine sales, then a lot of people are going to say California wins but really places like Washington might have a better concept of how to do this because they deal with mostly professional farmers so cheap Washington wines like this Upper Left Merlot is a good example of that solid drinkable wine that’s the kind of thing where if you paid 7 bucks for a bottle from France from can if you know that one of the outlying regions you’d be happy with Washington’s more capable of producing the good sites in California are just too expensive and hotter Central Valley is just not capable of producing the quality that people are expecting from European grapes.

The other place that probably makes the most sense our other overseas wine making regions that aren’t affected by the tariffs so if you’re looking for $15 French Pinot Noir what that becomes is 30 or $40 Pinot Noir and at that point you might just choose something from California and support your local economy kind of thing but bottle from New Zealand New Zealand can still get wine into the country at an affordable rate and so you know you can looks with some of these secondary markets and this is all kind of exasperated by the fact that really the true winner of this should be Australia but given the fires in the destruction of Vineyards there there’s no guarantee that there’s going to be extra wine coming in the market so in reality is we have an industry that is going to struggle for a little bit with this on a partially goes to the fact that you know although I sell California Oregon Washington wine only the industry is really a larger market and this is really taking a bite out of kind of price points and it’s going to make consumer Choice a lot smaller and I think that’s why you hear a lot of people in the industry that point and you know we would logically be somebody that you say they hate these guys might do better in this scenario and we won’t ignore does anyone who even if they sold no EU wine at all, would think this was a good idea for the industry, or really the wider economy.

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Synthetic Cork….A Cheap Example

Cheap Synthetic Cork Example

So I opened a bottle and found this……to start, yes this is a synthetic cork and yes, this is a super cheap version of one.

I’m no cork snob by any stretch of the imagination and lessening cork taint is something the industry needs to focus on. After all, cork taint ruins well made wine for no good reason. It sucks for winemakers, it sucks for retailers (and wine clubs!) that have to deal with the returns and consequences like lost customers. It also above all else, sucks for consumers who lose money, or at least time, or end up drinking a wine that they really shouldn’t.

So I’m all for synthetic corks. I’m all for better manufacturing standards for regular corks. I’m all for screw caps. Wineries and winemakers should choose the correct closure for their brands.

But this?

This is cheap, it’s damn hard to get out and I’m guessing it’s no cheaper than a screw cap.

Guys, the red doesn’t look cool. It’s unnecessary. Let’s do better next time.

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Can’t We Just Call Merlot, Merlot?

It Kinda Says Merlot

Yes, even those of us in the wine industry have our complaints. Here’s one of mine, needing to keep varietal levels to a certain level, to hide said varietal from the label. That’s not really the way this is supposed to work. I understand there will literally always be some gaming of the system, but this is a bit off putting for me. If it’s a Merlot, can’t we just call it Merlot?

Video Transcription:

I’ll this up for a quick picture so we can get to little bit of silliness today so as you can see on the front this says red blend and then it names off well, most of the Bordeaux varietals in this case Carmenere is left off, because nobody knows what it is.

Looking at the back, we see what’s really in the bottle, evidently closer like to 67% Merlot and that’s where the sillyness comes in a whole list of stuff and it’s a good reminder of how far Merlot has fallen you know if you want to put a name name on a wine bottle it has to be at least 75% of that varietal.

Now is because Merlot grapes of the Bordeaux varietals Napa specially are the cheapest or at least a hell of a lot cheaper than Cabernet Sauvignon is what you’re finding is a winery or in this it’s going to be bulk wine sold to a retailer is getting listed as a head of this red blend or a special name and not Name by Bridal because they’re intentionally keeping the percentage of merlot under 75% to make sure they could put more low on the label and so that’s kind of where the silliness comes in a little bit of a good thing in some ways but this is the kind of thing that I can drive people knowing about the wine industry will just say that without somebody having to dig through the back of the bottle in this case actually Costco Kirkland is doing a good job Winery winemakers website or you have to dig through color of other notes if it’s available anywhere. doing it with the wine industry