Global wine shortage could be good news for struggling wineries
The shortage of California wine is rippling through the system, causing serious if not quite catastrophic consequences.
Winery principles tell me that when their sales forces fan out across the country, buyers are unhappy at the lack of supply and in some cases are personally blaming the winery!
I’m sure that distributors as well as retailers both on and off premise find themselves in an uncomfortable position when wines they’ve sold for years are suddenly unavailable. Of course, the rational part of them knows that no one at the winery is responsible for short crops: Mother Nature is.
But there’s a vein of paranoia that runs through the end users of the three-tiered distribution system like a low-grade infection, and sometimes these buyers can’t be sure if the winery really is low on supply, or is just cutting them out and pretending to be short.
It’s bad for the winery. If buyers feel the winery is shorting them, they might turn to someone else they can get product from, thus terminating what might have been a long relationship.
We’ve all been reading about a wine shortage, for instance here and here, which cites BofA Merrill Lynch that “Global supplies appear to be tightening simultaneously,” with government policies in Europe and Australia deliberately discouraging production, while bad weather in South America had the same effect.
The problem is exacerbated by increasing demand from China for U.S. and particularly California wineries, some of whom are selling a surprisingly high percentage of their top wines there.
Several highly placed producers have openly fretted to me about the shortage, wondering what their companies are going to do. But the truth is, they have few options. They can’t turn to Oregon because crops there run so short due to natural circumstances. Washington has huge, fertile spaces in the east, but that state’s frequent hard winter freezes intimidate California producers, who aren’t used to having entire vineyards wiped out in a single night.
The 2012 vintage, California’s biggest ever, threw the industry a lifejacket, throwing it into temporary balance, but it probably won’t be enough to overcome the result of prior years of below-average crops, coupled with increasing demand. As Gomberg Fredrickson’s Jon Fredrickson told the Unified Wine & Grape Symposium earlier this year, “California ran out of wine.”
The result? Higher prices. The trend is especially notable at restaurants, where by-the-pour prices are inching up. It’s curious that all this is happening just as the country (and world) seems to be emerging from the Great Recession, putting a little more money into the average consumer’s pocket. Are consumers willing to dig deeper for their daily Pinot Grigio and Merlot? I expect they are–and that’s good news for wineries that have gone through the hell of the past five years, and survived.