A Huge Harvest For The Central Coast

Sorting out the numbers from the huge 2005 California winegrape harvest, it became clear that the Central Coast AVA gets high marks for top production. It is an honor that many producers would have gladly skipped.

San Luis Obispo and Santa Barbara counties were up 57.3% over 2004 harvest figures--that is the largest percentage increase in the state, and Monterey was up 48.1%, a third-place finish. Napa logged an increase of 50.8% to finish second.

The numbers are truly amazing. One veteran observer of the California wine and grape market called the crush "mind boggling." Chardonnay was up 75.1% in San Luis Obispo (SLO) and Santa Barbara counties and 51.4% in Monterey. Also in SLO/Santa Barbara, Cabernet Sauvignon was up 51.8%, Merlot 52.2% and Pinot Noir 49.2%. In Monterey, Cabernet Sauvignon was up 52.7%, Merlot 40.3% and Pinot Noir 57.2%.

Looking beyond the numbers, Steve Fredricks, vice president and partner of Turrentine Wine Brokerage, agreed there is an imbalance, but he didn't want to use the term "oversupply." Fredricks, who spoke about the Central Coast winegrape and bulk wine market at the 11th annual Central Coast Insights Conference at San Luis Obispo in early March, said that people need to pay attention to what they grow and what programs the grapes are going into.

"We are moving toward more positive times in terms of consumer sales, and we don't have a lot of new acres coming on board," he said. "We still need moderately priced Pinot Noir and Rhône varieties."

Fredricks added that growers need to be looking at ways to improve efficiency and lower the cost of production. Bill Turrentine, a principal in the firm, said that without a doubt there will be a real challenge ahead for the Central Coast. "The grape market price had been going up a little, but as wineries started becoming concerned about crop size, they stopped buying. The longer they waited, the more concerned they were."

Turrentine pointed out that the 2005 harvest was a very different situation than the oversupply of winegrapes that started developing in 2000. "Then, there were too many grapes planted and consumers started trading down. In today's market, the consumer is trading up. The situation now is not nearly as dangerous as it was in 2001," he said. He added that almost all new vineyard plantings on the Central Coast are now in production, so the trend line for production should be leveling off or even dropping.

Jay Indelicato, senior vice president at Delicato, a winery that farms thousands of acres on the Central Coast and buys grapes as well, also balked at the term "oversupply." "Pinot Noir and Pinot Gris were both way up, but I don't think anybody can talk about a glut for the varietals. You have to take it on an item-by-item basis," he said.

He agreed that there will be a lot of extra wine to sell. "Having said that though, at the end of the '04 harvest, we had a whole lot of Chardonnay, but by the end of (last) summer it was pretty much sold. Going into the harvest of '05, inventory was lower than it has been for several years."

Even though he was generally upbeat, Indelicato agreed that the large harvest would certainly have an impact on prices. "But it could be short-lived if we get an average yield in '06," he said. "The big question right now is, what size harvest do we need for everything to be in balance? I think a 3.1 to 3.4 million ton winegrape crush could put the market in balance."

Indelicato said that for the Central Coast, a good price-point is $8-14 per bottle, and that is a growing market. "The demand is increasing rapidly," he added.Don Brady, the winemaker for Robert Hall Winery in Paso Robles, a winery that does custom crush work, said he was not seeing any panic. "It's generally calm, not a disaster," he told Wines & Vines. "We are not a big player on the bulk market, but we did sell the last of the 2004 in December, after the 2005 harvest was finished. The 2005 wines are good and in my experience, good wines sell," he said.

Following up on Brady's last point, consumers bought an estimated 187 million cases of California wine in 2005, 6.5 million more cases than the previous year, a gain of 4%. However, they bought 11% more imported wine, with imports growing to 81.5 million cases.

The question arises, will the large crop enable Central Coast producers to compete more successfully with the imports in that key $8-14 category? Bill Turrentine thinks it will. "It might not be great for margins, but it should help in the fight for market share," he said.

Wine market analyst Jon Fredrikson (Gomberg, Fredrikson) said the intense competition for market share will lead to more aggressive marketing, which will in turn lead to greater consumer wine demand. "From a consumer standpoint, this is a dream market. From the industry standpoint, it is going to take some work to move these wines through the market."

In sum, most observers echo Jay Indelicato's question: How big of a harvest does California need? In general most agree that something in the range of 3 million to 3.1 million tons should work. For the Central Coast, the feeling is that if the crop is anything close to normal this year, there is no need to panic, especially if strong market growth of 3-4% per year continues.

It took almost perfect growing conditions to produce the 2005 record harvest. Growers on the Central Coast and elsewhere in California are keeping their fingers crossed, hoping for something a little less than perfect for the 2006 harvest.

Major Winegrape Varietals, In Tons

Monterey

Varietal 2004 2005 %Change

Chardonnay 90,599 137,146 51.4

Sauvignon Blanc 5,644 8,921 58.1

Cabernet Sauvignon 28,817 44,010 52.7

Merlot 35,366 49,609 40.3

Pinot Noir 16,916 26,600 57.2

Zinfandel 1,225 1,873 52.9

Total All Varieties 212,856 315,299 48.1

San Luis Obispo/Santa Barbara

Varietal 2004 2005 %Change

Chardonnay 47,201 82,643 75.1

Sauvignon Blanc 5,290 8,276 56.4

Cabernet Sauvignon 43,910 66,654 51.8

Merlot 20,928 31,845 52.2

Pinot Noir 10,406 15,528 49.2

Zinfandel 11,454 15,955 60.6

Total All Varieties 175,767 276,767 57.3

Source: Based on Preliminary Grape Crush Report, California Agricultural Statistics Service.