Big winegrape crop strains capacity, supplies

Issue Date: November 30, 2005

By Kate Campbell
Assistant Editor

With a winegrape harvest described as "outstanding," "exceptional," "plentiful" and "huge," wineries now are scrambling to keep the juice flowing--into tanks, barrels, bottles and eventually the marketplace.

State agriculture officials estimate the harvest at 3.15 million tons of wine-type grapes, which makes it the second-largest crop ever produced in California, behind the record 3.32 million tons harvested in 2000. For many, grape and wine sector veterans included, the size of the slow-ripening crop came as a surprise.

"This year's crop yields are generally 10 percent to 15 percent larger than normal, produced during a cool year that's being compared to the outstanding 1997 vintage," said Robert Steinhauer, consulting viticulturist for Foster's Wine Estates Americas. Steinhauer is finishing his 39th California winegrape harvest.

The scramble to process the grapes, however, has not been quite so easy. And, the flood of grapes may have hurt some growers who could not deliver because of full capacity at wineries or who had to contend with a cutthroat spot market.

In the Napa Valley, Andy Hoxsey of Napa Wine Co. in Oakville estimates that the valley's crop was about 25 percent larger than recent crops.

"We were scouring the state for storage space. I hear that lots of fruit has had to leave the (Napa) valley," he said.

Growers farther north reported the same constraints: Wineries were taxed to process all the grapes being delivered, practically at once.

"This crop is much bigger than anyone thought it would be, especially the chardonnay," said Mendocino County grower Jason Dolan. "Everything came in at once--the whites, the reds. Normally the whites are 70 percent to 80 percent done before the reds come in. Many of the local wine storage facilities are completely full and are turning away thousands of gallons that are looking for a home."

Experts say the bottleneck problem at the wineries can be attributed to two factors--wineries' emphasis in recent years on marketing their wine rather than expanding facilities, and many new vineyards coming into production and mature vineyards providing much higher per-acre yields.

Given the unexpected size of this year's crop, wineries began to impose strict tonnage limitations, according to Bill Turrentine of Turrentine Brokerage in Novato. There have been few buyers for the overages. Growers found it difficult to contract for processing in order to make wine for their own account, unless they had reserved the tank space long before harvest began.

"Substantial tonnage of all major varieties--with the exception of pinot noir--are likely to be left on the vine or dropped on the ground in most areas of the state," he said.

Some estimates put the amount of winegrapes that will go unharvested at 5 percent to 15 percent, depending on variety and regional crush capacity.

At Monterey Wine Co. in King City, Steve McIntyre said his company normally processes about 11,000 tons of grapes, but this year ended up handling about 12,000.

"This year was just a huge crop, a much bigger crop than I have ever seen, and I've been doing this since 1982," McIntyre said. "I would call it the perfect storm."

"We had two years' worth of climate influences on this crop and the vines were well rested. At the same time we were coming out of an economic downturn with so much consolidation, I don't think enough attention was paid to building winery capacities. Wineries were spending money purchasing other wineries; they weren't spending money putting in new tanks and facilities.

"Most wineries I know about have had to ramp up their bottling schedule, full speed ahead, in order to empty tanks and have some place to put fruit. When you see a huge company like Constellation having to accelerate their bottling schedule just to make room for their own fruit, that really is evidence of a critical lack of capacity in the wine industry."

Nat DiBuduo, president of Allied Grape Growers, also agrees tank capacity is a major issue this year.

"With the tanks full, wineries had to delay harvest of a lot of grapes," DiBuduo said. "In some cases, the wineries were waiting to see what the bottling schedules were so they could move wine from previous years around in their facilities to open up fermenters and storage tanks for this year's grapes.

"I'd have to say that at every winery we deliver grapes to (about 60 statewide), there were tank capacity issues, without a doubt," he said. "That delayed our growers' harvest and stopped wineries from buying additional grapes."

Those who supply services to wineries report there's strong interest in adding tank capacity and in finding additional barrels to store last year's vintage--now being moved out of tanks and into barrels to make room for this year's crush.

Unfortunately, stainless steel tanks aren't something that can be ordered at the last minute, at least not the large tanks used by commercial wineries. These require engineering, piping and plenty of lead time. But large tank manufacturers around the state say, given the unexpected magnitude of this year's crush, wineries are still calling.

The owner of one stainless steel tank company said he had received hundreds of emergency calls in the past month or so. Another said his company had gotten a few dozen calls.

"Believe it or not the majority of wineries that call wait until crush time to decide they want something. Unfortunately it doesn't work that way," said Pat Watkins of Napa Fermentation Supplies. "I'm not feeling a pinch right now, but I know there is a great deal of need out there to expand capacity; the big harvest has made that clear. When you have a glut of grapes you have to have something to put them in.

"And, now we're looking at a serious barrel shortage," Watkins said. "We sell wooden barrels and we can't get any. We usually get them from all kinds of suppliers, but when I need 50 or 100, I can't get them. But next year I guarantee there won't be a shortage. It's a cyclical business. There's a little bit more demand for everything this year. It will be less next year."

Barrel makers report a surge in demand for cooperage products. Sales at Tonnellerie Radoux USA cooperage in Santa Rosa are up as much as 35 percent this year, Norm Leighty, vice president of sales, told local media. The company builds barrels onsite and also imports them.

"We're making as many barrels as we can here as fast as we can make them and every other cooperage is the same way," Leighty said.

Under normal circumstances, winemakers are selective about barrels for storing and aging wine, selecting certain types of wood and dictating the amount of "toasting" on the inside of the barrel. Not this year, barrel makers say.

"We just got an order for 61 oak barrels of any type, any toast, as long as they were oak," Leighty said. "It's crazy."

Phil Burton of Barrel Builders Inc. in Napa said every winery supplier in the area has been going "berserk" during the past month or so.

"This is like 1997. It's been amazing, for barrel people in particular," Burton said. "This crush blindsided everybody. There are veteran vineyard managers around here who have been working with the same vineyard for years and years. A friend of mine has been working with mature vines; he does cluster weights and clusters per vine and he was off 30 percent in his crop estimate.

"Obviously someone who builds barrels or tanks, with long lead times, there's nothing they can do in a situation like this," Burton said. "Right now there are no used barrels for sale. If a container can hold wine it's worth a fortuneright now. A month from now no one will care.

"I have an emergency barrel shipment coming in from Europe and we're working full-tilt boogie, but there's no way we can completely meet the immediate demand," Burton said.

In the San Joaquin Valley, Jim Mosqueda, who owns Sanitary Stainless Welding in Fresno, said, "It seems like people who could have purchased stainless steel tanks last year didn't do it. They weren't expecting such a large harvest and now we're seeing a big swing in tanks. More orders are coming in and more people are calling."

The tanks, however, are custom made and can take three to six months to install at a winery, he said. In the San Joaquin Valley where wineries and tanks tend to be larger, 100,000- to 300,000-gallon tanks call for engineering, piping, wiring and incorporation into the wineries' overall operating systems.

"Some small tanks we can produce in a matter of weeks; others take months," Mosqueda said. "Check back with me in March. I think this is the calm before the storm, and I can give you a better idea of how much demand for this equipment has increased. Wineries are seeing they need more capacity and I believe they'll be calling people like us for help."

Turrentine explains the current processing situation this way: "When the wine business is flying high, growers and wineries plant more vineyards. Wineries also reinvest some of their profits in expanding their facilities. But when profits become elusive, as they have been the last four years, wineries are more likely to focus available funds on marketing."

Last year California wineries shipped a record 428 million gallons of wine to markets in the United States, a 3 percent increase compared to the previous year, according to wine sector consultant Jon Fredrikson of the Gomberg-Fredrikson Report, based in Woodside.

The Wine Institute estimates the retail value of California wine shipped to U.S. destinations at $15 billion. California winery shipments to all markets, both domestic and international, reached 522 million gallons in 2004, a 6 percent increase.

The 2005 winegrape crop, however, is estimated to be more than 10 percent larger than last year's crop. California wine sales have been rising steadily and gaining in popularity among American adults. Wine industry experts say total U.S. consumption has grown 63 percent since 1991 (excluding wine coolers).

And, they say, with plenty of wine in the pipeline from this year's harvest, consumers will find many excellent, well-priced choices on retail shelves, beginning with the early release white wines for 2005, which will be available in February or March, with most of the reds following in 2007.

But, DiBuduo said one thing needs to be made clear: Even though the crop was large, the quality is outstanding.

(Kate Campbell is a reporter for Ag Alert. She may be contacted at kcampbell@cfbf.com.)

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