WBWE 2019: Highs and lows of bulk and bottle market in US and California
By Richard Siddle
There were two worlds working in parallel at last week’s World Bulk Wine Exhibition. On the trading floor producers and buyers were getting down to the serious business of negotiating wine prices and availability for the year ahead. But in the conference and masterclass rooms, those lucky enough to have time to break away could enjoy and take part in a wide series of debates and tastings.
In fact, this year’s conference programme could have been an event in its own right and gave visitors the chance to take a deep dive into a wide range of topics, including set-piece talks on the bulk scene in California.
The California debate, which was chaired by Erin Kirschenmann, editorial director of Wine Business Monthly in the US, looked at how producers and buyers are coping with what was described as a “wine glut” that had seen prices for bulk wines plummet during 2019.
Ana Diogo Draper, winemaker at Artesa Vineyards in Napa said anyone looking to seriously buy wine from the US can get some great prices. “Cabernet prices have gone down considerably and people are keeping quiet about it. There is a great opportunity to buy Cabernet from Napa. Some are losing a lot a money on what they can get for their grapes, particularly for non-vintage blends.”
But she also conceded that prices have been too high for too long with some grapes going for as much as $10,000 a ton “which is unreal compared to Europe”. “Growers who have put their chips into Cabernet are seeing that now,” she added.
This, though, was a “big opportunity for bulk wine in California,” added Draper. The difficulty has been finding enough buyers willing to pay even lower prices. “People are reticent to lower the bottled prices, but will do for bulk,” stressed Draper. “There are spectacular Cabs from the 18 and 19 vintages and great quality Cabernet bulk. There is lots more opportunity in bulk than in bottle.”
Kirschenmann said the overall California crush will be up slightly for 2019 at 4.1m tons, which will only add to the “glut” in the market. The issue California is having to come to terms with is that there is simply too many growers and vines in the ground, she said.
“We over planted for our needs,” she added. “In parts of the Central Valley growers are questioning whether to pull up their vines. We still have a lot of 2016 and 2017 bulk wines in the market. Chardonnay from 2016 bulk is not moving. We’ve heard stories of producers used to selling at $2,000 a ton having to sell at $200. Some producers are leaving the fruit on the vine as it is too expensive to harvest.”
Kirschenmann also looked closely at the picture for US exports which has seen a drop in volumes exported of 1.2% and 9.3% in value. The UK, she said, remains its biggest market for bulk, with Canada top for bottled wine.
“Bulk wine exports have seen a double-digit drop for some major players,” she added.
New opportunities
Steve Daniel, head wine buyer for Hallgarten Druitt in the UK, said he was interested in accessing more premium Pinot Noir from the US, rather than the big volumes of Cabernet that were available.
“We hate Cabernet in UK,” he said. “We drink five times more Merlot and there is this big demand for Pinot Noir. We’re hearing lots of rumours that Russian River Pinots coming into the market which would very interesting.”
“We like to buy by varietal and price,” he added. “California for us is Zinfandel, Rhone varietals and Pinot. We are not into Chardonnay and Cabernet as we can buy better from other parts of world. But the UK consumer wants to buy into California. It’s seen as glamorous. It’s just the price of bottled wine is often too high. But it’s good to see more importers getting back into California.”
The issue for California is that UK buyers are looking to buy closer to 90c a litre, which is why there is so much of California that is “not represented in the UK”. “There is an opportunity for Californian producers to bottle more of their wine in the UK and take the opportunity of our bottling facilities,” he added.
Importing bulk
The panel also looked at the possibilities for imported bulk wine into the US, where producers and distributors might be able to get round the 20% plus tariffs that have been placed on large volumes of French and Spanish wines in particular. US wine consultant, Deborah Parker Wong, claimed some French producers are already circumnavigating the tariffs by sending rosé wine to be bottled and blended in US.
Alison Leavitt of the Wine and Spirits Shippers Association agreed the tariffs could give an injection and new interest in imported bulk wines.
Kirschenmann said there were still great opportunities for European producers in the US. “Rosé is being drunk all year round now, and sparkling is growing all over the US and Prosecco is doing better,” she said.
Wong agreed and expected the US to take over from UK as the biggest sparkling wine drinkers. “The UK only has a 2% lead on the US, so it’s only a matter of time.”
Kirschenmann said the biggest growth categories in the US are all $11 and more. But as a market as a whole volumes are in decline as “people are not buying as much wine” as health trends really kick in and alternatives like hard seltzers have become a real threat.
She pointed to wine figures that show wine sales for bottles up to $4 is down 8.5%, $4 to $7 is down 5.8% and $8 to $10 is 2.8%. Whereas bottled priced $11-$14 are up 6.4% and $15-$19 is up 8.3%.
The conditions could get even tougher, she warned. “The US is bracing itself for an economic recession. We have had 10 years of unprecedented growth and we’re waiting or that to change. When it does it will hit wine.”
Where there was an opportunity in the US, added Kirschenmann, was in private label with so many more retailers and on-trade groups waking up to the advantages and benefits and private label can bring.