Are California wineries consolidating at an historic pace? Nobody can predict the future, but we can remember the past. And what I remember from the early Nineties were dire predictions that wineries were consolidating fast, with big wine companies snatching up little ones, until some people were worrying there’d be only a handful of wineries left in a few years.
The cause, it was said, was phylloxera, and the billions of dollars it would cost to replant thousands of acres of vines. The little wineries, it was further said, would go broke, and have to sell off.
I was just a cubby wine writer at the time, but even so, I didn’t believe it. I just couldn’t envision a scenario where hundreds of wineries would go out of business overnight. And, as it turned out, they didn’t. California sailed through the phylloxera crisis pretty smoothly–in fact, the conventional wisdom is that it was good for the industry. Vintners were able to replant the right varieties onto the right rootstocks, in the right terroirs, and many even reconfigured their vineyards, in accordance with the latest scientific thinking. The outcome, of course, was that California wine emerged from the 1990s healthier than ever.
We again began to hear the consolidation theory (or its twin sister, the bankruptcy theory) as the Great Recession took hold, in 2009-2010. Those prognostications I took more seriously. Not only was it the worst financial crisis in the country’s history since the 1930s, but imports, from dozens of countries, as well as competition from the other States, were putting more pressure than ever on little family wineries in California.
Well, here we are, supposedly emerging from the Great Recession, and, aside from a couple acquisitions over the last few years (by Charles Banks, Jean-Charles Boisset, Gallo and the Jackson family, among a few others), most of the wineries that existed in 2007 are still here, joined by a bunch that weren’t. The economy seems poised to continue a slow recovery, which would seem to be good news for wineries. Our best glimpse into the future might be the recent Silicon Valley Bank report, summarized here, that takes a glass-half-full approach: it hedges its bets, suggesting that things will get better, but there are snags in the road ahead.
What are those snags? As the Silicon Valley Bank report states, Baby Boomers, who fueled the modern wine boom to begin with, are likely to be drinking less, as they retire, live on more modest incomes and [shudder] die. And our successors, Millennials, “can’t pick up the slack immediately, due to lower income, and access and the proclivity to purchase more foreign wine.”
But there’s another snag I foresee that doesn’t seem to have been mentioned in the SVB report: the proprietors of many of California’s older wineries also are retiring, dying or otherwise cutting back, raising succession issues. I can name a hundred wineries in Napa-Sonoma alone that were founded in the 1960s and 1970s, meaning their owners are getting old. What is the future of those wineries?
The kids don’t necessarily want to stay in the business. They may have seen their parents struggle through the hard times, and feel like they’d rather have a safer, more predictable life as a doctor or lawyer or something (or just live off their trust funds). Not everyone is cut out for the agricultural life and being at the mercy of Mother Nature–especially when she throws a drought of historic proportions at them.
What happens when these older wineries no longer are viable? In part, this is what some acquirers base their business model on. From the consumer’s point of view, it matters not who owns a winery, so much as what happens to quality when it changes hands. There are some big acquirers out there whom I trust: the ones I mentioned above (Banks, Boisset, Gallo and the Jacksons) have proven that when they buy a property (whether or not it was previously distressed), they not only maintain quality but actively improve it. There are other major buyers out there about whom I cannot say the same thing and whom I will not name.
What does all this bode for the future–say, 15 years from now? I suspect the California winery landscape will look pretty much as it does now. The big wine companies will be bigger (unless they do something really stupid, which is unlikely), but California has been fortunate to have an incursion of young, new winemakers into places like Paso Robles, Monterey County, Lodi and the Sierra Foothills, meaning that the plant is constantly being watered from the roots and will continue to grow.
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Just so you know…
Got a press release this morning from VINEXPO stating that “China becomes world’s leading red wine consumer…Having downed more than 155 million 9-litre cases or 1.865 billion bottles of red wine in 2013, up 136% compared to 2008, China, including Hong Kong, is now the largest red wine market worldwide, followed by France, now in second place with nearly 150 million cases and Italy with 141 million.” Wow, did not know that.
Bloggers have long identified themselves as having the same right to express their opinions through reportage as do traditional journalists writing for newspapers, AKA “the mainstream media,” even though they may have had no formal journalistic training, and no editors or fact-checkers are around to make sure they get their facts straight.
Now, the Ninth Circuit Court of Appeals, based here in San Francisco, apparently agrees. In a ruling that hasn’t attracted the attention it should, they threw out most of a lawsuit against a blogger, Crystal Cox, who had been sued for defamation by a investment consulting company, Obsidian Finance Group, after Cox accused them of “fraud, corruption and other misconduct” on her blog, crystalcox.com.
A self-described “investigative blogger,” Cox, who defended herself in the lawsuit, argued [as she wrote on her blog] that “Bloggers have Equality [sic] with reporters such as the New York Times” and that, in essence, if a newspaper like the Times can make allegations against public officials or corporations, so can she, as an “Anti-Corruption Blogger[s], Whistleblower[s], and Citizen Journalist[s].”
That stance is what the Court of Appeals agreed with. The Court determined that “The protections of the 1st Amendment do not turn on whether the defendant was a trained journalist, formally affiliated with traditional news entities.”
No one disagreed that Cox’s blog postings were, in the Los Angeles Times’ words, “rants [to the] extreme.” Rather, the Court ruled that, since Cox did not act with “actual malice,” she had the right to express herself.
I have no idea if Cox is correct or not; that’s not the point. But journalists and First Amendment defenders no doubt will celebrate this ruling. I do; I would not want to see a blogger self-censor herself, out of fear of being sued by a big, wealthy, bullying corporation. But this case does raise troubling questions.
Granted that a blogger has the right to publish her rants, does that give him or her credibility?
Ought the public to believe “investigative blogging” in which no editor or fact-checker is present as a balancing restraint, as is the case with newspapers?
How can the public determine the accuracy of blogs, a medium notoriously devoid of traditional ethical and publishing standards (e.g., the reporter has to have multiple sources for each assertion, and there has to be a bright line between editorial, on the one hand, and opinion, on the other)?
Can the public know for sure that a blogger does not have ulterior motives? Newspaper reporters are much less likely to have hidden agendas precisely because their work is scrutinized by editors, and they ultimately are answerable to (and fireable by) a publisher.
Better yet, how can we educate the public to be discerning when they digest the content of blogs?
These questions become even more poignant when we consider that traditional journalism is being challenged by blogs and other forms of self-publishing on the Internet and “alternative media,” in this post-Citizens United atmosphere. The First Amendment to the U.S. Constitution mandates that “Congress” [i.e. the Government] “shall make no law…abridging the freedom of speech, or of the press…”). “The press” later was defined, by the U.S. Supreme Court, as “every sort of publication which affords a vehicle of information and opinion.” It was this sweeping definition, which obviously includes blogs, that the Court of Appeals apparently subscribed to in their decision.
But we are entering into dangerous waters when we have an increasingly powerful “Press” that is devoid of traditional restraints against unproven and unresearched allegations. I hardly need point out a growing section of the American population that believes nothing the Mainstream Media says–and turns instead to “journalistic sources” (including blogs) that are patently nothing more than mouthpieces for (often unidentified) corporate, political and personal interests, regardless of whatever claims they make of serving the public interest.
The balancing act American journalism must tread is one between First Amendment rights, including the right to self-publish a blog, and the preservation of some standard of truth by which to judge published claims. We should celebrate diversity of opinion, of course, but we also should insist on a strict adherence to facts and their correct interpretation.
No easy task.
I know I’ve been harping on this damned drought out here in California for months, ever since it appeared (by early December) that 2013 was going to be the driest year in California’s history, with records going back to the Gold Rush.
That’s exactly how it turned out. People were hoping the rains would return in January, but now, with the month half over, that hasn’t happened, and the extended forecasts–completely dry and warm–mean we’ll now have to pin our hopes on February and March, both of which can be extraordinarily wet. February historically has been the wettest month of the rainy season, with 4.61 inches falling, on average, in San Francisco. That’s about one-fifth the seasonal total. This is why Gov. Jerry Brown has not yet declared a Drought Emergency in California, although he’s been urged to do so by Sen. Dianne Feinstein and others; the Governor feels it’s a little too early to panic, and he may be right.
On the other hand, vintners, as well as farmers of all crops, are starting to panic. Or maybe “panic” is too strong a word. They’re concerned. They’re forming contingency plans. What will they do if there’s no water to fight off Spring frosts? What will they do for irrigation when the heat spells return next summer? There are no easy answers. The San Francisco Chronicle reported a few days ago that “residents in many parts of California are being asked – and sometimes ordered – to scale back their water use.” It’s not only been a dry winter, it’s been a warm one. Yes, we had an unusually chilly early December, but since then, it’s been more like May. Oakland, where I live, has set numerous high temperature records lately, including yesterday, when it was 74 degrees. Other records were set in San Francisco, San Jose and Santa Maria, where it was an unbelievable 83 degrees. The flowering trees in Oakland (magnolias, plums) are in full bloom. We’re in Day Three of a high fire danger, Red Flag warning in the East Bay and North Bay hills. This morning, the situation has grown even worse; the state now is under an Extreme Fire Danger alert, and Southern Californians are on edge, as those dreaded Santa Ana winds kick up, howling through the canyons where wildfires erupt and roar through places like Malibu and Laguna Beach. The warnings extend all the way up and into the Sierra Foothills.
I see red-breasted robins, honeybees and tiger swallowtail butterflies flying around–things you shouldn’t see in the Bay Area in deep winter. It doesn’t make sense. My T.V. weatherman last night called the weather “eerie,” a good word. He’s a trained meterorologist and he doesn’t understand what’s happening. Nobody does.
As the website, Wunderground.com, reported today, “The prospects for any significant rain or mountain snow in California over the next seven to 10 days look dismal, according to the latest computer model forecast guidance. If this type of pattern were to persist through the final week of the month, many January precipitation records could fall by the wayside.” That should cause everyone–not just Californians–deep concern.
I had a little time to catch up on the proposed Freestone-Occidental appellation. Here’s what I found out.
It was first proposed to the TTB in 2009, according to First Leaf, a Sonoma company that helps investors acquire agricultural land, and whose website contains valuable information on Sonoma’s various wine regions. Freestone and Occidental are, of course, small towns in the southwestern part of Sonoma County. Here’s a link to one version of a map, Free-Occ, prepared by my friend, the AVA specialist Patrick Shabram. The website, everywine, has done a nice job summarizing the facts of the proposed appellation.
So what’s happened since 2009? In a word, nothing. “TTB returned [the application] last year,” explains Mike McEvoy, vice president of sales and marketing for Joseph Phelps Vineyards, which has vineyards in the area. The problem, according to McEvoy: “The reason TTB gave was, they had clarified their view on new AVAs that overlap with existing AVAs. And because part of the Freestone-Occidental appellation overlaps Russian River Valley, they sent back the petition back.” The problem seems to particularly apply to Freestone, not Occidental.
Shabram told Marimar Torres, (who shared the email with me) back in 2012, that he was aware of the overlap problem, and that “resubmitting a revised petition with the overlapped area removed, is much more plausible.” McEvoy, however, says little has occurred lately to push things forward. He says a group of members of the West Sonoma Coast Vintners, including Andy Peay, Ehren Jordan, Regina Martinelli and Ted Lemon, has plans to meet new month “to tackle this Freestone dilemma.” Unfortunately, the group wants any Freestone AVA “to include the area that’s overlapping with Russian River Valley,” which TTB is opposed to. Of course, no matter what the new eventual appellation is, starting this year it will have to append the words “Sonoma County” to it, according to the county’s new conjunctive labeling law, which will make for quite a mouthful.
My own feeling is that there should be at least one new AVA carved out from that area. I’ve always said the existing Sonoma Coast appellation is too big to mean anything. I was excited when Fort Ross-Seaview was approved by the TTB in 2011, but, as Marimar Torres, whose Doña Margarita Vineyard lies in the proposed new AVA, correctly notes, Fort Ross-Seaview is quite a distance away from Freestone-Occidental. “It’s so far north [whereas] Freestone-Occidental has a distinct personality.” The elevations there aren’t as high as in Fort Ross-Seaview, meaning the region is more subject to fog, making the wines deeper, heavier, more brooding than those of their northern cousins. Marimar’s 2005 Doña Margarita Pinot Noir is a classic example: dark, tannic and lush, not to mention ageworthy.
It’s official: 2013 was the driest year ever in recorded California history.
Here are some statistics for selected cities. The number represents the percentage of normal seasonal rainfall that has fallen so far during this year’s rainy season. (Figures courtesy of San Francisco Chronicle)
Los Angeles: 6.4%
San Diego: 21.7%
San Francisco: 8.7%
San Jose: 9.8%
Santa Rosa: 6.2%
Napa City, meanwhile, had only 22.7% of its normal yearly precipitation average, according to the Napa Valley Register, making 2013 “the driest year since reliable records started being kept nearly a century ago in Napa.”
Granted, the 2013-2014 rainy season still has many months to go. But we’re getting off to a bad start, and people are scared.
The numbers clearly are unsustainable, and reflect the fact that the drought is statewide and not merely regional. All previous drought records, dating back to 1850, have not only been surpassed, but pulverized. “The official drought map of California looks as if it has been set on fire and scorched…”, a reporter wrote in the San Jose Mercury-News.
Sen. Dianne Feinstein in early December asked Cal. Gov. Jerry Brown to declare a drought emergency, an action Brown so far has resisted taking, although a week after Feinstein’s request, he did form a task force to study the issue. Some municipalities aren’t waiting for statewide action. The city of Folsom on Dec. 23 mandated a 20 percent rationing order. Three days later, Sacramento County asked some residents to reduce water consumption of 20 percent. In Sonoma County, the County Water Agency has asked permission from the state “to slash flows from Lake Mendocino to the Russian River,” in order to keep the reservoir’s dwindling water level from falling even more.
Other cities are expected to enact similar water-saving mores in January.
The American Geophysical Society announced that California, and large parts of the West, may be experiencing a “megadrought” that could last for decades. They released this drought map
showing the extent of “severe” and “extreme” drought, with the worst areas centering on California and northwestern Nevada.
What impact could the drought–if it continues through the rest of the winter and spring–have on California wine? Vintners fear there won’t be enough water to spray for frost protection during the crucial early budding season. And there won’t be enough water for vine irrigation next summer, especially if we have heat waves. This enforced dry-farming probably means lower crop levels, especially compared to the last few years. Catastrophically dry conditions could spark massive wildfires that take out vineyards.
Is the drought related to climate change? I’m not prepared to go that far.
As we wrap up another year, I find myself, like so many others, looking back over the old one, and wondering what it all meant.
I’m not going to do any sort of list, but instead want to let my mind wander free-range over the past 365 days. It’s been a year of gradual and welcome emergence from the despairs of the Great Recession. Here in California, as you may know, our economy is booming, particularly in the coastal areas, and most especially in Northern California. Fueled by the growth of Silicon Valley, NoCal is experiencing low unemployement, high salaries, and most notably a housing boom. Prices (and rents) are soaring, bringing to mind the housing bubble of the early and mid-2000s–but this time, the experts are telling us there’s no chance of a burst. I don’t know that I believe them, though.
Wineries seem to be doing all right. Like I always say, nobody can really know a winery’s bottom line unless you’re the banker or owner, so any conjectures about the industry’s health are only that: conjectures. But business seems to be back on track. I’m sure there are individual wineries that are struggling, but sales, bankruptcies and the like don’t seem to be any higher than they’ve been in the 25 years I’ve been watching the California industry.
The Holy Grail for wineries is, of course, direct-to-consumer sales. I can’t even remember when I first heard that phrase. I do recall the first time it was brought to my attention that a direct sale brings the proprietor 100 cents on the dollar, rather than the split he has to eat when dealing with the three-tiered distribution system. That was years ago, when I was touring the wineries of the Sierra Foothills, particularly those along Highway 49, in Gold Country, and also located conveniently between the population centers of the coast and the ski resorts around Tahoe. All the owners told me how much wine they were selling through their tasting rooms, up to 90% of their production. That was a good thing, for them–but a bad thing, as far as I was concerned, because too many of the wines were (in my opinion) flawed, and yet the owners had no motivation at all to clean up their acts.
Anyhow, tasting room sales obviously are a subset of direct-to-consumer. So, today, are wine clubs that are active through the Internet. I don’t have a crystal ball, but I’d love to be around in, say, 20 years, to see if wineries are still at the mercy of a (fairly heartless) distribution system, or if they’ve managed to figure out how to sell direct. At this point, I don’t have a clue.
Two other aspects of the past year intrigue me: the excellence of the 2012 and 2013 vintages. After a difficult 2011 and challenging 2010, California enjoyed two of the nicest years, weather-wise, in memory. The main wines have yet to appear from either, but theoretically, both 2012 and 2013 look to have the qualities of stellar vintages. One cloud that’s hanging over the coming 2014 vintage is California’s severe drought. As I write these words, 2013 is shaping up to be the driest year in California’s history–which goes back in record-keeping to the 1850s. It’s appalling how dry conditions are. On Jan. 1, 2014 (i.e., tomorrow), if the national (which is to say, East Coast) media don’t make a big deal about this, they discredit themselves, and show their right coast bias. How the drought will impact the grapes is complicated, a story that will play itself out next summer. Of course, the weather could change on a dime: January-March could be real drenchers. We’ll just have to wait and see.
A final observation: In all my years of wine reporting I’ve never appreciated so much as I have this year the importance of a younger generation coming up. I guess this is a natural result of the fading away of the original boutique winery proprietors, who came of age in the 1960s and 1970s. There are ambitious, talented young winemakers all over the place. I’ve written about this extensively in my articles about Paso Robles and Monterey, but it’s not just along the Central Coast, it’s statewide. What energy these winemakers are bringing, what innovation, what risk-taking. California is a very conservative state, wine-wise (the opposite of our political liberalism), and it’s a bold move for a young, unproven winemaker to try her hand at something new, rather than “just” another Pinot Noir or Cabernet Sauvignon (not that there’s anything wrong with either!). But I do see a cadre of vintners in their 20s and 30s tinkering with less familiar varieties–and often they’re crafting them at lower alcohols and with higher acidity than has been the case. I’m looking forward to experiencing more of these wines in 2014.
I’d like to thank my readers for sticking with steveheimoff.com for another year; I’m now going into my sixth on this blog. Thank you, too, for all of you who take the time to comment. Your feedback always is welcome and sometimes educational. I wish you all a happy, healthy New Year.